Intel and ARM Holdings are Becoming Competitors
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Year by year we have been witness to the gradual transmutation of the computer from desktop to mobile. We are now accustomed to carrying mobile devices and computing is a part of our lives now, not a task we do at a desk. In the midst of this change, the PC market and the mobile market continue to draw closer and closer together. It has become so overlapped that two tech companies are now camping in each other’s backyards. Intel (NASDAQ: INTC) and ARM Holdings (NASDAQ: ARMH) continue to run into each other as their two worlds collide. Who has the edge?
There are three events that have extremely weakened the semiconductor marke -- the Eurozone crisis, low global GDP growth-rate and the economic slowdown. In this harsh environment many in the industry have struggled. Companies like ARM Holdings experienced an 11% decline in earnings. How is it that a powerhouse like Intel can post a 4% (year over year) increase in revenue for the second quarter of the year and others can’t? This is a perplexing question, especially when ARM in centered upon the mobile market and Intel is still anchored in the PC market. The demand for smartphones and tablets remain strong, the slowdown in the PC market remains a cause of concern for the semiconductor industry.
Intel, like other global companies has been forced to reduce the rest of its 2012 projections. At the same time, market definition is developing different shades of gray. Intel is getting closer and closer to a direct face-off for business with ARM as technology brings the respective markets together. When we talk about the emerging markets as the center of PC growth, we have to remember that right now Intel has over 80% of the global PC market with superior microprocessors. ARM, as a competitor may find a niche market in less expensive PCs for the emerging markets. Yet in the Asia-pacific region Intel reigns with a 5% increase in revenues while ARM showed a decline. So Intel definitely has the edge where the future of the PC industry is expected to grow. The competition will heat up as both companies begin the clash even more.
The Mobile Market Heats Up
Intel recently entered the mobile market in early 2012. But how well can its business model adapt to the mobile market, which is so different from the PC market? ARM is a mobile market chip producer and has its tentacles in 90% of all smartphones and is also found in tablets. As these two companies draw closer and closer, can Intel adapt to such a different market? These companies have been moving closer for several years. Intel’s superior processors also consume a lot of energy and this is problem in the mobile market where battery life is key issue. So it is working on driving down power consumption. At the same time it has been increasing the energy efficiency in its Atom Platform making the Atom Z2460 Medfield chip. This chip can be found in smartphones from India like Orange, Lenovo and Lava International. It also hopes to have its Ivy Bridge processors in numerous tablet designs.
While Intel moves into ARM’s territory, so it is pushing into Intel’s. It is exploring partnering a move into energy-efficient chips into PCs and low-power servers. But the future battle is in the mobile market. Computing is no longer a task we do, but a way of life we carry with us. And this is where ARM dominates right now.
So Alliances are being Drawn up!
- Microsoft (NASDAQ: MSFT) last month unveiled its own tablet, the Surface, which is powered by ARM chips.
- Hewlett-Packard (NYSE: HPQ) and others now are expected to first come out with Intel-based tablets running Windows 8, rather than directly compete with Microsoft’s device.
- Asus this month have been showing off an upcoming tablet—code-named Tablet 600—which runs Windows RT and is powered by Nvidia’s (NASDAQ: NVDA) ARM-based Tegra chip technology, demonstrating what the combination of ARM chips and Windows can do.
Right now ARM may have a networking advantage over Intel. ARM estimates it has more than 275 such partners.
ARM may have the upper hand presently because the ever expanding market favors its business model. It has the partnerships with a core base of low power-high efficiency system. But as Intel develops its Atom chip after the same manner, it may have a different edge over ARM. Intel can set itself apart from ARM in its ability to add greater security features via its acquisition of security software company McAfee. Embedding tighter security features will drive up margins and quite possibly attract more smartphone vendors to its platform. So the battle continues between Intel and ARM as technology draws them closer and closer in competition.
johnmylant has no positions in the stocks mentioned above. The Motley Fool owns shares of Intel and Microsoft. Motley Fool newsletter services recommend Intel and NVIDIA. 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. If you have questions about this post or the Fool’s blog network, click here for information.
