In the world of PC CPUs, the x86 architecture reigns supreme. Intel (INTC -9.20%) and Advanced Micro Devices (AMD 2.37%) are the only two companies outside of China able to design x86 processors destined for PCs.

There have been efforts to break the x86 stranglehold, but until recently, they've fallen short. A version of the Windows 8 operating system ran on Arm-based chips, and Microsoft even released variants of its Surface tablet about a decade ago powered by them.

The big problem was compatibility. Applications compiled for standard x86 Windows wouldn't work. This created confusion among consumers expecting to be able to download whatever applications they wanted. The product and Arm-based Windows were mostly dead on arrival.

Apple is the only success story so far, thanks to its complete control over hardware and software for its Mac PCs. The company began switching from Intel CPUs to custom Arm-based CPUs in 2020, providing a translation layer called Rosetta that enabled old applications compiled for Intel-based Macs to run on new Arm-based Macs. The switch has given Apple an important edge over Windows laptops in terms of battery life.

Breaking the PC CPU duopoly

For Microsoft, keeping Apple in check requires PCs to get better, particularly on the efficiency and battery-life fronts. While Intel made progress with its Meteor Lake chips launched late last year, more competition is likely necessary to push Windows PCs forward.

Microsoft has been once again trying to push an Arm-based version of Windows, this time with Windows 11 and a translation layer that enables traditional Windows applications to run. There are some laptops already available running Arm-based chips from Qualcomm (QCOM 1.45%), although they fall short in terms of performance. There are still some compatibility issues, and emulating x86 apps introduces a performance penalty that noticeably slows things down.

Microsoft and Qualcomm aren't giving up. Qualcomm's next-generation PC CPU, the Snapdragon X Elite, may be powerful enough to overcome the performance gap with traditional laptops when it starts showing up in devices in mid-2024. There are even rumors circulating that Microsoft will announce a new Surface laptop later this month packing one of Qualcomm's new chips.

In early pre-release testing, the Snapdragon X Elite has put up some impressive results. Tom's Hardware recently reported that some benchmarks taken at an official Qualcomm event during the Mobile World Congress paint a rosy picture for the upcoming Arm-based chip. Up against Intel's Core 7 Ultra 155H, the 12-core Snapdragon X Elite held its own in some tests, while beating the Intel chip by wide margins in others.

All downside for AMD

While it will take time for Arm-based laptops to win over consumers, it seems inevitable that the PC CPU duopoly's days are numbered. More competition is bad news for both Intel's and AMD's PC CPU businesses.

However, Intel has a way to benefit from Arm-based PC chips proliferating, while AMD does not. Intel may lose PC CPU market share, but its foundry business could eventually be pumping out Arm-based PC chips for Qualcomm and others.

Intel expects to surpass semiconductor foundry leader TSMC technologically early next year with its Intel 18A process, which packs a new transistor design and will be the first process node to use backside-power delivery, which can boost power efficiency. This will be particularly important for chips aiming to maximize battery life.

Intel and Arm Holdings struck a deal last year to co-optimize the Arm architecture and the Intel 18A process. Intel has scored some Arm-based design wins -- notably, a server chip using Arm Neoverse cores. If Arm-based PCs take off, the downside of potentially losing share in the PC CPU market can be offset by design wins in the foundry business.

AMD doesn't manufacture its own chips, so increased competition in the PC CPU market is all downside. The company is already in a distant second place in the PC CPU market with a unit share of about 20%. Viable Arm-based PCs powered by CPUs from Qualcomm and potentially others -- Nvidia is rumored to be working on PC chips -- will eat away at that market share.

One could argue that Intel has more to lose, given that its PC CPU market share is much higher. That may be true, but it also has more to gain. As Intel pushes to become the world's second-largest foundry by 2030, Arm-based PC chips are likely to roll off the company's assembly lines as its manufacturing technology catches up with TSMC.

While Arm-based PCs introduce uncertainty for both Intel and AMD, they represent an opportunity for Intel, while only a risk for AMD.