Intel (NASDAQ:INTC) has finally found the magic formula that is going to make it a dominant force in the mobile CPU market. For five long years, Android and iOS device manufacturers ignored Intel's processors and instead used ARM (NASDAQ:ARMH) products from Qualcomm (NASDAQ:QCOM) or Samsung (OTC:SSNLF). However, this is not the case anymore. Intel proved it too can produce a cheap, low-power CPU that is fit to use for smartphones and tablets.
As of October 28, Intel's Bay Trail processor-equipped convertible laptop/tablet Asus T100 is Amazon.com's (NASDAQ:AMZN) #2 best-selling "Computer & Accessories" electronic product. This achievement is worth praising because the category covers all laptops and tablet computers including the Kindle Fire. The $399 Asus Transformer T100 has also sold out on Newegg.com. The same thing is happening to other online computer sellers; so many people are buying the Asus T100 that shops are running out of stock.
This surprise development is a great comeback success for Intel. The company has failed year after year to deliver a competent alternative to ARM processors. While Intel still dominates the traditional PC market with 90% market share, it only has a meager 3.5% share in the mobile processor segment. The netbook category died after the rise of tablet computers because Intel failed to produce a cheap, long-lasting Atom CPU that can compete with the performance of an iPad or Android tablet.
The New Intel Era
Intel made a lot of money when netbooks were selling like hotcakes. Now it has found a replacement cash cow niche in 2-in-1 hybrid notebook/tablet computers. The Asus Transformer T100's big success is chiefly because of Intel's new System-on-a-Chip (SoC) QuadCore Bay Trail Z3740 processor.
The Z3740 is a significant improvement on previous Intel Atom mobile-centric processors. Despite having a dynamo 1.8 GHz quad-core engine, the Z3740 is very power efficient. Intel used a custom optimized 22 nanometer low-power P1271 process to keep the power consumption of the Z3740 comparable with ARM products. This marvelous SoC only has a 2 Watts SDP rating, so it is perfect for passively cooled tablet computers.
Despite being more power efficient than its predecessor, the Bay Trail Z3740 ships out with more powerful graphics processing power. Intel said this new CPU is even perfect for the Retina displays of the iPhone and iPad. The HD Graphics used by this SoC is capable of displaying crisp 2560 x 1600 high-definition screens.
Intel has so far only supplied the Z3740 to hybrid notebook/tablet manufacturers, but since the breakout success of the Asus T100, expect a lot of tablet-centric companies to order a lot of Z3740 chips to power their Windows 8.1 tablet products. Even Android phone manufacturers may consider upgrading their SoC chips to the more power-efficient Z3740.
Microsoft (NASDAQ:MSFT) is Helping Intel
The WinTel term became legendary beginning the mid 1990s. It was coined to describe the duopoly relationship between Microsoft's Windows and Intel processors. WinTel computers dominated the PC market since their partnership began.
Their success in capturing 90% of the desktop PC market has caused International Business Machines (NYSE:IBM) to abandon making personal computers and also caused the near bankruptcy of Apple (NASDAQ:AAPL) in the late 1990s. Wintel machines still hold 90% market share of today's regular desktop and laptop market.
The market landscape has changed, tablets and smartphones are causing the rapid decline of desktop computer sales. Microsoft is once again cooperating with Intel to grab the market away from Apple and Google's (NASDAQ:GOOG) Android.
Official sources say Microsoft has lowered the OEM price of its Windows 8.1 OS to help boost the sales of new Intel Bay Trail-equipped hybrid and tablet computers. Windows and Intel are banking on the fact that people will most probably buy a $350 Windows 8.1 hybrid notebook/laptop computer rather than purchase the cheapest and low-spec $499 iPad.
This strategy will boost the balance sheet of Intel very soon. As evidenced by the great sales performance of the Asus T100, the Z3740 is a big step forward towards Intel's push for mobile processor domination. Microsoft is on their side and Intel has delivered the performance and battery life requirements that Microsoft wants. The upcoming Surface 3 tablet and new Lumia phones may soon ship out with Intel-branded chips instead of Nvidia (NASDAQ:NVDA) or Qualcomm.
Future Success Guaranteed
With Microsoft's official backing, Intel is poised to dethrone Samsung and Qualcomm from the mobile market category. It has the financial muscle and technical expertise to mass produce new generations of power-efficient Bay Trail models.
Intel has a long history of muscling out competitors by making very favorable deals to OEM manufacturers. Now that Intel has come up with a viable mobile processor, expect the company to recruit more smartphone and tablet manufacturers into its fold.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.