Intel (NASDAQ:INTC) recently launched its smallest and most power efficient lineup of Core CPUs to date. The new Hybrid "Lakefield" CPUs are built on the new 10nm process, and combine a newer Sunny Cove core with four low-power Atom-class Tremont cores.

Intel's Hybrid CPUs mark its first line of 10nm chips to be packaged with its Foveros technology, which reduces a chip's size with "3D stacking" technology. The package also stacks two layers of DRAM into the package to eliminate the need for external memory.

Let's see how these new chips could strengthen Intel's CPU business and widen its moat against SoftBank's (OTC:SFTB.Y) ARM Holdings.

A visualization of electrical circuits.

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Smaller, faster, and more power-efficient

Intel claims the Hybrid chips will fully support Windows 10 applications with a 56% smaller package area, 47% smaller board size, and a 91% reduction in standby power consumption than its comparable Y-series processors.

In terms of real-world applications, Intel expects the chips to offer up to 24% better power efficiency during web browsing, up to 1.7 times better graphics performance, and up to 54% faster conversions of video formats. They could also offer double the throughput for AI-enhanced workloads.

Intel is aiming these CPUs at lightweight laptops and foldable devices. Samsung's Galaxy Book S, Lenovo's ThinkPad X1 Fold, and Microsoft's dual-screen Surface Neo are the first three devices to use the new CPUs.

Less about AMD, and more about ARM

Intel's biggest challenge in recent years has been a resurgent AMD (NASDAQ:AMD), which chipped away at Intel's dominant shares of the PC and data center CPU markets with its new Ryzen and Epyc CPUs, respectively.

A dog uses a notebook computer.

Image source: Getty Images.

However, Intel's new Hybrid chips target SoftBank's ARM, which dominates the smartphone and tablet markets with its low-power chip designs, more than AMD.

ARM's designs are licensed, modified, and produced by leading chipmakers like Qualcomm (NASDAQ:QCOM), NVIDIA, and Apple.

Intel initially challenged ARM with its Atom chips in the mobile market, but they flopped due to a lack of OEM interest, software compatibility issues, and a poor balance between performance and power consumption. Intel's loss of the mobile market stung, but ARM-based chipmakers are now gradually creeping into the laptop CPU market -- which is traditionally split between Intel and AMD.

Intel's longtime customers HP, Lenovo, and Asus all started selling Qualcomm's Snapdragon-powered Windows 10 laptops over the past three years, and those chips -- which bundle together a CPU, GPU, and baseband modem in a single package -- bring constant mobile connectivity and low power consumption to laptops.

ARM-powered laptops still represent a small slice of the PC market, but that niche could grow as new devices, like Microsoft's Surface Neo, blur the lines between mobile devices and laptops. But ARM-based Windows 10 laptops still have two glaring weaknesses: a lack of support for older x86 CPUs (which means they can only run apps from the Microsoft Store), and less horsepower than Intel and AMD's chips.

Intel's new Hybrid chips, which won't suffer from those weaknesses, could end (or at least hobble) ARM and Qualcomm's advance into the laptop market.

What does this mean for Intel's investors?

Intel's introduction of its Lakefield CPUs indicates its ongoing chip shortage -- which occurred after the difficult production of 10nm chips disrupted its production of older chips -- is nearly over. It could also strengthen its PC-centric chip businesses, which generated nearly half its revenues last quarter, and expand its presence beyond traditional desktops and laptops.

Intel's new Hybrid CPUs won't move the needle right away, but they could widen its moat against ARM-based chipmakers and allay fears about the chipmaker falling behind the tech curve and losing its core market to more nimble rivals.