Intel Corp. Likely to Adopt ARM Architecture for Future Smartphone Processors

By Markets Fool.com

Image source: Intel.

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A little while back, microprocessor giant Intel (NASDAQ: INTC) made public that it had cancelled its SoFIA family of processors for low-end and mid-range smartphones and Broxton for high-end smartphones. When this news broke, it seemed to me that the chip giant had all but canned its plans to compete in the smartphone applications processor market.

However, at a recent investor conference, Intel exec Brice Hill hinted that the company may try its hand at the mobile applications processor market.

Then, in a recent interview with IDG News Service, Intel's Murthy Renduchintala flat-out said the cancellation of the SoFIA/Broxton projects doesn't imply that Intel is "no longer doing mobile platforms."

He even went on to say that, going forward, Intel's goal with respect to mobile platforms is to "talk less and do more."

So, it's quite clear that Intel plans to reenter the market for mobile applications processors. However, buried in the interview, Murthy strongly hinted that any future smartphone processors from Intel would be based on ARM processors, rather than Intel's own Atom processors.

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ARM is the established architecture in mobile

During the interview, IDG News Service asked Murthy if the company would be "open to the idea of taking an ARM CPU license."

Murthy's response was "yes." He further went on to explain that "there are many areas in the ARM ecosystem where Intel can pragmatically play in for its own benefit," and that he is a "big believer in paying respect to established ecosystems."

Remember that in the mobile processor market, the ARM architecture is the established standard with overwhelmingly dominant market share. Intel tried to capture some share with processors based on its Atom processor cores (these cores implement Intel's own X86 instruction set architecture), but those efforts clearly failed.

Although I don't blame the X86 architecture for that failure, I do believe Intel's Atom processor designs were not competitive with what ARM's processor designs (which can be licensed by mobile chip manufacturers) had to offer in terms of performance/power/area.

I get the sense that Murthy recognizes that the easiest and safest way to reenter the mobile processor market (and actually succeed in it) is to rely on as many third-party technologies as possible.

An interesting longer-term opportunity

It is by no means guaranteed that just because Intel reenters the smartphone processor market, it will actually be successful. Intel's execution over the last several years in the mobile processor market was nothing less than atrocious, and the venture ultimately wound up costing shareholders a lot of money.

However, if Intel can manage to become a credible player in this market, then the revenue and potential unit volume opportunity here could be quite attractive. Each year, more than a billion smartphones are sold, and if Intel can, over time, capture a low double-digit percentage of that market, then that could ultimately mean several billion dollars in incremental revenue and a positive contribution to operating profit.

I look forward to seeing how this "mobile reset" ultimately plays out for the chip maker, though I would urge both current and potential investors to not make any investment decisions with respect to Intel stock based on such efforts at this time.

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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.