Advanced Micro Devices (NASDAQ:AMD) has chosen to enter into a strategic partnership with ARM Holdings (NASDAQ:ARMH) for making a low-power chip, code-named "Seattle", which is an all-ARM 64-bit processor intended for use in servers. With "Seattle" AMD plans to move away from x86 architecture for a processor. AMD plans to launch "Seattle" in the first quarter of 2014.
AMD has been making chips based on x86 architecture since the 1980s. The company's long-term strategy is to continue to compete with Intel (NASDAQ:INTC) on the technology front. AMD announced in February last year that it was open to the ARM architecture. The strategic partnership with ARM is a part of their long-term strategy. In this article I'll analyze whether this move will have any significant negative implications for Intel.
AMD's Long-Term Strategy
AMD will incorporate ARM CPUs in its select few APUs initially. Eventually it will integrate ARM cores into all of its processors. AMD has the basic hardware for capturing the low-power mobility and microserver market, but the company is seriously lagging behind its competitors in hardware security.
AMD desperately needs a hardware security technology for remaining competitive in the market. Intel's security platform, the Trusted Execution Technology, isn't a part of the x86 specification, so it isn't covered by AMD's x86 license. Developing its own technology would not only be expensive, it would result in a fragmented market as well. So instead of designing its own technology, the company has chosen to license ARM's TrustZone technology.
Since TrustZone is an ARM technology, AMD needs an ARM CPU to execute it. By doing so, AMD gets access to a hardware security platform that's already in active use. Moving away from Intel's x86 instruction set and embracing ARM processors is driven largely by the explosion in ultra-portable computing.
ARM vs. x86
ARM is a RISC (Reduced Instruction Set Computing) architecture in which instructions operate only on registers with a few instructions for loading and saving data on memory. In contrast, x86 being a CISC (Complex Instruction Set Computing) architecture, can operate directly on memory. ARM being a simpler architecture takes less silicon area and consumes less power than x86. That's why ARM chips are widely used in smartphones and tablets.
But now Intel is challenging ARM in mobility with its Atom chips based on the new Silvermont architecture. ARM chips are designed for mobile devices, while Intel's Atom chips have been scaled down from power-hungry x86 PC chips. Intel is trying to reduce power leakage and improve power management by placing 3D transistors on its x86-based silicon.
ARM's processors today -- including the high-end Cortex A15 and low-end A7 chips -- will beat Intel's chips based on the Silvermont, claims Noel Hurley, vice president of marketing and strategy at ARM's processor division. ARM's Big.Little technology enables the company to produce chips that can flexibly combine low-power and high-performance cores. Samsung (OTC:SSNLF) uses the design on its Exynos 5 eight-core chip, which has four high-performance Cortex-A15 cores for demanding tasks like graphics, and four Cortex-A7 low power cores for mundane tasks like MP3 playback or text messaging.
The Implications for Intel
Things are changing awfully fast in the chip industry. AMD's move to incorporate ARM cores into its chips shouldn't have any negative implications for Intel. Intel has just launched its Silvermont microarchitecture, the new version of Atom, which was a move to capture the ultra-portable computing market. This market is significantly larger than PCs. The only worry for Intel could be that ARM's lead in mobile has started to gather momentum again with AMD's recent move.
The x86 architecture will have a long life in computing products like PCs, and Intel wants to extend x86 in smartphones and tablets as well. ABI Research claims that Intel's Atom offers the same performance but with a much lower power draw than competing chips, ensuring longer battery life and significantly undercutting the ARM proposition its chips offer much longer battery life than traditional x86 chips. James Mielke, vice president of engineering at ABI, said:
His firms' tests show that as the ARM providers increased the performance of their chips, the current drain scaled up as well, reducing battery life. This would imply as ARM's licensees scale up the clock speeds of their chips to meet the increasing demands of apps and other phone software, the battery life of those phones could dip as well.
The war between Intel and ARM has just started. However, the performance-per-watt battle is over, with Intel and ARM now equally competitive. If Intel wins the next battle of power management efficiency, Intel shareholders would be handsomely rewarded.
Disclosure: I am long INTC, ARMH. 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.