Asus’ move to Qualcomm for the next ZenFone exposes a critical flaw in Intel’s mobile strategy.

ASUS ZenFone 5 外觀 13 1024x576 Intel’s ‘Paradise Lost’

While most semiconductor companies strive to earn wins for their mobile processors by offering the best chip at the best price, Intel’s stratagem to launch its mobile business has simply been to buy hardware wins for its silicon.

Intel isn’t denying that this is the core of its strategy to launch its mobile business. During Intel’s most recent earnings call, company CEO Brian Krzanich talked up this plan to analysts and shareholders; at IDF Shenzhen in April it was more of the same plus an announcement of a $100 million fund specifically for new Shenzhen-based mobile manufacturers to help them bootstrap their business with Intel inside.

As I wrote in April, this big bet on contra revenue and China has its inherent dangers. Manufacturers could simply use Intel’s deeply discounted chips to launch their mobile business, then switch to a competitor like Qualcomm, MediaTek, or Allwinner once their mobile business gets going.

It looks like this has happened with Asus and the Zenfone. Earlier this month reports came out that Asus was mulling a switch away from Intel for the 4G LTE version of the Zenfone, and a leak from an Asus meeting that came via our sister site VR-Zone Chinese confirmed this and more.

aas 1024x910 Intel’s ‘Paradise Lost’

An inside look at a recent Asus meeting.

First, the new ZenFone — a 4.5-inch device — will be powered by a Qualcomm 400-series SoC, that comes with a LTE baseband as well as 802.11ac connectivity. Now Intel certainly has its share of LTE options, but they don’t include an on-board modem. This won’t be the case until SoFIA comes online. The lack of the onboard modem adds to the overall costs, and makes the SoC non-competitive when compared to the alternatives.

But that’s old news.

What’s more interesting is what leaked out of an Asus meeting where the company’s big bosses were present. The new line of ZenFones will support wireless charging (likely thanks to Qualcomm’s WiPower technology ) and Asus is likely to launch a DIY ZenFone model — probably similar to Motorola’s customizable Moto-X handset — at next week’s Computex in Taipei.

Last year, Asus needed Intel. Asus had mobile ambitions and the ZenFone was the answer. The ZenFone wasn’t Asus’ first foray into the smartphone space, but it proved to be the most successful. It was a risky play, as Xiaomi was dominating the high-end low-cost space, but Intel providing the silicon at a deep discount helped substantially.

Now, Intel is in need for another hardware win for its chips. Its Shenzhen project will soon be producing hardware, but there’s a very good chance that whatever success stories emerge from the Shenzhen ecosystem will transition from Intel to another provider months or years after they hit market and Intel’s funds run dry.

Intel is losing its mobile paradise. The big question is, can it recover?