Simple answer? Intel.
It has too much of an advantage over its competitors and has unparalleled influence, power, and wealth. Its home territory is very secure, and ARM Holdings plc (ADR) (NASDAQ:ARMH) will have a hard time penetrating that turf.
Intel’s future product releases will also strengthen the company’s already strong position. For example, the new Avoton and Bay Trail chips coming out later this year are (from what I can understand) better than those offered by ARM.
And all this assumes that none of the companies producing ARM’s chips decide to switch. Imagine for a moment: what if, a few months from now, Apple Inc. (NASDAQ:AAPL) decide to start using Intel chips instead of ARM?
Things are starting to look that way. At the moment, Apple relies on Samsung to get its ARM-designed chips for it’s iPhones and iPads. The obvious problem here is that Samsung is one of Apple’s direct competitors, if not its biggest, in the smart phone market. Relying on your mortal nemesis to provide the chips you desperately need doesn’t seem to be the smartest business move. So switching over to Intel chips means that Apple wouldn’t have to rely on Samsung as much.
Consider the costs saved from Apple’s point of view: a deal with Intel Corporation (NASDAQ:INTC) would allow it to diversify its supply chain, thereby bolstering its margins by fostering greater competition in its supply chain. Not only that, but it means that Apple would have greater control over its supply chain and reduce its own risk at a time when its iPhones and iPads are in high demand.
So there is clearly plenty of incentives for Apple Inc. (NASDAQ:AAPL) to eventually switch from Samsung-produced ARM chips towards Intel-produced chips. This phenomenon will only grow as Intel continues to improve its mobile chip designs so they consume less energy and work more efficiently (all the while being cheaper). It’s only a matter of time before this move occurs.
If that were to happen, ARM would be placed in a very bad position, as it would lose an immense amount of royalty revenue from its intellectual property for the chip designs. And considering the way things are angling, as previously mentioned, that just may happen.
My belief is, therefore, that Intel Corporation (NASDAQ:INTC) will grow significantly at ARM’s expense, despite current appearances. So if you want to make money off of this “war” over the coming months and years, then long Intel and short ARM Holdings plc (ADR) (NASDAQ:ARMH).
The article The War over Chips originally appeared on Fool.com and is written by Carlos Roa.
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