Intel Corporation Didn't Win the Wi-Fi Spot Inside the Microsoft Surface 3

By Markets Fool.com

Microsoft announced its next-generation Surface tablet, called the Surface 3, in late March, with availability in early May. According to the Microsoft Store, Surface 3 pre-orders will begin to ship to customers on May 5, so it's just a matter of hours before customers will start getting their hands on these devices.

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Just in time for the rollout, tech site AnandTech has put up a review of the Surface 3. In this review, the site provided some additional details on Microsoft's component selections for the device. In particular, one component choice stood out as a tad surprising.

A Marvell Wi-Fi chip again
According to AnandTech, the Surface 3 makes use of a connectivity combo chip from Marvell -- a well-known vendor of connectivity components. The chip, AnandTech says, supports 2-by-2 802.11ac, and is identical to the chip found inside the larger Surface Pro 3.

In hindsight, this shouldn't have been too surprising: By using the same Wi-Fi chip inside the Surface 3 as is used in the Surface Pro 3, Microsoft simplifies its component inventory management with respect to both the devices. I'd also expect that as Microsoft orders more of a chip from a vendor, the lower its average cost per device is.

It makes sense. So why am I surprised?

Didn't Intel just release a low-power Wi-Fi chip?
I had believed there was a chance that Intel might push hard to bundle its recently announced Wireless-AC 8x70 chip with the Atom x7 applications processor inside the Surface 3. If Intel had won the spot with this Wi-Fi/Bluetooth combo chip, then this would have -- to my knowledge -- represented the first major low-power Wi-Fi win for Intel.

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It also, in my view, would have validated the competitiveness of Intel's new chip.

Now, this isn't to say Microsoft's decision not to use the Intel wireless chip means it isn'tcompetitive -- remember, there are at the very least good supply-chain related reasons to use the Marvell chip. It just means the chip's competitiveness is currently "to be determined."

Keep an eye out for the winner of the cellular spot inside the Surface 3
Microsoft plans to launch a variant of the Surface 3 with cellular support. I had initially believed that this would be a pretty easy win for Intel's XMM 7260 LTE-Advanced modem -- especially since I believed that Intel could offer Microsoft a nice package deal with an applications processor, Wi-Fi/Bluetooth combo, and cellular modem.

I still think Intel has a solid chance of winning this spot with its XMM 7260, but until the teardown reports for the LTE model are in (and there's no telling when that will be), investors shouldn't assume that Intel has won this spot.

Will Intel's Wi-Fi chip gain traction in other tablets?
When Intel introduced its Atom x7 lineup at the Mobile World Congress, it said to expect designs based on the chip from ASUS, Acer, Lenovo, Dell, Toshiba, and Hewlett-Packard.

I suspect that Intel's Wireless-AC 8x70 will pop up in designs from some, if not all, of these vendors. Once an Intel Wireless-AC 8x70 device shows up in a commercially available device, I'm sure the various hardware review sites will test the solution and compare it with other popular Wi-Fi chips.

Why is this important?
As an Intel investor, I don't particularly care whether Intel won the Wi-Fi spot inside the Surface 3 for any financially related reason; the Surface 3 isn't likely to sell in quantities that will move the needle for Intel.

What I do care about is the competitiveness of Intel's wireless chip offerings. For Intel to succeed in the mobile market, and in particular smartphones, it will need to be able to supply its customers with a whole set of competitive components -- from the applications processor to the Wi-Fi/Bluetooth combo chip.

If the Wireless AC 8x70 is competitive on performance, range, and power consumption with other Wi-Fi chips, then this is a good sign for Intel's mobile efforts. If not, the company's prospects in mobile may be limited until it gets its Wi-Fi story together.

The article Intel Corporation Didn't Win the Wi-Fi Spot Inside the Microsoft Surface 3 originally appeared on Fool.com.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.