Intel's deals with Motorola and Lenovo will bite into ARM Holdings' dominance of smartphone market
The chip designer ARM Holdings' total domination of the mobile and tablet market is under threat after its American rival Intel planted a flag firmly on the British company's turf, announcing its first alliances with handset manufacturers.
News that Intel chips will feature in smartphones made by America's Motorola and China's Lenovo, the world's second largest PC maker, was described as a "significant negative" for ARM and pushed the Cambridge company's shares 2.57% lower to a closing price of 596pon Wednesday.
Motorola is being acquired by Google, whose Android software is used in most smartphones sold today. Other Android users, including Samsung and LG, could join the Intel alliance.
While Intel dominates the PC market, sales of desktop and laptop computers have begun to plateau, dented by the demand for more portable gadgets.
Janardan Menon, an analyst at Liberum Capital, said: "After more than a decade, Intel has finally got the pieces of the puzzle in place to start taking some share from ARM in the smartphone market through 2012 and beyond. We see this announcement as a significant negative for ARM."
About 360m units sold last year ran on Intel's x86-based system, including servers, desktops and laptops, while 550m units, including smartphones, tablets and portable media playersran on ARM-designed chips, giving the UK firm a 60% share of the consumer computing market. Royal Bank of Scotland analysts estimate that ARM will still feature in 68% of all gadgets sold in 2012.
Using architecture developed by Cambridge's now defunct Acorn Computers, ARM stole a march on its much larger US rival by capturing 100% of the smartphone and tablet market. Its technology is preferred because it consumes less power, allowing longer battery life. With smartphone batteries typically lasting no longer than a day even on ARM chips, Intel's designs, some of which consumed three times more power, have until now been unable to find takers.
At this week's Consumer Electronics Show in Las Vegas, Intel unveiled the Medfield chip, which, it claimed, tested better than some ARM designs, with 15 days of standby, seven hours of voice calls or eight hours of video per battery charge.
Intel's move also dampens ARM's hopes of gaining a foothold in the PC market. PC makers that had been planning to switch may now decide to remain loyal thanks to Intel's more efficient new design.
Microsoft's Windows 8 software, due for release this autumn, will run on ARM chips for the first time, where it previously worked only on Intel's architecture. ARM's outgoing president, Tudor Brown, said last summer he hoped Microsoft's support would put his designs inside 40% of netbooks (ultra-light laptops) by 2015.
"ARM-based chip suppliers will face a tougher task in moving PC and server customers to their products," wrote Menon. "Much also depends on Intel's pricing strategy, which we believe is likely to be competitive."