The biggest threat to Intel (NASDAQ:INTC) isn't ARM Holdings (NASDAQ:ARMH), Advanced Micro Devices (NYSE:AMD), or quite frankly even Qualcomm (NASDAQ:QCOM). It's Samsung Electronics (OTC:SSNLF), and as an Intel shareholder, this is the one company that I would truly regard as a truly fierce long-term competitor.
Samsung's Got Cash And Fabs
The other ARM licensees that I mentioned are fabless. This means that they're at the mercy of the process technology development at foundries such as Taiwan Semiconductor (NYSE:TSM) and Global Foundries. Intel has a process technology lead over these fabs, and I don't really see that gap closing anytime soon.
But Samsung has its own fabs for both memory and logic. Now, granted, Intel is still ahead of Samsung in terms of process technology for logic, but if there's any company that could afford to outspend even the mighty chipzilla in a bid to catch up, it's Samsung. Why? Samsung makes more profit in 6 months than Intel makes in a year, thanks to its smartphone device sales. It's one thing to make 60% gross margin on $100 ASP chips, but you're in a totally different league when you're pulling 50% gross margins on $500+ smartphones.
The good folks at the iHub Intel boards linked me to a very interesting Samsung Electronics LinkedIn page in which the company states very clearly that it is staffing up CPU and GPU design teams for future mobile products (phones, tablets, and computers). The whispers on the street (which are confirmed by looking at multiple LinkedIn profiles) are that Samsung basically hired the majority of AMD's Austin design team (low power X86). Even CEO Paul Otellini at the Sanford Bernstein conference a few months ago noted that he suspected this was the case.
Give the talented AMD (among the others poached from elsewhere) engineers a blank check and all the resources they need to do something truly extraordinary (i.e. Intel-like), and the world now has another very serious CPU design and fabrication powerhouse. That's what Samsung seems to be building.
It will take some time to get these folks building something really wonderful, but Samsung has the money to plow into the venture as well as infinite patience afforded to it by its huge income from device sales.
Only The Paranoid Survive
Samsung could very well prove to be a major long-term threat to Intel. Samsung's bigger, makes a lot of money, and sells both devices and chips, in addition to almost every other part of a modern computing device. Intel needs to be very, very paranoid. Do not frown on Intel for making major R&D and capex investments; it needs to keep making them in order to maintain its leadership position against Samsung in processors.
Additional disclosure: I am short ARMH.