On Wednesday, Intel (NASDAQ:INTC)mobile division chief Hermann Eul gave a presentation at the Nasdaq investor program in London. The presentation itself rehashed the address he gave at the company's investor meeting on Nov. 20, but during the Q&A session an analyst asked a very interesting question -- the answer to which was quite surprising.

First, some background. According to AnandTech's Brian Klug, a typical cellular baseband processor usually consists of an ARM (NASDAQ:ARMH) CPU core and a digital signal processor, or DSP, "running a realtime OS of some kind." In fact, Klug noted last year that "at some level the modem really just is another [applications processor] running a different workload with a very specific DSP on board."

While Intel generally does not advertise what CPU core powers its latest baseband processors, it is widely accepted that they use ARM cores. However, Eul this week suggested this will not be the case going forward.

The Q&A snippet
During the Q&A session, Eul was asked whether Intel believes it can fully "displace" the ARM core.

Eul offered the following response: "In the SoFIA architecture, yes, we have displaced the ARM core that was usually formally used in the communications processor. Then also the communications protocol stack also runs on Intel architecture."

So, at the very least, the SoFIA product, which integrates the cellular baseband and the applications processor, will not feature an ARM core to perform the baseband functions; it will all run on an X86 core.

Although it's not clear when Intel will transition its stand-alone baseband modems to the X86 core, I would guess that if the company does not use an X86 core inside the upcoming XMM 7360 modem, it will do so with the XMM 7460 that will be built on Intel's 14-nanometer manufacturing technology. My expectation is that this would be a perfect use for Intel's Airmont processor core.

What could this mean for ARM and Intel?
Intel's cellular baseband revenue is not particularly high today, but I think it will become a major player -- a very strong No. 2 to Qualcomm -- in the coming years. To the extent that Intel gains share in integrated applications processors and cellular basebands, ARM will feel the impact (in a future article, I'll explore the potential impact in greater detail).

This means Intel does not have to pay ARM the royalties that it had to with prior generations of cellular products. While this probably doesn't move the needle too much in terms of Intel's overall cost structure (ARM's royalty rates average sub-2%), every penny saved allows the chip maker to be more competitive in highly price-sensitive markets.

Ashraf Eassa owns shares of ARM Holdings, Intel, and Qualcomm. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.