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:
- How likely is it that this rumor is true?
- 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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