Intel Corporation (NASDAQ:INTC)‘s new fourth generation Core processors (Haswell) included low power Systems on Chip (SOCs) that are being used in thin tablets without fans, a first for the Core series. These Haswell-based tablets have the potential to devastate the market for ARM Holdings plc (ADR) (NASDAQ:ARMH)’s tablet processors. Without a swift response from ARM’s Common Platform partners, International Business Machines Corp. (NYSE:IBM), Samsung, and GlobalFoundries, the ARM Holdings plc (ADR) (NASDAQ:ARMH) processor ecosystem could lie in ruins by this time next year.
Intel Corporation (NASDAQ:INTC) made a number of significant improvements that enabled it to fit a Core processor into the thin tablet form factor, but the main ones were improved power management and the development of single chip SOCs, eliminating the Platform Controller Hub, an accessory chip needed by the previous Core generation. These Core SOCs still consume roughly five times the power (5-10 Watts) compared to a typical ARM Holdings plc (ADR) (NASDAQ:ARMH) processor, but they are usually more than five times faster. Getting into the 5-10 Watt range allows these SOCs to be used in a tablet, and it can be thin since no fan is required.
These processors are full Intel Corporation (NASDAQ:INTC) 64 bit architecture machines capable of running Windows 8 Pro, or Chrome OS, or Android. At Computex, the industry trade show where the chips and devices were unveiled, Intel Corporation (NASDAQ:INTC) made it clear it was targeting all three OS markets.
The introduction of 64 bit Core computing into the tablet form factor is nothing short of revolutionary. The Microsoft Surface Pro hinted at what was to come, but it was bulky, heavy, and needed a fan for cooling its third Gen Core processor. Now, Microsoft will be able to update the Pro with a fourth Gen Haswell and get the size and weight down to something closer to the Surface RT.
But not quite to the Surface RT. Here, the main problem is the power requirement of the Haswell Y series processor. Five times the power means five times the battery capacity for equivalent battery life. Haswell tablets won’t be able to provide the battery life of ARM-based tablets, but this is the price to be paid for having a much more powerful computer.
For this reason, all of the Haswell tablets shown at Computex were what Intel Corporation (NASDAQ:INTC) calls 2-in-1 with detachable keyboards, and Intel Corporation (NASDAQ:INTC) really wanted to push the utility of the keyboard. In fact, the keyboard is mainly there to hold the extra battery pack that the Haswell tablet needs.
The necessity of carrying around the extra battery pack will tend to reduce somewhat the desirability of Haswell compared to current and future Atom or ARM-based tablets, and this goes far to explain Samsung’s decision to use the soon to be obsolete Clover Trail Atom in its new Galaxy Tab 3. Combined with the fact that the Bay Trail Atoms, based on the same 22nm process as Haswell, won’t be in tablets until Q4, the ARM Holdings plc (ADR) (NASDAQ:ARMH) ecosystem has a very limited window of opportunity to respond to the Intel tablet threat. The ARM-based ecosystems of Android and iOS can carry forward on some momentum due to their size, but this will not sustain them for long in the face of the Intel onslaught. Can ARM Holdings plc (ADR) (NASDAQ:ARMH)and its partners respond?
Yes, I think they can and they will. This may come as a surprise to Intel bulls, many of whom regard the largest ARM Holdings plc (ADR) (NASDAQ:ARMH) foundry, TSMC, with derision. I often hear it claimed that “TSMC will never get their 20 nm process off the ground,” despite the fact that TSMC has formally announced that it is ready to enter production. One of the constants of technological change is the rapidity with which technical advantage leaks away to competitors. Intel is able to produce x86 chips to compete with ARM chips because it uses a superior 22 nm process while the rest of the ARM world still uses 32 nm. This situation will probably not continue indefinitely.
In addition to TSMC’s new 20 nm process, the Common Platform alliance, composed of ARM, International Business Machines Corp. (NYSE:IBM), Samsung, and GlobalFoundries, is working on its own 20 nm process and a 14 nm FinFET technology superior to Intel’s current 22 nm. IBM holds many patents related to the FinFET technology, which is also used in the Intel “tri-gate” 22 nm process, so Intel has no exclusive lock on the technology. GlobalFoundries is currently working to bring the 14 nm process on line at its Saratoga County, New York facility. The problem, of course, is time to implementation. Currently, only their 28 nm process is in production.
The Common Platform alliance has been in existence for 10 years. In effect, it has served as a licensing pathway for IBM research developments (such as the FinFET) to get into production facilities. The ARM ecosystem has benefited from this and has been able to more or less keep pace with Intel, although a step behind in process technology. This will be the Common Platform’s most difficult test, since remaining a step behind Intel may no longer be an option.
How much time does the Common Platform and the rest of the ARM ecosystems have? Here, the fact that the ARM ecosystems are very developed with over half a billion users each for Android and iOS may help. Consumers are basing buying decisions on the ecosystem of services for which the device is a portal as much as on the device itself. So, immediate inroads by Windows and Chrome based tablets may be modest and small compared to the overall growth of the tablet market. In this scenario, ARM foundries might have until late 2014.
But, Samsung’s decision on the Galaxy Tab 3 could be the beginning of a wave of defections from Android, especially among Android manufacturers who have had a tough time competing with Samsung and are looking for an advantage.
I believe the 20 nm processes in development at TSMC and the Common Platform partners will be in production in early 2014, if not sooner. Given the onslaught of Intel Haswell and Bay Trail processors in Q4, I expect ARM processor shipments to stagnate if not actually decline in the quarter. This will bring on a long overdue correction in ARM’s share price, as I have been expecting since I wrote “Does ARM Still Have Momentum.”
However, I expect ARM processor shipment growth to resume in Q1 2014 as ARM foundries bring their 20 nm processes on line, and a new generation of ARM processors hits the market.
The article Intel’s Haswell Tablet Breakthrough originally appeared on Fool.com.
Mark Hibben has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and International Business Machines. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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