What Microsoft Corporation's Surface Pro 4 Means For Intel Corporation

By Markets Fool.com

Microsoft is expected to launch its next flagship two-in-one device, tentatively known as the Surface Pro 4, between June and October to coincide with the launch of Windows 10.

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Microsoft's Surface Pro 3. Source: Microsoft

Rumors suggest that Microsoft will launch 12-inch and 14-inch versions of the device. Both devices are expected to have a resolution of 2160 x 1440, up to 16GB of RAM, and a maximum of 1TB of internal storage. Microsoft is also expected to replace Intel's Haswell processors with either Broadwell or Skylake chips.

This decision could have an impact on Intel investors, so let's take a closer look at the differences between using Broadwell or Skylake for the Surface Pro 4 and other two-in-one Windows devices.

Broadwell vs. Skylake
Intel's Broadwell and Skylake chips are both manufactured with the 14nm process, making them the smallest and most power-efficient PC chips on the market.

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Broadwell "Core M" processors, which arrived in late 2014, traded processing power for power efficiency. These chips boosted battery life by roughly 30% compared to Haswell processors and didn't require fans, which let companies build much slimmer and longer-lasting devices. Notable devices powered by Broadwell processors include Apple's new MacBook and Lenovo's Yoga Pro 3.

Apple's New Macbook. Source: Apple

Skylake, which is expected to launch on Aug. 15, offers the fanless design and power efficiency of Broadwell without sacrificing processing power. That potent combination will let them replace the workhorse Haswell line across high-end PCs, laptops, and two-in-one devices.

A shorter "tick-tock" cycle
Intel launches chips on a "tick-tock" schedule. In a "tick" launch, the existing microarchitecture is replicated with a more advanced manufacturing process. When Intel shrunk down the microarchitecture in the 22nm Haswell to the 14nm Broadwell design and enhanced it with new instructions, that was a "tick" launch.

In a "tock" launch, a new microarchitecture is introduced but the fabrication process remains the same. That's the case with Skylake, which is manufactured with the same 14nm process as Broadwell but has different circuitry.

With Intel's 32nm chips, thegap between the "tick" and the "tock" was a year. With the 22nm chips, the gap was 13 months. But if Intel launches Skylake on Aug. 15, it will arrive less than a year after the Broadwell launch on Sept. 5 last year.

The timelines don't match up
Current rumors suggest that the Surface Pro 4 might be one of the first devices to use Skylake, whichwould explain the device's long development cycle. The Surface Pro 2 and Surface Pro 3 both launched just eight months after their predecessors, but it's been nearly 11 months since the Surface Pro 3 launched.

If the Surface Pro 4 arrives with Skylake CPUs inside, it would offer top-tier power efficiency and processing power that other ultrathin devices like the new MacBook simply won't be able to match.

Unfortunately, Microsoft and Intel's timelines don't quite match up. Even if Intel launches Skylake in August, large quantities probably won't arrive until the holiday season, which would further delay the arrival of the Surface Pro 4. However, Intel and Microsoft have a long history together, so it's possible that the two companies might work together to surprise the market with a Skylake-powered Surface Pro 4.

What this all means for Intel
For Intel, dominating the Windows 2-in-1 and tablet market with powerful fanless chips is a crucial way to boost revenue at its Client Computing (PC and Mobile) division, which accounted for 58% of its top line last quarter.

Research firm IDC expects sales of Windows tablets and two-in-one devices to surge 41% year over year in 2015 and account for 7% of the global tablet market. By 2019, IDC believes that Windows devices will account for 14% of that market.

Those figures seemingly contradict widespread reports that PC and tablet sales will stall out or decline. IDC believes that annual PC shipments will fall 5% between 2014 and 2019, while tablet shipments will rise just 17%.

The Surface Pro 3 was Microsoft's best-selling two-in-one device ever, with sales rising 44% year over year last quarter. Those sales were fueled by rising demand for devices that "bridge the gap" between PCs and tablets. Strong Surface sales have also convinced PC makers like Hewlett-Packard to manufacture "Surface clones" of their own.

HP's new Envy x2 resembles the Surface Pro 3. Source: HP

These two-in-one devices help Intel leverage its strength in the PC market to gain a foothold in the high-end tablet market, since they straddle both markets.

The main takeaway
The Surface Pro series is an industry-shaping device for Windows two-in-one devices. Moreover, it's a great showcase for Intel's fanless chips, which have become essential components for any company looking to develop powerful ultrathin devices with impressive battery life.

The article What Microsoft Corporation's Surface Pro 4 Means For Intel Corporation originally appeared on Fool.com.

Leo Sun owns shares of Apple. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple. 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.