By now, it's common knowledge that Microsoft's (NASDAQ:MSFT) Surface 3 is powered by an Intel (NASDAQ:INTC) Atom x7-8700 processor. Although this design just isn't going to move the needle financially for Intel, I do think that the Surface 3 design win is important to Intel for a few other reasons.
Microsoft confident in Intel's future Atom chips
If we assume that Microsoft is serious about its Surface (non-Pro) lineup of tablets, then it's likely that the company will want to release new iterations of the device each year. Although AMD has talked about entering into the market for low-power x86 tablet chips, Intel is realistically -- in my view -- the only reliable vendor of such chips today.
Seeing Microsoft choose an Intel Atom processor for the Surface 3 suggests, at least to me, that Microsoft is reasonably confident in Intel's ability to deliver future Atom processors for future Surface devices in a timely fashion.
It almost goes without saying, but I'm sure Microsoft expects those chips to be competitive, to boot.
Major tablet vendors, such as Samsung and Apple, release their flagship tablets on an approximately one-year cadence. If Microsoft is launching the Surface 3 in early May 2015, then I would expect follow-on devices to launch at approximately that same time in the coming years.
This means that Intel will need to have its Broxton system-on-chip (the follow-on to the Cherry Trail-based Atom x7) shipping to customers by the end of 2015 for a mid-2016 launch. This also implies that Intel will need to ship its 10-nanometer Atom processors by the end of 2016 for mid-2017 product launches.
I'm hoping that Intel will give a substantial update on when it plans to launch next-generation Atom processors later this year at the Intel Developer Forum in San Francisco in August, or at the company's investor meeting in November.
Right now, it's pretty clear that the top ARM chips in the market deliver more performance than the top Atom processors today. This is OK in the near term, as the Intel chips can fundamentally run full Windows and applications, while ARM chips, no matter how fast, just can't. Longer term, though, I'd imagine that Microsoft and Intel want to deliver best-in-class tablet/convertible performance.
This is important not just for "bragging rights," but also because the Surface (and other Windows convertibles like the Surface) are honest-to-goodness Windows computers, and many non-mobile applications, such as games and intense productivity applications, will benefit from having as much performance as possible.
A hero for Atom
Although Intel was able to ship more than 40 million tablet chips during 2014, it's hard to think of too many high-profile designs based on those chips. The Microsoft Surface 3 is easily among the highest-profile mobile designs Intel has ever won with an Atom processor.
There doesn't seem to be an "Intel Inside" sticker on the Surface 3, but reviewers and customers will almost certainly talk about the processor inside. If the system "feels" fast in the tasks that people use it for -- and I think it will for the most part) -- then this could build up the credibility of Atom with consumers and investors, alike.
Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple. 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.