Taking Back the Market

In an iPad World, Intel Could Displace ARM with a New CPU

Tim Nash - 2011.04.29

When Microsoft announced at CES that Windows will be available on ARM, it was the result of Microsoft lacking a modern tablet OS and Intel lacking a low power x86 chip and major design wins in mobile. It's the usual divorce, in that Microsoft and Intel need to work together for the sake of all the Wintel offspring, but both need other partners to live happily ever after. It also gives Intel the opportunity to design a new CPU on a clean slate that doesn't need to support the x86 legacy.

Windows Is in Decline

x86 has grown up around the needs of Windows and Intel, but the PC - at least in the developed economies - is a market that has peaked. From now on, as the sales of iPads and other tablets ramp up, PC sales will fall. iPads and Macs have already sucked all the growth out of the Wintel PC market, and the more people like using touch on phones and tablets, the less they will want to use any of the current versions of Windows on PCs.

Also, Intel's current approach of shrinking Atom to a 24nm design to reduce power doesn't seem to be picking up many new customers, so it should look at an approach that offers more for mobile.

iOS alone will require about as many ARM processors as the number of x86 processors Intel makes for desktops and laptops.

Intel already has Apple's x86 business, but in calendar 2011 that will be at most 18-20 million CPUs. This year Apple will probably sell more than 80 million iPhones, 35 million iPads, and 25 million iPod touches - the 2011 iOS opportunity should be over 140 million CPUs. If the September refresh of the iPod nano makes is an iOS device too, add 5 million to that, and in 2012 Apple should sell more than 200 million iOS devices. iOS alone will require about as many ARM processors as the number of x86 processors Intel makes for desktops and laptops.

A New Apple/Intel CPU Makes Sense

That is why it makes sense for Intel to design a new CPU with Apple. Indeed, Intel should forget about Windows and design the most efficient chip it can for iOS and OS X. Intel can treat the x86 market as a cash cow and keep pulling in the money while its new 3D transistor design and new 22nm process makes AMD uncompetitive for at least a couple of years.

All the design wins with the new CPU will be with other operating systems. It needs to be more power efficient than the current Atom and offer better throughput than ARM, so the future of this is a commodity chip that can run iOS and Android better than ARM, and run OS X and Linux (particularly on server versions) better than x86, and ideally allow HP to migrate its Unix business and leave behind all the costs associated with Itanium.

If it has the same throughput as x86 but uses less power, it will make inroads in computing centers and high performance computing, where power consumption and the resulting need for cooling is a major constraint; if Intel doesn't go this route, it risks losing the power efficient server market to ARM based designs.

Windows on ARM

There is also currently no large financial penalty for Microsoft making Windows run on ARM (WARM). The expenditure of time, effort, and money will be worth it if WARM delays and reduces corporate defections. However, if this new Intel iOS/OS X chip gets traction, Microsoft will be forced to react or risk more erosion of its IT user base. As it is, the more IT goes mobile, the more IT people are getting used to non-Microsoft solutions. This is why Apple is starting to make moves into the enterprise and building briefing rooms into Apple Stores.

With this new chip, Intel and Apple could be seen as a newer, safer bet for sizable parts of the future of corporate IT.

This new chip could also attract Nokia, RIM, and HP's WebOS for the phone/tablet market, as it gives them a way of showing better performance and can split - and therefore further fragment - the Android manufacturers.

The Potential Market for a New CPU

Nokia is still the largest cellphone manufacturer in the world, typically selling over 100 million a quarter, even though it has little US presence and has lost a large part of its smartphone market. But for the fallout over the move to Windows Phone 7, away from the partnership with Intel for MeeGo tablets, Nokia could have been in Apple's position to drive this chip design forward. The volume is there now, but management needs to concentrate on the OS transition, if Nokia is to survive as a major manufacturer, and as the largest Windows Phone customer for the foreseeable future, it can persuade Microsoft to port Windows Phone 7 to a new CPU.

RIM, although it is the well established leader in a very profitable niche messaging/email market, has problems too. It won't reach its targets for the quarter and is losing market share in the US to Apple and Android. Like Nokia, it is moving to a new OS, but as QNX is a Unix, it should port effectively to this new Intel CPU. At current volumes of Blackberries, RIM would take over 50 million CPUs without any PlayBook success.

HP, since it took over Palm, has done little to commercialise WebOS. As it profits so little from PCs despite being the No. 1 vendor, it makes sense if HP sees more of its future away from Windows. While WebOS can be part of that future, it has a lot of catching up to do to become a large enough market to attract many developers.

Android was always Google's best way of blocking Microsoft from the mobile market and continuing to control mobile search. Google would therefore want to make a good port of Android available as soon as any Apple exclusivity for the new CPU ends, and those Android manufacturers without a strong contractual commitment to ARM chip suppliers, like HTC, LG, and MMI (Motorola Mobility), will move as quickly as they can.

What About Samsung?

However, this would cause difficulties for Samsung, now Nokia and HTC's biggest rival. What will Samsung do with its foundry business, which produces ARM chips? Is Samsung, as a vertically integrated manufacturer and components manufacturer, willing to hand over a key component of its phone business to a design partly controlled by Apple, a key rival, or will it concentrate on using its own OS, Bada, on ARM and look to keep up market share and profits with that.

Whatever decision Samsung comes to, it will lose ground and revenue and Apple's ARM business. With the new fab in Austin, TX supplying up to 50% of production to Apple, a move to Intel could leave Samsung stretched. Apple currently buys over $6 billion worth of components a year from Samsung, but that isn't enough to stop lawsuits between them. While Samsung wants to be the biggest cellphone manufacturer in the world, it will pay Apple to source elsewhere and stop subsidising a major competitor.

Disrupting the Market

Why would Apple spend time, effort, and money helping Intel produce a new chip, which would then be sold to competitors too?

Because this chip can disrupt the market.

Currently Apple licenses reference designs from ARM and customizes them for iOS to get better battery life and performance where needed, but all ARM architecture licensees can go through a similar tuning process for their designs. As this includes iPhone's major competitors and the ARM foundries, iOS advantages on ARM are likely to be temporary. A new chip designed for iOS and OS X that outperforms ARM and gives good battery life should give Apple a much stronger advantage for at least a few chip generations.

With a similar agreement to that made for Thunderbolt, Intel could own the intellectual property and Apple have an initial period of exclusivity. This would provide time to show off the advantages of the new chip, let Intel pick up design wins, and give competitors like RIM time to port and test their operating system on the new CPU. As the design evolves through future generations, building the testing around iOS and OS X would keep an Apple advantage. Apple, though, would probably keep its ARM license, so there would be an iOS port running on the latest designs. This would keep Intel from raising the chip price too much and keep it developing the new design.

Apple would also be guaranteed the lowest price of any buyer, as well as substantial quantity discounts, and with Intel's eight worldwide fabs available, Apple's production lines would no longer be at risk from lack of CPUs.

Could It Work?

Making a project like this work is to a large extent cultural. Both Intel and Apple are engineering companies, and both are dedicated to making the best designs. They already have a successful collaboration to build on (Thunderbolt).

The only reason Wintel worked so well for so long was because of the revenue it brought Microsoft and Intel, and money papers over many cultural differences in business. But Windows is now a fading platform, Intel can make even more money with Apple without the friction of working with a marketing culture like Microsoft.

Of course, as the platform gains traction, Microsoft will want to come on board to protect Windows and Windows Server revenue. Their biggest difficulty will be accepting the role of junior partner, with companies where they used to drive the agenda. LEM

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Tim Nash is a Director of WattWenn which has a new approach to scheduling the production of TV and movies to make the most of budgets. The views in this article are his own and are prejudiced from spending more years working for computer companies than he cares to remember.

Tim lives with his wife, her website on the area ariege.com, two daughters, a cat, and a dog in the French Pyrenees. He lapsed for a while after the Apple II, but became a Mac fan when his wife introduced him to the Macintosh IIsi. If you find his articles helpful, please consider making a donation to his tip jar.

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