Intel continues to chase after incumbent ARM Holdings plc (NASDAQ:ARMH) in mobile processors, but is making progress on that front. The firm’s upcoming “Silvermont” Atom chips will feature a new architecture and will be manufactured at the cutting-edge 22-nm chip fabrication technology, which we think will increase Intel’s competitiveness in the smartphone and tablet space.
Further down the road, we expect Intel’s wide moat to come into play, as the firm will take advantage of its industry-leading manufacturing assets and ability to aggressively refresh its processor architectures in an attempt to increase its presence in the smartphone and tablet processor space.
Manufacturing Assets Are Intel Corporation’s Greatest Competitive Advantage
Intel has a wide moat, which stems from its position as the world’s largest chipmaker. The firm’s immense scale allows it to invest more in research and development and in semiconductor manufacturing assets than any other chip company, which is encapsulated in Intel’s “tick-tock” strategy. Intel makes a new iteration down Moore’s Law every two years (the tick), while it launches a new architecture for its computer microprocessors during the years in between (the tock).
Intel has the most advanced semiconductor fabrication technology in the world, with at least a one-year lead over the rest of the industry, which we view as the firm’s greatest competitive advantage. It has helped the firm dominate the PC and server microprocessor space. Importantly, we believe the advantage will also come into play as Intel attempts to gain headway into the smartphone and tablet processor market. Being at the forefront of Moore’s Law is an invaluable asset for Intel, as manufacturing a chip design at a next-generation process versus a prior-generation technology (for example, Intel’s latest 22-nm versus the 32-nm process) provides three key advantages:
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