It's no secret that ARM Holdings (NASDAQ:ARMH)-based processor designs dominate the smartphone market. Chip giant Intel (NASDAQ:INTC) has been trying to develop products for this market for some time, but its applications processors have failed to gain meaningful traction. According to ARM, that will not change this year.
"No significant smartphone share loss"
During ARM'S latest earnings call, Liberium's Eoin Lambe asked about what impact, if any, Intel's efforts in phones (particularly vis-a-vis its partnerships with Rockchip and Spreadtrum) are being baked into ARM's royalty revenue forecast.
ARM CEO Simon Segars offered a succinct response: "So we're not assuming any significant market share loss in smartphone in any of the numbers and outlook that we've given today."
In other words, ARM's management team doesn't believe its partners (from whom ARM collects royalty revenue for its designs) will lose meaningful share to Intel this year.
Does this claim hold up?
I've seen ARM break down the smartphone total addressable market into the following segments:
- Entry level
In the premium space, Intel has nothing to compete with during 2015, so ARM will maintain market share essentially by default.
In the midrange, Intel has its Moorefield platform, but I'm not convinced it has the integration levels necessary to compete in the space. Lenovo (OTC:LNVGY) and Asus have announced a few phones based on this platform, but I'm not holding my breath for too many more designs. So ARM's market share in the midrange is probably safe this year, too.
The low end is where things could get interesting. Intel claims to have qualified its first integrated applications processor-plus-3G-modem (known as SoFIA 3G) in the fourth quarter of 2014. The company also expects to qualify its applications processor-plus-LTE-modem in the first half of 2015 for mid-2015 availability.
These parts should be better suited for the low end of the smartphone market than were any of Intel's prior efforts, but it's not clear what kinds of volume or share they can ultimately capture. I think the SoFIA chips (particularly the first LTE flavor) will sell much better than the prior Intel chip designs, but I don't expect them to drive a massive market share shift.
ARM safe in 2015, but 2016 could get tougher
ARM appears correct to not factor in market share loss in smartphones in its financial forecasts for the year. The vertically integrated smartphone vendors all use ARM technology today, and the top merchant chip vendors all use ARM CPU cores.
However, in 2016, Intel has signaled that it plans to roll out a complete stack of mobile processors built on its 14-nanometer technology. If Intel can get these products out in early 2016, it could finally start to take enough share in phones for the shift to show up in ARM's financial results.
However, given how well ARM and its partners have executed in this space, and the difficulties Intel has seen thus far, meaningful smartphone share gains for Intel in 2016 are hardly guaranteed.