Intel Corporation (INTC) Beats ARM Holdings plc (ADR) (ARMH) to the Server Punch With Avoton

The first – transistor technology – is an area in which Intel has a well-known lead in the industry. Chips are made of transistors, and if a company can make them smaller, faster, and more cheaply than the other players in the industry (the majority of whom are tied to external foundries like Taiwan Semiconductor or Global Foundries), then that company will have a real advantage out of the gate on performance/watt and potentially performance/dollar given equal design resources.

However, Intel brings to the table massive design resources that are leveraged across multiple, highly profitable business units. For example, the processor core designs, process technology development, and even the development of other IP blocks are amortized over millions of units that generate billions of dollars in revenue. In addition, since Intel runs its own manufacturing facilities, it is able to really co-optimize its process technology and its processors. Don’t just take my word for it; preliminary performance tests (admittedly from Intel) suggest that those R&D dollars have been very well spent:

Intel’s datacenter lead seems safe
All told, I believe that Intel anticipated the potential threat from ARM Holdings plc (ADR) (NASDAQ:ARMH) and its partners in the datacenter, which is in stark contrast to what happened in the tablet/smartphone space in which the chip giant is playing catch-up. In order to break the many hurdles to entry into the server space, ARM and its partners will need to offer a product that offers significant performance per watt per dollar advantages over its Intel peers. I don’t believe that this is likely to happen anytime soon, and as a result believe that the optimism for the ARM camp and the pessimism for the Intel camp may be overdone for the foreseeable future.

The article Intel Beats ARM to the Server Punch With Avoton originally appeared on Fool.com and is written by Ashraf Eassa.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. 

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