How Long Can Intel Defend Against ARM?

Are any of Intel's (Nasdaq: INTC  ) home turf markets safe from a potential raid from ARM Holdings (Nasdaq: ARMH  ) ?

While ARM has effectively claimed the mobile-processing sector for itself with a market share exceeding 95%, Intel still has the lead in traditional areas like desktops, laptops, and servers. ARM's threat isn't exactly imminent, but it's certainly on the horizon. If Intel falls asleep at the wheel, an ARM-based tidal wave will wash out the tech giant.

ARM is now getting its feet wet in the server market with a new ARM-based offering from Hewlett-Packard (NYSE: HPQ  ) that's in its initial testing phases. A fresh report from Taiwanese DigiTimes says that laptop makers are giving ARM some serious consideration alongside Intel. It mentions that ARM has been cooperating with Microsoft (Nasdaq: MSFT  ) while Intel has been working with Google (Nasdaq: GOOG  ) , which promises more choices.

ARM-based chips have always boasted low power consumption as a key selling point, while Intel chips have better performance. The two are converging on middle ground, as ARM has been working on improving performance and Intel has been trying to reduce power consumption.

It's inevitable that ARM will catch up in performance, so if Intel fails to make a dent in mobile while losing ground in notebooks, it may run into its "biggest crisis yet in 2013." Intel's director of its Ultrabook group, Greg Welch, had previously mentioned that Apple (Nasdaq: AAPL  ) had threatened Intel to cut its power consumption or risk losing Cupertino's business, which was a "real wake-up call."

Evidence is mounting that ARM has a chance at tapping into laptops. Microsoft is including ARM support in Windows 8, which will run on tablets, laptops, and desktops. Rumor has it that Apple has been testing its popular MacBook Air running on the ARM-based A5 processor. Apple had also allegedly tried using Intel's low-power Atom chip in the iPad initially, before opting for ARM architecture.

NVIDIA's (Nasdaq: NVDA  ) freshly launched quad-core ARM-based Tegra 3 already promises "PC-class performance levels." While the Tegra 3 is the world's first mobile quad-core CPU, it won't be the last, as chipmakers keep raising the bar with ARM-based performance.

ARM is storming Intel from all sides. Intel's offense has yet to make any dent on ARM's turf, while its defense has some holes in it that ARM is managing to get through. How much longer can Intel hold down the fort?

Add ARM Holdings to your Watchlist to see it assault Intel. Get access to this free report on three more companies that are raking it in from the mobile revolution.

Fool contributor Evan Niu owns shares of Apple and ARM Holdings, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple, Google, Microsoft, and Intel and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Apple, Google, NVIDIA, Intel, and Microsoft, writing puts in NVIDIA, and creating bull call spread positions in Intel, Apple, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 11, 2011, at 9:06 PM, TheDumbMoney wrote:

    Even at ARMH's currently optimistic valuation, Intel could basically buy ARMH using nothing more than its cash on hand. Intel will absolutely face competition in laptops, and that is likely going to be fine. It's not an if, it's a when. Where will, at minimum, be Windows 8 laptops running ARMH-based processors. But ARMH is a vastly greater threat to AMD than it is to Intel. Yet, all the articles on ARMH focus on its threat to Intel. That's because it's sexy to write about the potential fall of the titan. Meanwhile, AMD is not even mentioned above.

    All best,

    DTAF

  • Report this Comment On November 11, 2011, at 9:11 PM, taddys wrote:

    It is true that ARM can disruptively impact Intel from the low end (both on client and server market), however, analysts always seem to miss the obvious, converse side which will make it tough for ARM as well.

    First, as ARM increases its performance, all else being equal, it will have to compromise on power. Similar to how Intel will compromise some performance while trying to lower power consumption. So when ARM enters performance (laptops) or server space, the power advantage will gradually fade away.

    Second, when (not if) Intel eventually becomes succesful in the tablet/phone space, it will gradually erode the dominant (~95%) market share of ARM in that segment. Although ARM does not directly manufacture chips, it does benefit from others who do.

    Beyond this realization, it essentially becomes a game of who can execute on their strategy better, both from a manufacturing and an efficient architecuture perspective. That, time will tell, althogh Intel has the advantage on the manufacturing (process) side given their lead (and own fabs) and experience over the past ~40 yrs.

    Fool on!

  • Report this Comment On November 12, 2011, at 1:10 PM, russfischer1013 wrote:

    We shouldn't forget that ARMH doesn't make anything. For ARM to continue to be successful, QCOM, NVDA, TI, and others have to be successful and all of those companiew are dependent on TSMC to make their parts. TSMC is 2-3 years behind Intel in manufacturing and process technology.

    If the Intel 22nm TriGate transistor is twice as fast and 1/4 of the power and 1/4 of the size of a TSMC transistor, QCOM, NVDA, and TI ( all using ARM/TSMC cores) will be at a long term disadvantage.

    Intel is now building the world's largest semiconductor plant in Oregon. Why? and another new plant in New Mexico. Why? According to the talking heads, the PC business is flat.

    If you own even a share of Intel or ARMH holdings you should take the time to listen to this webcast.

    http://cc.talkpoint.com/well001/110811a_hr/?entity=43_0N34NY...

    Intel will take a big share of the mobile application processor market, and when they do the losers will not only be ARMH. It will also be WCOM, NVDA, TI, and TSMC. Be careful with ARMH.

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