Intel Corporation (NASDAQ:INTC)’s new Atom chips may change everything for Windows 8 tablets, in the view of analysts at Morgan Stanley. They released a report this week with updated figures for the company’s Atom-based tablets.

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They said the performance of Intel‘s Atom chips appears to be more competitive with the mobile device chips made by competitor ARM Holdings plc (NASDAQ:ARMH). They also believe Intel Corporation (NASDAQ:INTC) will become a leader in Windows 8 tablets because of the Atom chip, although it won’t turn into immediate revenue for the company because there are some challenges that still must be dealt with.

The Potential Of Intel’s Atom Chips

Morgan Stanley analysts said Microsoft Corporation (NASDAQ:MSFT) turned to ARM Holdings plc (NASDAQ:ARMH) when Intel was unable to produce a chip that had a “compelling performance per watt.”  However, they now question whether Microsoft will need to continue investing in Windows products on ARM chips because of the new Atom chips from Intel.

They point out that the chips come with “significantly improved CPU performance” and also that there are “consumers’ preferences for legacy PC applications that run best on x86. In light of these details, they predict that Intel Corporation NASDAQ:INTC) will achieve leading share in Windows 8 tablets and even gain some ground in Android as well.

Intel’s Challenges In Producing The Atom Chips

Analysts at Morgan Stanley said at this point, both Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) use their own apps processors. However, Bay Trail will likely use Intel’s chips for Android tablets, although many Android customers remain concerned about Intel’s compatibility with Android. In addition, they said Intel Corporation (NASDAQ:INTC) will need to make an integrated baseband / apps processor, and so far the company hasn’t announced any kind of plan for integration.

They believe Intel Corporation (NASDAQ:INTC) will ship 50 million Atom chips by 2015, with most of them being used for Windows 8. However, the financial impact will be limited to earnings of 6 cents per share, in their view.