In 2006 Intel Corporation (NASDAQ:INTC) pushed International Business Machines Corp. (NYSE:IBM)’s PowerPC processor architecture into obscurity when Apple Inc. (NASDAQ:AAPL) switched its Macs over to Intel processors. In its quest to conquer mobile computing, can Intel overwhelm the ARM Holdings plc (ADR) (NASDAQ:ARMH) architecture in the same way?
Reversal of fortune
The market’s current valuation of Intel Corporation (NASDAQ:INTC) (P/E of 10.18, courtesy Motley Fool) suggests that many have written off Intel’s efforts to get into mobile computing. After all, since the iPad’s introduction in April 2010, no competitive tablet with an Intel processor had even existed through the end of last year. And Intel’s efforts to get into mobile phones fell very flat with its mobile phone platform only making limited appearances overseas but not in the US.
Early this year, this situation started to change as tablets, such as Hewlett-Packard Company (NYSE:HPQ)‘s ElitePad 900 and the Microsoft (NASDAQ:MSFT) Surface Pro, began to hit the market. Intel’s next (4th Gen) Core architecture, code named Haswell, which is due possibly in June, has the potential to combine the thin and light form factor of ARM Holdings plc (ADR) (NASDAQ:ARMH) tablets with the computational power of Intel Core processors.
The stage seems to be set for Intel Corporation (NASDAQ:INTC) to recapture its role as the purveyor of commodity processors for personal computing, but in the mobile arena. Indeed, in a previous article, Why Microsoft Needs Intel’s Haswell CPU, I proclaimed this future and urged Microsoft Corporation (NASDAQ:MSFT) to embrace it. It is, I believe, the only future that Microsoft has. But is it inevitable that the rest of the mobile device makers will follow suit? Is the future of mobile devices the same rather bland present of commodity Intel PCs?
In trying to arrive at some answer to this question, I was struck by the similarities as well as differences with Intel’s battle with PowerPC.
Both ARM (which stood originally for Advanced RISC Machine) and PowerPC implemented RISC (Reduced Instruction Set Computing) processor architectures that were supposed to provide higher performance in a simpler, lower-cost implementation. Although it was argued that RISC had inherent advantages compared to Intel’s x86 processors, Intel Corporation (NASDAQ:INTC) was able to mitigate or eliminate those advantages through heavy investment in design and fabrication improvements.
Apple was the principal user of PowerPC processors, and was part of the PowerPC alliance along with IBM and Motorola. Today, Apple is one of the most important users of ARM architecture devices, and at one time held a stake in ARM Holdings (NASDAQ:ARMH). Microsoft, as before, is closely associated with Intel processors, despite its Windows on ARM initiatives.
Unlike the PowerPC, ARM Holdings plc (ADR) (NASDAQ:ARMH) architecture processors have a much larger customer base. In addition to Apple, there is the whole of the Google Inc (NASDAQ:GOOG) Android ecosystem, especially Samsung, with an interest in defending ARM against Intel. PowerPCs were the upstart challenger to Intel, but now the tables are turned and it’s Intel challenging the incumbent ARM hardware ecosystem.
Perhaps the most important difference is that in mobile computing, RISC processors may have found their perfect niche. Intel could easily overpower PowerPC in desktops, where power consumption wasn’t a consideration. Intel Corporation (NASDAQ:INTC) has and will continue to find it difficult to achieve the low power performance of ARM processors that consumers have come to expect in their mobile devices. However, I wouldn’t discount Intel’s resourcefulness in this regard.
Intel Corporation (NASDAQ:INTC)’s impending assault on the mobile device market involves another deeper conflict of technological trends. As processor manufacturers have been able to squeeze ever more transistors onto their chips, more and more functionality has been moved onto them. This has resulted in two divergent mobile device manufacturing paradigms.