Why Arm chips pose a threat to Intel and AMD’s PC dominance

Intel (INTC) and AMD (AMD) are facing a new competitor in the PC market: Arm (ARM).

The UK-based chip designer is making another push into the field via Qualcomm (QCOM) and its Arm-based Snapdragon X Elite and X Plus chips, which are deployed in laptops from companies ranging from ASUS and Acer to Dell, HP, and Lenovo in the coming weeks.

Arm is already the go-to platform for Apple (AAPL) and its M-series chips for its line of Mac laptops and desktops, but its relationship with Microsoft’s (MSFT) Windows platform is more difficult. There was the Surface RT from 2012, which couldn’t run some apps, as well as the Surface Pro 9 from 2022, which suffered from similar compatibility issues.

But Microsoft, Arm and Qualcomm say they have fixed the problems and that Arm-based PCs will be as reliable as Intel- and AMD-based offerings. The proof? Microsoft has turned to Arm-based Qualcomm chips to power its new Surface Pro tablet and Surface Laptop, rather than Intel or AMD processors.

These Surface devices are part of Microsoft’s new Copilot+ PC standard, which is essentially high-end laptops capable of running native AI apps, making it all the more interesting that Microsoft has used Qualcomm chips based on Arm.

Rene Haas, CEO of ARM, delivers a speech at the COMPUTEX forum in Taipei, Taiwan June 3, 2024. REUTERS/Ann WangRene Haas, CEO of ARM, delivers a speech at the COMPUTEX forum in Taipei, Taiwan June 3, 2024. REUTERS/Ann Wang

Rene Haas, CEO of ARM, delivers a speech at the COMPUTEX forum in Taipei, Taiwan June 3, 2024. REUTERS/Ann Wang (Reuters/Reuters)

“The Microsoft Build moment, with Microsoft coming out and sort of anointing or declaring that the Snapdragon explained Daniel Newman, CEO of the Futurum group.

“It was just a little sea change that we haven’t seen in the industry for a long time,” he added.

Qualcomm’s chips are meant to be part of Microsoft’s larger Copilot+ PC AI project, which will see more generative AI applications on Windows laptops and desktops. But generative AI applications are still in their early stages, meaning overall power and performance remain the best marketing tools for PCs running on Qualcomm chips.

And the company appears poised to make big gains in performance and battery life over Intel and AMD processors, not to mention Apple’s M3 chips. Microsoft says Qualcomm’s X Elite chip delivers up to 51% faster CPU performance when using the same power as competing chips and matches competitors’ peak CPU performance while using 65% more power in less. And that, at least initially, will be a key selling point for Arm-powered PCs.

“One of the key things that Qualcomm did was basically deliver on its promise to deliver Mac-like, if not better, battery performance,” said Bob O’Donnell, president and chief analyst of TECHnalysis Research, at Yahoo Finance. “This has been a huge deal for all of the Apple M Macs, and it’s been a real challenge, frankly, for Intel and AMD.”

But Arm isn’t just hoping that Qualcomm can take on Intel and AMD alone. According to Reuters, Arm CEO René Haas said that other manufacturers will launch Arm chips in the future. Additionally, he estimates that Arm will control 50% of the Windows PC market over the next five years.

But Intel and AMD are not satisfied with this existential threat. The companies both rolled out their own responses to Qualcomm’s Arm-based chips during their respective keynotes at Computex 2024 in Taipei, Taiwan, this week.

On Intel’s side, this comes in the form of a new Lunar Lake chip, which the company says will be released on PCs in the third quarter of 2024. According to Intel, the Lunar Lake line uses 40% less power than current Intel. The Core Ultra line delivers 50% better graphics performance and features up to 4x faster Neural Processing Unit (NPU).

Additionally, Intel CEO Pat Gelsinger said during his Computex keynote that Lunar Lake already outperforms the Snapdragon X Elite’s CPU, GPU, and NPU in internal testing.

AMD is also fighting back with its own line of Ryzen AI 300 processors for Windows Copilot+ PCs, with upgraded CPUs, GPUs and NPUs. Importantly, AMD claims its NPU is capable of performance of up to 50 TOPS, or billions of operations per second, more than chips from Intel or Qualcomm. TOPS are a common metric for running AI applications.

Intel and AMD will need to ensure that their chips are not only able to compete with Arm and Qualcomm, but also beat them in overall performance and price. That’s especially important for Intel, which still makes most of its revenue from selling chips to third-party vendors through its Client Computing Group.

In the first quarter of this year, the Client Computing Group generated $7.5 billion of Intel’s $12.7 billion in total revenue. This represents approximately 59% of the company’s total quarterly revenue. AMD’s own customer segment, meanwhile, accounted for $1.3 billion of its total revenue of $5.5 billion in the first quarter.

Microsoft says the first Copilot+ PCs will go on sale June 18, meaning we’re still a few days away from seeing the performance of Qualcomm’s Arm processors on the market. But if the company manages to deliver on its promises, it could pose an existential threat to Intel and AMD’s chip businesses.

We’ll know soon enough.

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