At this point, it's common knowledge that chip giant Intel (NASDAQ:INTC) tried and failed to enter the market for smartphone applications processors. It's hard to attribute that failure to any one factor -- it was seemingly a proverbial death by a thousand cuts. 

Some of the big issues that sank Intel's smartphone efforts included, among many other things, constant product delays, the lack of a competitive cellular modem, the lack of a competitive product that integrated the cellular modem with the applications processor, and more. 

A wafer of Intel chips.

Image source: Intel.

On top of the product/competitiveness issues, by simply up and exiting the market, Intel has shown prospective customers and partners that it can't be counted on to stick with it over the long term. 

Nevertheless, despite Intel's historical failures in this arena, I think that enough has changed that the company may want to try again.

Here's why. 

Solving some big issues

Although Intel is nonexistent in the smartphone processor market, the company has made quite a name for itself in the market for stand-alone cellular modems. 

Today, Apple (NASDAQ:AAPL) -- the only major smartphone vendor that uses stand-alone applications processors and cellular modems -- uses Intel modems for a significant portion of its iPhone shipments. And, according to generally reliable KGI Securities analyst Ming-Chi Kuo, Apple is set to use Intel modems entirely in the iPhones that it intends to launch later this year. 

Intel continues to prove that it can develop competent cellular modems. More importantly, though, the modem that Apple is expected to use in its 2018 iPhone models is designed by Intel and manufactured by Intel. Historically, Intel faced significant difficulties in trying to build cellular modems using its own chip manufacturing technology, which hindered the integration of cellular modems with its applications processors in the past. 

These two improvements are a pretty big deal. 

Intel also tried to sell processors based on its Atom architecture into the smartphone market. Though Intel spent significantly on trying to get the Android software ecosystem to treat Intel's proprietary architecture (known as Intel Architecture, or IA for short) as a first-class citizen, the reality was that the Android software ecosystem grew up around the ARM architecture. 

This led to issues with app compatibility and performance on devices powered by Intel processors. 

For quite a while now, Intel has made it public that it is working with ARM Holdings (the creator of the ARM architecture) to allow Intel to manufacture ARM's latest processor designs using the former's chip-manufacturing technologies. 

Should Intel reenter the mobile processor market, I think it would do so by implementing industry-standard processor, graphics, media, display, and other designs from ARM. The key differentiation on Intel's part, then, would be in the cellular modem and in other technologies that are important to smartphones. 

In other words, Intel's fundamental attitude has changed from, "try to shoehorn in Intel Architecture everywhere" to "use the right tools for the job." 

Not only would using ARM's technology speed up Intel's time to market for mobile processors, but it'd ensure that Intel were competitive with other mobile-chip makers. 

And, finally, Intel's previous mobile efforts seemed to focus more on the flagship/premium portion of the smartphone market, which is increasingly dominated by companies that build their own chips. If Intel were to re-enter the market, it'd probably make sense to go after the high end (this is a step down from the premium portion of the market), midrange, and even low end -- segments that smartphone vendors don't typically build their own chips for. 

Why go after this market?

I think there are a couple of good reasons that Intel would benefit from trying to participate in this market.

The first would be that, if Intel is successful, it can generate significant incremental revenue by leveraging quite a lot of the work that it already does today in modem technology development, its custom foundry efforts, and even its personal computer business (some technology that goes into PC processors can be leveraged in mobile processors).

That could ultimately translate into increased profits in the years ahead -- though Intel would need to stick with it for a while. 

Additionally, by entering the market, Intel could substantially increase its manufacturing scale, since the smartphone market is gigantic. If you're a chip manufacturer, having more scale is generally a positive, especially if it means eating into the scale that competing chip manufacturers enjoy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.