Please ensure Javascript is enabled for purposes of website accessibility

Don't Blame X86 for Intel Corporation's Smartphone Failure

By Ashraf Eassa - May 6, 2016 at 11:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The chip giant's failure to capitalize on this market has little to do with CPU instruction sets.

Mark Hibben, writing for Seeking Alpha, offers up his view of why microprocessor giant Intel (INTC 0.82%) ultimately failed in the market for mobile processors.

"If we accept that Intel mobile processors were not technically disadvantaged, then there is only one way in which they could fail to be market competitive, and that's based on cost," Hibben writes. He goes on to cite a previous article of his in which he claims that "Intel's x86 architecture simply wasn't cost competitive with ARM (ARMH)."

Here's why this explanation is, in this Fool's view, incorrect.

Understanding the anatomy of a modern system-on-chip
A modern system-on-a-chip targeted at smartphones is made up of many different intellectual property blocks, one of which is the CPU complex. To get a sense of what a typical mobile system-on-a-chip looks like, take a look at this shot of the Apple (AAPL 0.96%) A9 chip:

Apple's A9 chip. CPU block in yellow. Image credit: Chipworks.

In yellow, I have highlighted the CPU complex of the A9 chip. Notice that, although it is sizable, it is hardly even the largest block on the chip (that honor belongs to the Graphics Processing Unit, or GPU).

If it is true that Intel's X86 architecture necessitates a die area penalty in the CPU core, in the context of a full system-on-a-chip that penalty just isn't going to be large enough to really move the needle in terms of cost. A competitive x86 product with CPU cores that are slightly larger than comparable ARM-based CPU cores could still do well in the market without being prohibitively expensive.

So, why did Intel fail?
The bottom line is that Intel's chip design teams did not produce competitive products. In some sense, the fact that Intel's products for mobility routinely saw severe delays (often by over a year) is arguably the biggest culprit here; a product that may have been competitive in year X is unlikely to be competitive in year X+1 in an industry where the competition brings out new products each-and-every year.

Beyond that, though, Intel's chips had competitive issues elsewhere. Intel never seemed to be able to successfully integrate an LTE modem with an applications processor, and to date Intel has not demonstrated an LTE modem implemented in its own manufacturing technology (Intel's modems thus far have all been built on third party chip manufacturing technology).

Taking it a step further, though, Intel never achieved leadership in many of the key intellectual properties required for successful smartphone chips (modem, image signal processor, low power graphics, and so on).

In short, a mobile system-on-a-chip requires success in a broad set of intellectual properties and not only could Intel not build those leadership intellectual properties, but it couldn't stitch them together into cohesive system-on-a-chip products for the smartphone market in a timely fashion.

Why write this?
If Hibben's claims are correct, that X86 has this fundamental and significant cost structure disadvantage relative to ARM, then this indeed has negative implications for Intel's core server, PC, and Internet of Things chip businesses.

However, I believe that this argument is flawed and one should not extrapolate from Intel's failure in the smartphone/mobile chip market potential failure in markets in which Intel has demonstrated considerable success.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
$36.99 (0.82%) $0.30
Apple Inc. Stock Quote
Apple Inc.
$142.92 (0.96%) $1.36
ARM Holdings plc Stock Quote
ARM Holdings plc

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.