Intel Corporation (NASDAQ:INTC) holds long-term advantages over smaller rival Advanced Micro Devices, Inc. (NYSE:AMD) in the microprocessor industry. While there have been rising fears that Intel Corporation (NASDAQ:INTC) may have trouble competing with emerging processor design firm ARM Holdings plc (ADR) (NASDAQ:ARMH), I believe this has been blown out of proportion. Intel Corporation (NASDAQ:INTC) is the dominant force in the roughly $30 billion computer processor market, and has benefited tremendously from the proliferation of personal computers in the past few decades. Intel Corporation (NASDAQ:INTC) has long held the lead in microprocessor technology and performance, while Advanced Micro Devices, Inc. (NYSE:AMD) has mostly been an also-ran. Although Advanced Micro Devices, Inc. (NYSE:AMD) has emerged periodically as a threat, such occurrences are few and far between. After being caught off-guard several years ago when Advanced Micro Devices, Inc. (NYSE:AMD) narrowed the competitive gap between the two firms, Intel Corporation (NASDAQ:INTC) has gone on an impressive streak of out-innovating its smaller foe while reasserting its stranglehold on the microprocessor market.
The runaway success that Intel has had in the processor market can be traced back to the firm’s economic condition. As the world’s largest semiconductor company, Intel has a massive research and development budget that is unmatched. In addition, it has the financial resources to invest in cutting-edge semiconductor manufacturing technologies. These advantages enable Intel to push processor performance and lower manufacturing costs at a much faster pace than AMD. Although Advanced Micro Devices, Inc. (NYSE:AMD) has shown it can trump Intel in a particular processor generation, it has never been able to maintain its lead in successive generations.
In the microprocessor market Intel has seen the emergence of a new competitor in ARM Holdings plc (ADR) (NASDAQ:ARMH), which can be real threat to Intel and whose processor designs populate most smartphones and tablets. ARM’s attempting to move upstream, while Intel tries to extend its presence downstream with its Atom chips.
ARM’s growing presence in server processor IP should allow the firm to gain modest market share and receive another top-line boost, and it has projected 18% annual revenue CAGR for the company over the next five years. ARM Holdings plc (ADR) (NASDAQ:ARMH) reported strong first-quarter earnings and gave investors a solid second-quarter outlook that was in line with my expectations for the firm.