Over on Seeking Alpha, contributor Alcaraz Research points out that the chairman of Taiwanese ODM Inventec confirmed to the Taipei Times that well-known smartphone vendor Xiaomi will be entering into the notebook computer market. These notebooks, per the Taipei Times, are expected to begin shipping in either the first or second quarter of 2016.
Alcaraz Research believes that Xiaomi will opt to use Intel (NASDAQ:INTC) processors "simply because Xiaomi is trying hard to copy the Intel-using MacBook."
Can investors safely assume that the upcoming Xiaomi laptop -- which is said to run Linux -- will pack an Intel processor? Let's take a closer look.
It depends on what price point Xiaomi is aiming for
The first potential clue as to whether Xiaomi's laptops will use Intel silicon is the price point Xiaomi is targeting. For mid-range and high-end notebook computers, Intel's processors are the gold standard and, in my view, the only viable choices.
For low-end computers not running Windows, the situation is a bit trickier. The mobile chips from Intel's competitors in the low end of the market are quite competitive with Intel's Atom processors, meaning that Intel wouldn't necessarily "win" such laptops by default.
According to the rumors floating around, the Xiaomi laptop is expected to be priced at about CNY 2,999, which, at current exchange rates, works out to around $470.
At this price point, there are Windows-based laptops available using Intel's low-power Core i5 silicon. This leads me to believe that the odds are very good that Xiaomi's upcoming laptop will use Intel processors.
Did Intel's Kirk Skaugen basically confirm this already?
Upon reading Alcaraz Research's article, I remembered the following statement from Intel's Kirk Skaugen at a recent investor conference: "[T]here are other big brands and consumer electronics out there that we would love to bring in to the PC space, and I am confident if they enter the PC space we'll have them on Intel."
Xiaomi fits the description of a "big brand" in the consumer electronics space that seems to be trying to enter the PC market. Since Xiaomi has very likely already chosen the components that it plans to use for its upcoming laptop, Skaugen almost certainly knows whether Xiaomi is using Intel or not.
What does this mean for Intel? Xiaomi?
From an investment perspective, having Intel supply Xiaomi with PC processors seems to be "neutral." Xiaomi's entry into the PC market isn't likely to grow the total available market for PCs. Indeed, each sale of a Xiaomi laptop will most likely mean that a pre-existing PC vendor loses a sale.
For Xiaomi, this move looks like a positive. Xiaomi's brand is already well known, as it's already one of the top smartphone vendors in China. The company will probably be able to leverage the brand equity it has built up in the smartphone space to capture some of the revenue to be had in the PC market.
That being said, I think that Xiaomi will face an uphill battle trying to sell Linux-powered laptops into a marketplace that's dominated by Windows and, to a lesser degree, Chrome laptops.
If Xiaomi can build an attractive graphical user interface atop Linux and provide many of the key applications that a mainstream PC buyer would want to use, then it could have a chance. However, if Xiaomi can't provide a user experience that's at least on par with Chrome/Windows, then there's a real risk that its upcoming laptops do poorly in the market.
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.