The Intel-Qualcomm Fight
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There is a fight raging between two giants in the semiconductor sector that is really heating up.
In one corner stands Intel (NASDAQ: INTC), the world's leading PC chipmaker. And in the other corner stands Qualcomm (NASDAQ: QCOM), the number one chip manufacturer for mobile phones.
The recent Consumer Electronics Show in Las Vegas put the spotlight on the battle between the two companies whose chips are beginning to encroach on each other's territory.
Intel couldn't stop talking about its Atom Z2460 processor. It is the first system-on-a-chip from the company to be competitive with chipsets from mobile phone chip manufacturers like Qualcomm, which are based on chip architecture designed by the British company, ARM Holdings ADR (NASDAQ: ARMH).
The new processor offers a dramatic reduction in size and power requirements from Intel's previous efforts to break into the mobile chip market. For years, Intel chips have been far too power-hungry to work well in mobile phones. But despite the advances, Intel is still behind the technological capabilities of its rivals. Qualcomm is moving to quadcore chips.
Intel introduced the first smartphone to feature its Atom processor, a Lenovo phone that will go on sale in China sometime in the second quarter of 2012. Intel and Motorola Mobility, the phone maker being bought by Google (NASDAQ: GOOG), announced a long-term relationship starting with Motorola shipping smartphones using Atom chips in the second half of 2012.
Qualcomm counterpunched by announcing its move into the PC world. The company said it would take advantage of the decision by Microsoft (NASDAQ: MSFT) to make its latest operating system, Windows 8, compatible with Arm-based chips.
This opens up that whole space to Qualcomm and other makers of Arm-based chips.
Qualcomm said its latest S4 Snapdragon would be inside laptop and tablet computers before the end of the year. The company claimed that more than 20 companies had over 70 non-phone devices in the works using S4 Snapdragon processors.
The rising popularity of smartphones and tablets as access devices to the internet and the relative decline of PCs has inevitably drawn Intel and Qualcomm together on a collision course.
According to Linley Group, a consultant for the communications semiconductor market, the market for mobile phone chips will grow 40% by 2015 to nearly $30 billion. The market will reach 1.1 billion units by 2015, up from 300 million last year.
Intel cannot afford to sit idly by and concede this lucrative market while its business slowly disappears. PCs switching to ARM chips could cost Intel $2.2 billion in sales by 2015, according to Lazard Capital Markets.
It definitely has more to lose and less to gain in this fight than does Qualcomm.
Grabbing 10% of the market for mobile phone chips, for instance, would not be significant to Intel's overall sales. Meanwhile, competition coming from Arm-based chips in the PC market (where it has a more than 80% market share) may hurt Intel's high average selling prices.
There are forecasts that Arm-based processors will grab as much as a third of the market for mobile computers by 2015, up from just 8% last year. The total market in this sector is expected to grow to 340 million units from 275 million units in 2010.
These figures are significant when one considers that Intel's processors have an average selling price of about $107, according to Mercury Research. The average selling price for the typical processor in a mobile phone sells for less than $20 each.
Bottom line for now is that it's still anybody's fight with Qualcomm having a very slight advantage over Intel thanks to the move by consumers toward mobile devices.
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