Intel (NASDAQ:INTC), as we all know by now, is the world's largest semiconductor manufacturer by dollar volume. We also know that Intel provides up to 90% of the CPU chips used in Windows Personal Computers. We also know that he PC business has experienced two years of softness.
The Name Game
In the early days of PCs, Intel used a well understood number system for their CPU chips; 80286, then 80386, then 80486. During these times, competitors, mainly AMD (NASDAQ:AMD) simply numbered their processors using the Intel numbering system whether the devices were fully compatible or not. Since numbers can't be copyrighted, AMD and others were clean legally. So Intel, at what would have been the 80586 level, decided to name the CPUs and copyright the names. Brilliant, just brilliant. Now a guy like me, who has difficulty reciting the names of my immediate family, has to keep track of literally hundreds of names of different Intel computing devices by name.
OK, with that rant out of the way, let's run down the name game:
Silvermont, which is the new, 22nm replacement for the five year old Atom design will be introduced on Monday, May 6, 2013 .
Since the Silvermont is the new Atom architecture, it will be the foundation for a family of SoCs (System on a Chip) with different names. So Monday, we will actually hear about a SoC called Bay Trail, the heart of which will be the Silvermont CPU.
The BayTrail is a quad Silvermont core version SoC, which will be aimed directly at replacing the ARM (NASDAQ:ARMH) based SoCs used in tablet computers. The manufacturers in the cross hairs are Samsung (OTC:SSNLF) (including the Apple (NASDAQ:AAPL) fab versions of ARM derived parts), Qualcomm (NASDAQ:QCOM), Nvidia (NASDAQ:NVDA) and other sellers of ARM based chips for use in tablet computers.
At 22nm and chronologically the newest design available, Bay Trail will outperform any ARM based chip design while delivering longer battery life.
There is some subtle genius in Intel making tablets the first serious target in mobile devices. First, only an x86 device can run full Window 8, we're not talking about Window RT, which is an abbreviated, and largely failed, version of Window 8. Bay Trail will run full up Win8.
95% of people using PCs use Windows/Intel (WinTel) machines. Until very recently, there were zero tablets that could run the full version of Windows 8. In only one calendar quarter of availability, Windows 8 tablets based on the Intel Clovertrail SoC have claimed 7.4% of the tablet market and shipped three million units. Bay Trail will provide even a higher level of performance and a longer battery life than Clovertrail.
While the analysts seem to have missed it, the 95% of PC users who know and understand Windows would really like a product that is compatible with their Win/Tel machines in their offices and homes. I have to emphasize this; no ARM based tablet computer can run Window 8. This one fact alone should make ARM based tablets obsolete for all but the Apple Mac market.
Since the Mac market is only 5% of the PC market and the iPad is 50% of the tablet market, presumably many PC users have been forced into a mismatch; a Windows PC and an iOS tablet. These users would prefer the unified look and function of a Windows based tablet that matched their PC. I am such a user, and I find it frustrating to have to switch gears between my PC and totally unfamiliar tablets, both iOS and Android.
The good news doesn't stop there. Bay Trail is also capable of running Android, the second most widely used operating system in tablet computers. Don't be surprised if we learn that Bay Trail will be able to switch back and forth between Windows and Android for those who find that functionality useful.
You can listen to the Intel Bay Trail introduction webcast here on Monday.
The next Intel move in mobile will be with the Merrifield SOC. The Merrifield is expected to be available by the end of the year. The Merrifield is dual Silvermont core SoC that is optimized for smartphone use.
The existing 32nm Clovertrail SoC, already beats ARM based phones on almost every benchmark. The 22nm Merrifield chip will add to performance and battery life.
The smartphone segment presents problems not present in the tablet segment. In smartphones, nearly two-thirds of the chip business is locked up with Samsung and Apple. The SoCs with these two companies are captive in that the Apple device is a custom chip manufactured by the arch Apple enemy, Samsung. And of course, Samsung SoCs are manufactured by, surprise, Samsung.
Penetrating the smartphone business will be a little trickier, but even Apple and Samsung will have to adopt a superior technology if they are to remain competitive in the smartphone market.
Intel will need a lead customer to get the conversion process started. That lead customer could well be Google/Motorola with their X-phone, which is to be introduced later this year. Intel and Google (NASDAQ:GOOG) have worked together for nearly two years to optimize Android to work with x86 processors. The higher performance and longer battery life of Merrifield in an Xphone will cost Samsung and Apple smartphone sales.
Superior performance and longer battery life of the Merrifield will eventually cause even Apple and Samsung to include the Merrifield in their new designs. Paul Otellini of Intel has often said that if the Intel smartphone SoC solution is compelling enough, even Apple and Samsung will have to use it. With Merrifield, that time has arrived.
So, to review:
Silvermont is the redesigned 22nm Atom core architecture.
Bay Trail is the quad Silvermont SoC targeted at tablet computers.
Merrifield is the dual Silvermont SoC targeted at smartphone.
High performance, supercomputing - check+
High performance and low cost data center - check+
Personal computers - check+
Foundry and custom - check-
Tablet - in process - Bay Trail
Smartphone - in process - Merrifield
The next Intel salvo in the mobile chip war will be launched on Monday -- don't miss it.
Disclosure: I am long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.