Is This Intel Win the Beginning of the End for ARM Holdings?

"Better late than never" definitely applies to Intel (Nasdaq: INTC  ) in the mobile processing space. ARM Holdings (Nasdaq: ARMH  ) and its legion of licensees have been able to reap the rewards as the Chip King has missed the boat, until now.

On last week's earnings conference call, Intel CEO Paul Otellini specifically noted that the company would be seeing an important milestone within a matter of days, as the world's first Intel Medfield Atom-powered smartphone would be launching as a bold step into ARM territory.

As expected, the device turned out to be the Lava Xolo X900.

Source: Xolo.in.

Here are the device's basic tech specs.

Processor 1.6 GHz single-core Intel Atom
Operating System Google (Nasdaq: GOOG  ) Android
Display 4.03-inch at 1024 x 600 resolution
Cameras Rear: 8-megapixel. Front: 1.3-megapixel.
Onboard storage 16 GB

The X900 also has all the other requisite features of any modern smartphone, like an accelerometer, gyroscope, and capacitive touchscreen, among others.

Who in the world is Lava?
Never heard of Lava? That's not surprising, because Lava is a small Indian gadget maker playing in the, um, Indian market. It's an interesting development that the OEM responsible for arguably one of the most important Intel-powered product launches in recent times is a relative no-name, especially compared with some of Intel's other mobile OEM partners, like Motorola Mobility (NYSE: MMI  ) and Lenovo, both of which should have Atom-powered devices out by year's end.

In all likelihood, Intel launched first with Lava as a relatively safer test bed. That way, if something went horribly wrong, it would be a safe environment for it to stumble in compared with the important domestic market.

I would say that the Medfield Atom is strategically more important than Chipzilla's new Ivy Bridge processors that just launched, since Ivy Bridge is a continuation of Intel's famous tick-tock model (with some major technological advances), while Medfield represents the company's big push into one of the largest growth markets that it's missed thus far.

Is there an app for that?
When it comes to app compatibility, Intel is using a process called binary translation to ensure that apps work on its x86-based Atom. Not all apps will be compatible, though, as some apps will still work only on ARM architecture.

Intel estimates that roughly 90% of apps out of Google's rebranded Google Play storefront will work just fine.

Anandtech recently got its hands on one of these handsets and subsequently put the device through its standard glut of rigorous tests. When it comes to app availability and compatibility, Anandtech found that the software performed admirably. There were a couple of minor hiccups, but the average Android user isn't likely to be able to tell the difference.

Stacking up
The device stood up well in the CPU benchmark tests compared with other popular devices. HTC's new One S and One X, both part of the Taiwanese OEM's new unified rebranding approach, stood up the best against the X900. Notably, what fared the best were the international versions of those devices, which carry NVIDIA's (Nasdaq: NVDA  ) quad-core ARM-based Tegra 3, while the domestic versions carry Qualcomm Snapdragons for their integrated LTE baseband support.

That's a good sign for Intel in terms of performance and apps.

The ARM advantage
One of the reasons ARM hasn't been afraid of Intel is that ARM chips have always had advantages in power efficiency and consumption, which are of paramount importance in mobile devices where battery life is an important consideration.

The X900 isn't taking home any medals in this department, but it's on par with other Android devices like Samsung's Galaxy S II or Galaxy Nexus. So while the Atom isn't better than ARM chips on power efficiency (no one really expected this), it's certainly competitive.

Scared?
While I recently sold my ARM shares over concerns of ARM's monetization and valuation, I still think the ARM ecosystem has advantages in momentum and a wider array of choices from numerous chipmakers. Intel is proving that it can be a viable alternative, though, with a competitive offering, so the ARMy should definitely be concerned.

Intel and ARM are battling it out for mobile supremacy in what will be The Next Trillion-Dollar Revolution. One of ARM's licensees is looking to cash in and certainly hopes Intel doesn't start stealing design wins in smartphones. Get the free report.

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


Read/Post Comments (13) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 27, 2012, at 10:33 PM, mwlove wrote:

    don't underestimate Intel over the long run. They have the R&D budget and the economies of scale to win. Just ask AMD.

  • Report this Comment On April 28, 2012, at 1:25 AM, iknoerle wrote:

    ARM will rise! And I'm not talking about mobile where they already rule. I'm talking about the rest of the computer industry. Look for Intel on ARM within the next decade. You heard it here first.

  • Report this Comment On April 28, 2012, at 4:50 PM, russfischer1013 wrote:

    Now here is a very well reasoned article on the Intel/ARM issue.

    I never thought about the cautious move with LAVA first.

    I think selling the ARMH shares is the right thing to do.

    For what it's worth, my valuation model says ARMH is overpriced by a factor of three, while Intel calculates to be underpriced by a factor of three.

    Disclosure: Long through LEAPS on 7150 contracts.

    I think Intel is a very rare opportunity over the next year or two.

  • Report this Comment On April 28, 2012, at 5:01 PM, jimbeama wrote:

    Intel's first phone chips were ARM based chips branded as Xscale. They sold the rights to Marvel several years ago. So, too late, Intel was on ARM before. They will not go back. You read it here first.

  • Report this Comment On April 28, 2012, at 5:38 PM, Mega wrote:

    "I would say that the Medfield Atom is strategically more important than Chipzilla's new Ivy Bridge processors that just launched, since Ivy Bridge is a continuation of Intel's famous tick-tock model (with some major technological advances), while Medfield represents the company's big push into one of the largest growth markets that it's missed thus far."

    I'd rather have the $10B+ in profits from Ivy Bridge.

  • Report this Comment On April 28, 2012, at 6:56 PM, russfischer1013 wrote:

    I find it curious that analysts find fault with Intel for "missing the mobile market", but don't seem to have the total picture well enough in focus to recognize that while the mobile business was being carved up Intel was busy building a $15 billion, 90% gross margin server business so all that mobile stuff would work.

    The mobile business isn't going to shrink or disappear, so Intel can move into a dominant position at their leisure. That server business had to be developed or nothing would have worked. Who else could have done the server parts needed? AMD? ARM? Excuse me while I have a belly laugh.

    Now the likes of QCOM, NVDA, BRCM, TXN, Samsung, and poor TSMC get the opportunity to step into the ring with Intel. Some won't finish the match, others will just get mauled.

  • Report this Comment On April 28, 2012, at 7:11 PM, russfischer1013 wrote:

    While the PC business will grow ~8% this year, the Intel content in that market will increase markedly. The Ivy Bridge with the 2500 graphic unit on it will sell for the Sandy Bridge price of today. The Ivy Bridge with the 4000 graphics (since it replaces an $80 GPU) will sell for about $40 more than the Sandy Bridge. If half of the parts sold have the 4000 graphics, the average selling price to Intel will grow 20%. So, 20% asp growth on top of 8% unit growth.....the PC business looks like a 28% short term growth business to Intel. That's $7-9 billion of new dollars to Intel.

    Poor Nvidia and AMD.

    The different ways that Intel wins from here will simply make for a once in a lifetime investment opportunity.

    I haven't mentioned stacked DRAM for servers or stacked FLASH for SSDs yet. Watch for something unexpected from Intel/Micron this year...probably this summer.

  • Report this Comment On April 28, 2012, at 10:37 PM, TEBuddy wrote:

    Hey Russ, you could have just stuck to praise for your facorite stock.

    AMD still makes some of the most efficient server processors, Intel has only been catching up. And the Intel integrated graphics hardly replace an $80 GPU, they still suck compared to AMD integrated or an actual $80 video card. LLiterally 100% worse than either.

    I dont think AMD has anything to be sad about with Ivy Bridge since its own Trinity Llano will bring in most of the notebook growth over the next year. While their dual core Brazos2 will likely dominate all of Intel's Atoms, as the original Brazos already does.

  • Report this Comment On April 28, 2012, at 11:18 PM, SSchlesinger wrote:

    I love readying the ARM and AMD cheerleaders responses. Intel is taking the battle to ARM in mobile and someone has already predicted they will not only lose that but will win in PC and in servers, and we've heard it here first! LOL!

    AMD servers? Really? Praise em all you want, they aren't selling. And aside from modest sales increases of Llano year over year (don't forget they had a shortage on them toward the end of last summer) there isn't much to get excited about. I'll put it to you another way. What Intel takes away from AMD in graphics cards won't be replaced in Llano, nor servers. Nvidia is also feeling the heat as well.

    Intel is like the US Navy. You can run your little boats into them all you want and blow holes in the side of their ships. But, when you wake up in the morning and you see their fleet in your harbor it's not going to be a good day. Intel has shown up in AMD's mobile harbor. You didn't hear it here first!

  • Report this Comment On April 29, 2012, at 11:47 AM, russfischer1013 wrote:

    I think AMD succumbs on this cycle. And I don't think that is the best thing for Intel due to the anti-trust implications. In defense, Intel can point to the fact that AMD couldn't even recruit a CEO for damn near a year. They sent their ownership in Global Foundries AND a $425 million check to get out of that deal. I don't have a clue who AMD thinks will manufacure their parts. TSMC? No capacity. Who else?

  • Report this Comment On April 30, 2012, at 3:13 PM, winklerf wrote:

    @TEBuddy

    The benchmarks say Ivy bridge is a little better than Llano, which isn't all that much considering Llano will be replaced this year by AMD. However, if you buy Llano and do anything but play games all day, you bought the wrong processor (and you probably should have bought an Intel chip and discrete graphics). Ivy bridge is the best chip bar none in standard processing tasks as well as (GPU-like) accelerated tasks like video encoding.

    You are right that HD400 isn't going to replace an $80 GPU on a desktop computer, but in mobile land where the GPUs are more expensive and perform worse, it probably will.

  • Report this Comment On April 30, 2012, at 3:18 PM, winklerf wrote:

    @russfischer1013

    Betting on AMD failing is a fool's errand. They just won't die because the PC manufacturers need them around to keep Intel's prices down at the low end of the market.

  • Report this Comment On April 30, 2012, at 3:21 PM, winklerf wrote:

    Looking at how the market is responding to the news that has culminated with the Lava announcement, the market's ridiculous optimism for ARM and pessimism for Intel is thawing. Options pricing predict Intel going up and ARM going down in addition to changes we are currently seeing.

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