When Intel (NASDAQ:INTC) spilled the proverbial beans on the technical specifications of its Atom x3 chips aimed at smartphones and tablets, one thing I found quite surprising is that the chips integrated graphics processors designed by ARM (NASDAQ:ARMH).
ARM's graphics processor IP is very popular in smartphones and tablets, ranging from very low-cost chips to very high-end processors like the Samsung (NASDAQOTH:SSNLF) Exynos 7420 in the Galaxy S6. Intel using ARM graphics was a surprise, at least to me, because Intel had previously used either its own graphics or graphics from ARM's smaller rival, Imagination Technologies (NASDAQOTH:IGNMF).
The question, then, is will Intel continue to use ARM graphics in future Atom x3 parts, particularly as Intel plans to manufacture future Atom x3 chips on its own manufacturing technology?
Magic 8-ball says: "Signs point to yes"
In a recent AnandTech interview with Intel's Aicha Evans, VP of the company's communication and devices group, Evans seemed to give a lot of "hints" as to what Intel's graphics strategy with Atom x3 is.
In particular, she made it clear that Intel will "use the [intellectual property] that is suited for the appropriate segment." She also said -- and this is probably the more relevant quote -- that her goal is to "optimize [research and development] for Intel," citing the fact that margins in low-cost mobile chips are slim and that the business is "tough."
Breaking this down into investor-speak, Intel may indeed continue to use ARM graphics to accelerate time to market and minimize operating expenses.
Why do the extra work?
ARM and Imagination, the two major vendors of graphics intellectual property, put in a lot of effort putting together different graphics blocks aimed at various performance/power/area targets. These vendors make their money by offering and licensing such technologies to suit various licensee needs.
Intel makes a lot of money from PC processors, so it's worth it to the company to have control over its own graphics technology. High-end phones and tablets have similar performance requirements to low-power PCs, so Intel can likely scale its PC-first technology into those segments.
However, for mainstream/low-cost smartphones and tablets, the same technology isn't likely to be so easily leveraged. Why? Well, there is a significant difference in the prices of high-end tablet/phone chips and low-end and midrange smartphone processors.
ARM refers to its higher-performance graphics processors as "performance efficient" graphics, while it refers to its lower-performance graphics as "cost efficient" graphics. On ARM's website, the company specifically says that "cost efficient GPUs" are "optimized to provide high performance, energy efficient graphics in the smallest possible silicon area."
Intel could spend the time and money to try to develop area-optimized variants of its own graphics. However, ARM has more experience developing graphics for this segment, and it's willing to license it out for a pretty modest per-chip fee. It might more sense for Intel to just license this technology rather than spend the money trying to "reinvent the wheel" in that segment, as long as doing so yields competitive products.
What about Imagination?
Perhaps the most surprising thing to me was that Intel hadn't chosen Imagination graphics for the initial Atom x3 parts. Intel had used Imagination graphics in multiple generations of its phone/tablet chips, and until fairly recently, Intel even had a significant equity stake in Imagination.
In light of that, I found the following quote from the interview with Evans quite interesting:
So obviously in the portfolio I will carry Intel graphics, but do I want to carry three architectures? I'm not quite sure -- there would have to be a business need or a business reason or maybe one of our partners would, but I can tell you I love Imagination and I am not confused about what they are able to deliver in other platforms. Hossein and his team do amazing work. Now whether we personally will use it or not I don't know but I am very pragmatic -- we look at the ASP (average selling price) band, we look at the segments, we look at the software requirements, the system level view and then we do what makes sense.
In other words, high praise for Imagination, but I don't get the impression that there are any plans to use the company's graphics in the near term. It seems to me, then, that the 14-nanometer Atom x3 parts will likely continue to use ARM graphics.
Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. 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.