A report recently surfaced claiming that Intel (INTC +5.42%) has landed a design win for its latest Atom Z3580 smartphone platform over at Samsung Electronics (NASDAQOTH: SSNLF). The Atom Z3580, for those of you unfamiliar with this part, packs four Silvermont CPU cores running at 2.33 GHz, Imagination Technologies' PowerVR G6430 (the same graphics block found inside of the Apple A7, and fairly modern (although not bleeding-edge) camera support. The circumstances surrounding this design, as well as the long-term implications, are worth exploring.
The report claims Intel is selling at cost
According to the report, Intel is selling this system-on-a-chip for about $7 -- well below the $20-$25 that a high-end applications processor from, say, Qualcomm (QCOM 1.43%) is likely to command. The reason for this hefty discount, per the report, is that the Z3580 turns into a bit of a power hog near maximum performance levels. While it's hard to know whether that's true (remember: even Qualcomm's high-end Snapdragon parts throttle fairly quickly in intense workloads), the bigger point is that Intel appears willing to take aggressive action to gain traction in phones.
It's a low-end design win with mid- to high-end performance
According to the report, the win that Intel scored over at Samsung with the Z3580 is a low-end one. Interestingly enough, even if Samsung only configures the part to run at 1.6 to 1.7 GHz, it should still run circles around the competing low-end ARM Holdings Cortex A7 and Cortex A53-based parts. In terms of graphics performance, the PowerVR G6430 is very high-end stuff as well.
Another point to consider is that the Z3580 doesn't integrate a cellular baseband on the same die as the applications processor, so even if Intel is selling the part for $7, Samsung still needs to buy a separate modem from Intel for what could ultimately be $10-$15 per unit. This may be a low-end design win, but the performance of this device should be upper mid-range to high end, depending on when the product actually launches.
The broader strategic view
While Intel has been moderately successful at winning modem sockets at Samsung in the past, it has been unable to win meaningful applications processor sockets. In particular, Intel once powered the 10.1-inch variant of Samsung's Galaxy Tab 3; however, not only was that tablet mediocre at best, but when it came time for the Galaxy Tab 4 to hit the shelves, Samsung booted Intel out in favor of a low-end Qualcomm Snapdragon 400.
In fact, it is pretty well known at this point that Samsung is vying hard to win Qualcomm's business on the foundry side of things. This means that Samsung -- which sells nearly a third of the world's smartphones -- could have some pretty significant influence on where Qualcomm could choose to build its chips, as pointed out in my earlier piece discussing the Galaxy Tab 4 design win. Guaranteed wafer volume for Samsung and guaranteed design wins for Qualcomm -- it's a great match!
So, where Intel fits into this -- as a direct foundry and chip competitor to Samsung -- remains to be seen over the long haul. Could Samsung Mobile really become a larger long-term customer of Intel's if Intel can deliver a world-class product lineup? Or is Intel simply being used as a bargaining chip on Samsung's part to try to get better pricing and/or foundry business from Qualcomm?
Foolish bottom line
If this report turns out to be true, it'll be interesting to see what design Intel's chip ends up in over at Samsung and what regions it's likely to be sold in. I'm not completely sold on the idea that Samsung plans on using Intel broadly across its smartphones, even when or if Intel's chips become unequivocally competitive with Qualcomm's across every vector, but as with all business dealings, things are never as simple as they may seem on the surface.
