Intel (INTC) has been trying to break into the mobile markets for quite some time. It even got close with a few design wins from friendly OEMs like Motorola or Lenovo (OTCPK:LNVGY). But in reality it never really broke through. ARM (ARMH) designs always kept a strong hold on 90%+ of the market, no matter what.
That is about to change, and this time it's for real
I'm not even talking about the present Clover Trail+ design wins, namely with the new Samsung Galaxy Tab 3. This is already significant because Samsung is a first tier OEM and is certainly not giving Intel this win because of its friendly nature. Samsung is doing something predictable taking into account the latest benchmarks (on a Lenovo K900), which show Clover Trail+ to be competitive with the present smartphones at the highest end.
But as I said, Clover Trail+ is not the reason why I'm penning this article. Intel's Silvermont architecture, which will be on products before 2013 is out, is the real singularity about to hit ARM. This architecture is entirely new, and showcases Intel's superiority both in product and process technology. The same superiority which relegated AMD to "also-ran" status.
This superiority, according to Intel's internal benchmarking, will lead to a substantial gap in performance, or, for the same performance, substantially lower power consumption. Among Intel's presentation, the following slide stands out:
This is showing that Intel expects to deliver twice the performance of competing tablets at the same (1.5W) power, or to consume 4.3 times less power at the same performance. With Clover Trail+ having reached parity, this bodes for a singularity in Intel's favor. And worse still, its greatest advantage is in power consumption - the very heart of the mobile race where there is still ample ground to make up, and which both OEMs and consumers highly value.
The possible catalyst which might open the floodgates
While the performance and power consumption specs, by themselves, are probably enough to extend Intel's penetration into the market well beyond what Clover Trail+ will manage, the really large impact will probably come all at once. This impact will come from the likely adoption by Intel either during the iPhone 6 cycle in 2014, or most likely during the 2015 cycle.
The reason is simple. Apple (AAPL) greatly values power consumption, as seen from the way it kept the iPhone's ARM-based CPU at 800Mhz long beyond necessary. Apple is thus highly likely to spring for the state-of-the-art if it guarantees it outstanding power consumption, which Silvermont seems likely to. Also, Apple is already using Intel in its OSX products, and would probably gain efficiencies internally from concentrating on a single architecture. The wildcard would obviously be backward compatibility, though re-compiling apps would probably enable it.
Thus, on the day Apple decides to go with Intel on mobile, ARM will instantly lose around 25% of the smartphone market in one single blow. While the market could conceivably accept slow erosion, such hit would be impossible to ignore.
Intel's possible failure
There is one ground where Intel might yet commit somewhat of a blunder. I'm talking about the GPU that's rumored to come with Silvermont. This is supposed to be based on Intel's HD4000 but with 1/4th the power, and thus at about the level where the iPad 4 is today. But unfortunately this market is fast-moving and where the iPad sits today is not where it will sit in one year's time. That's a possible weakness here.
Intel's further wildcard
Another wildcard is the fact that Intel will bring down its Haswell architecture to fanless tablets. A fanless tablet with the kind of power Haswell provides will blow everything else out of the water. The main problem with Microsoft's Surface Pro could be said to be the fact that it still has a fan, which makes it much thicker and heavier, as well as less reliable.
At the class of power Haswell provides we already know no other company is able to field a competitive product, so this also effectively cuts ARM's wings above Silvermont (if it were able to field anything there).
ARM is just the IP vendor for ARM CPUs, but these are then produced by a multitude of OEMs. Of these, several trade in the stock market, including Qualcomm (QCOM) and Nvidia (NVDA). Intel's forceful entry into the mobile market isn't just negative for ARM, it's also deeply negative for these vendors.
Intel has reached parity with Clover Trail+, and is now getting ready to launch Silvermont before the year is out. Silvermont seems likely to finally be wildly superior to anything that ARM is fielding this year or next, so Silvermont is likely to give Intel its much-coveted beachhead into the mobile market.
Not only that, but Silvermont's superiority seems so large, and its upgrade schedule is so aggressive, that most probably Intel will switch towards it either during 2014, or most likely in 2015. When this happens, ARM will lose 25% of the worldwide smartphone market in a single hit.
These developments are positive for Intel and deeply negative for ARM, which to make matters worse trades at a huge valuation premium - its EV/EBITDA stands at 45.3 times.
But it doesn't stop there. These developments are also significantly negative for OEMs producing ARM on a license, like Qualcomm and Nvidia. The current design wins by Intel mean the dam has been breached, when Silvermont arrives the floodgates will surely open.
In short: Buy Intel on weakness. Sell ARM. Sell Qualcomm. Sell Nvidia on strength.