Intel is making a bid to become a force in smartphones. This will test its ability to compete in arguably the most important chip market outside of PCs.
The deal struck this week with Taiwan Semiconductor Manufacturing Co. will put the Intel architecture into the same factories that churn out chips for companies like Qualcomm and Texas Instruments, which use an alternative architecture called ARM--the choice for many small devices, cell phones, and most smartphones, including the Apple iPhone, BlackBerry Storm, and Google-based Android phones.
ARM has always been a thorn in Intel's side. So much so that Intel acquired the StrongARM architecture in 1997, turned into Intel XScale, and aimed it at handhelds (most prominently iPaq handhelds sold by Compaq and then Hewlett-Packard). Before that, StrongARM had been used in the Apple Newton (a primitive precursor to the iPhone) and other small devices.
But Intel sold the money-losing XScale business to Marvell in 2006. And so ended Intel's attempt to compete ARM to ARM in the small device space.
Intel processors are not a player in the market for smartphones like T-Mobile's G1, which uses an ARM-based Qualcomm chip
(Credit: T-Mobile)What happened? The small consumer device and communications chip business is not the PC business and, consequently, not an area where Intel has historically been competitive. But that doesn't mean Intel can afford to ignore this space. Handheld personal computing has arrived (if you hadn't noticed). The iPhone, Blackberry, and Android phones are virtually handheld PCs--with Intel processors nowhere to be seen.
So this time instead of coming up with an ARM chip, Intel is trying to shoehorn its successful x86 architecture into the ARM universe of smart phones, consumer electronics, and the amorphous, though typically profitable, "embedded" market. TSMC excels in building chips for all of these markets. The world's largest contract chip manufacturer operates successfully on gross margins much lower than Intel's enviable x86 PC margins, typically north of 50 percent (as this CNET Blog Network piece points out).
And one market where Intel would like to succeed (and some would say must succeed) is smartphones because of its sheer size and because "that's where the PC functionality is moving toward," said Doug Freedman at Broadpoint AmTech. Though markets for hardware that goes into, for example, industrial or medical hardware, will be important, it's the smartphone market that will test Intel's ability to compete profitably in a consumer space outside of PCs.
Just how big is the overall cell phone market? On a unit basis, it is about five times the size of the PC market. There were about 1.22 billion handsets shipped in 2008, while the PC market is forecast at 257 million units in 2009, according to Gartner.
But Intel cannot operate the way it does in the PC world--where its credo almost seems to be: if we build it, they (HP, Dell, Acer) will come. This won't work in the cell phone industry. Service providers and handset makers are center stage, hardware is at best a side show. So, hooking up with TSMC is a way for Intel to make itself more palatable to cell phone companies, which are not used to dealing with the 800-pound PC chip gorilla. "By going through a TSMC, it is perceived less as an Intel move and more as, hey, I'm just another source for you the handset maker because you're already used to buying stuff from TSMC," said Ian Lao, an analyst at In-Stat. "It's insulating the gorilla thing."
And it's none too early. Qualcomm is now pushing the performance envelope with its Snapdragon platform, Nvidia is hawking its graphics-intensive Tegra technology, and Texas Instruments is revving up its OMAP chips to achieve better performance per watt.
In other words, while these chip companies are not wavering from their longstanding strong suit of power frugality--an imperative in the cell phone world--they are also beginning to ratchet up chip speeds to 1GHz and above and add more processing cores. And that's Intel's strong suit.
"For ARM developers, multi-core implementations will address much of the performance differential," said In-Stat's Lao. Look no further than Qualcomm. The future Qualcomm QSD8672 chip will be a dual-core Snapdragon that features two CPU computing cores capable of 1.5GHz performance, 1080p high-definition video, Wi-Fi, mobile TV, and GPS. The graphics core is based on Advanced Micro Devices' ATI unit's technology.
Hmm...Dual-core processor, ATI graphics, high-definition video? Sounds a lot like a PC. Indeed one of the burning questions is whether PC makers will begin running Microsoft's operating systems on ARM-based devices, according to Lao.
"The next 9 to 18 months will be quite interesting to watch," he said. "Can Intel get down to the cost and power levels needed? Will they be able to get the carrier and handset makers aboard? There will definitely be a market shakeup."
Qualcomm supplies the main processor for the T-Mobile G1, the first phone to run Google's Android OS. In an interview Tuesday, Qualcomm CEO Paul Jacobs talked about the genesis of the Google phone and how his company became one of the principal players in the development of the handset.
After a conference in San Diego, Qualcomm CEO Paul Jacobs holds the T-Mobile G1, which runs Google's Android OS and is powered by his company's processor.
(Credit: Brooke Crothers)Jacobs said he goes way back with Andy Rubin, Google's senior director of mobile platforms. "I've known Andy Rubin for a long time--from the Danger days," Jacobs said. (Rubin is co-founder and former CEO of both Danger Inc. and Android, a start-up Google acquired in 2005.) "When they started to get the idea to do an open-source operating system, they came and talked to us because we had the 3G chipsets and they knew us," Jacobs said.
On what Google brings to the mobile handset market that the Apple iPhone doesn't, Jacobs said, "They're trying to build an open developer's community and have the software be open source, and that means people will be able to modify it however they want."
What else makes Google's phone different? "The industry is also interested in seeing what new (business) models can accelerate time-to-market," Jacobs said. "Give people the opportunity to differentiate."
And Jacobs says Google's back-end services are crucial. "Everyone talks about cloud computing. This is cloud computing. It's got all those services on the back-end. It uses all that storage and compute power on the Net."
As for how HTC came into the mix, Jacobs said he has worked with HTC since its beginnings about 10 years ago. "We had an investment in HTC very early on. And I knew Peter Chao (HTC's chief executive)."
Jacobs said the relationship with HTC was forged when the Compaq iPaq, one of the most popular of the early handheld devices, first came out. HTC made the original Compaq iPaq handheld. "Microsoft got Compaq to sell it...the very first one that came out." The Compaq iPaq, which has been rebranded the HP iPaq, used Microsoft's PocketPC software.
So, looking back on all of this history, the principals from Android, Qualcomm, and HTC were really just leveraging longstanding relationships. "It was kind of like a bunch of people who had known each other for a long time in the wireless industries coming together," Jacobs said.
Jacobs also talked about the Qualcomm MSM7201A applications processor that powers the T-Mobile G1. "It's a system on a chip. We ported the Android operating systems onto it," he said.
Qualcomm optimized the Android software by integrating it with the MSM7201A--a dual-core chip that combines hardware-accelerated multimedia capabilities, 3D graphics and built-in, multi-mode 3G mobile broadband connectivity.
The MSM7201A is a 32-bit ARM9 processor that supports GPS functions, EDGE, and HSDPA (High-Speed Downlink Packet Access).
Qualcomm is also one of the founding members of the Open Handset Alliance.
Qualcomm said today in a statement that it is also working with other manufacturers to develop handsets that operate on the Android platform.
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