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Did Intel Just Win the Next Nexus 7?

There is a rumor going around that Intel (NASDAQ: INTC  ) just won the system-on-chip socket for the next-generation Google (NASDAQ: GOOGL  ) Nexus 7. While this is unconfirmed, it is worth taking a deeper look into two fundamental questions:

  1. How likely is it that this rumor is true?
  2. What are the implications if it is true?

How likely is it that this is true?
The rumor claims that Google, via its hardware partner ASUS, will be using one of Intel's Atom Z3000 series processors. In order for this to be plausible, the Z3000 chips need to be a significant leap ahead of the Qualcomm (NASDAQ: QCOM  ) Snapdragon S4 Pro found in the 2013 Nexus 7. From a CPU power/performance standpoint, a quad-core Z3740 or Z3770 should be meaningfully faster than the current-generation Nexus 7. As far as graphics goes, the higher-end Z3000 chips should be faster than the Snapdragon S4 Pro but a bit behind the absolute latest-and-greatest Snapdragon 800 and its recently announced successor, the Snapdragon 805. From a technical standpoint, this makes sense.

However, what's more interesting is that the prior two Nexus devices have been designed and built by ASUS -- one of Intel's best partners in the PC space. If ASUS is hired to do the third-generation Nexus 7, this lends credence to this rumor. After all, while Google has the final say in what hardware ends up in this device, it is likely that Intel could have pushed very hard to win this deal.

What are the implications if true?
If Intel wins the Google Nexus 7, it would probably be the biggest validation of Intel Architecture on Android. It could also be seen as proof that ARM (NASDAQ: ARMH  ) designs do not have an inherent software advantage on Android. In addition, if Google and Intel are ready to go with a stable release of Android 64-bit, then Intel will have an inherent advantage as the ARM vendors won't have high-end, 64-bit designs until early to-mid-2015.. Not only does this kill the argument that Intel is at a software disadvantage, but this could put the ARM vendors at a disadvantage.

More importantly, though, this will be seen as the first domino to fall. If Intel can find its way into a Nexus 7, what's to stop it from winning a Nexus 5 phone? From there, what's to stop it from winning tablet and phone designs at LG, HTC, Samsung, Lenovo, and so on? Intel has massive scale and an even larger ability to compete on price and performance, thanks to its major PC and server cash cows. While Qualcomm has cash cows of its own, Intel still generates more operating profit than Qualcomm does, despite more than a $2.5 billion operating loss in its mobile group. Can Qualcomm fight this war without scaring away investors?

Foolish bottom line
It will be very important to see if Intel wins this Nexus 7 design. If it does, then ARM becomes significantly riskier, as Intel will have a credible share-gain story going on in tablets that may eventually extend into phones. Qualcomm's competitive positioning across the board is still great, and the underlying market is still growing. But if there's any chip vendor that can put pressure on Qualcomm's chip business, it's Intel. And, if Intel can win the Nexus 7 -- currently owned by Qualcomm -- who knows what else it can take in due time?

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Read/Post Comments (6) | 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 December 26, 2013, at 1:12 PM, symbolset wrote:


  • Report this Comment On December 26, 2013, at 4:48 PM, SSchlesinger wrote:

    My money is on this rumor being true for one reason you didn't mention. Intel helps pay for advertising. In order to do battle with Apple Google needs to advertise, so does Amazon with the Kindle Fire.

    My money is on one or both Google and Amazon will go with Intel for the advertising resources Intel offers.

    The current ARMH talking point is that only Chinese white box tablet makers will use Intel in 2014. If this rumor is true this is a major win toward the top of the food chain. Sending a message to the Android community that Intel is legit.

  • Report this Comment On December 27, 2013, at 3:15 AM, symbolset wrote:

    SSchlesinger - Google needs Intel money for advertising? You can't really believe that. You do know what Google does for a living, right? You might as well say Intel needs Google's input on how to build a fab.

  • Report this Comment On December 27, 2013, at 10:37 AM, Foolme2x wrote:

    Hadn't seen anything on this previously. No "source" cited - perhaps is this the origin for this particular rumor? If so, where are the MF editors?

  • Report this Comment On December 27, 2013, at 12:52 PM, EngineerPaul wrote:

    This kind of thing is one of the reasons I sold NVDA a little while back. Phones and tablets were hard enough with QCOM pushing hard and MediaTek picking up the cheap end, but with INTC pushing for space I am no longer convinced that there is enough room for all the players who want a piece of the action.

  • Report this Comment On December 27, 2013, at 12:55 PM, masterwallstreet wrote:

    In my opinion only, I find your article to be hilarious. Do you have any proof of these rumors? Do you have any links to back up these rumors or are you just making these rumors up in a desperate attempt to put some excitement back in Intel the fallen giant? At one time this stock was top of its game and a leader in cutting edge technology but they lost that vision. There is no excitement in this company because it became a fallen giant. It is a very exciting time for a different company AMD. AMD products are cutting edge and they are becoming the leader in this technology. They have a great vision and it is a very exciting time to be in this company right now. Intel will probably lose a lot of its customers to AMD. Intel is overpriced, overvalued and has no vision. AMD my acronym is A Attraction M Money D Dreams what a great acronym. The best thing to do is to short Intel which in my opinion will make newer lows and go long on AMD which might make newer highs. That is where the market is going. I read several of your articles and in my opinion you are going by old data, useless information and some of the stuff I believe you are taking out of thin air. You are missing the big picture. AMD will be the next giant.

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