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Intel’s 3D Chip Challenge
By: Investment U   Thursday, May 12, 2011 1:38 PM
Symbols: AAPL, ADAM, AMD, ARMHY, IDC, INTC, NVDA, QCOM, TSM
Intel can now potentially challenge Arm in its predominant market of mobile phones and tablet computers.

No Easy Road for Intel

This news has some on Wall Street very bullish about Intel all of a sudden.

Take Lee Simpson, a Semiconductor Analyst at Jeffries. He sees major customers like Apple rethinking their chip choices in the near future.

That's not to say that Arm will simply stand back and let that happen, though. Not to mention that Intel's new chips might not be good enough in the first place.

Roger Kay, an Analyst at Endpoint Technologies, definitely doesn't expect them to compete. He predicts that Intel's chips "will certainly not be enough reason to uproot the established architecture."

And Richard Doherty at Envisioneering said the announcement "got a little bit more fanfare than it deserved."

Taiwan Semiconductor Manufacturing (NYSE: TSM), a pivotal manufacturer for Intel rivals including QUALCOMM Inc. (Nasdaq: QCOM) and NVIDIA Corp. (Nasdaq: NVDA), weighed in as well. It believes Intel will have more powerful transistors thanks to its new design.

But it was quick to say that its own chips are progressing along at a steady clip so that, "in terms of overall performance, we won't lag behind Intel." And it added that it's been working on similar transistors since 2003, and will have something ready to market soon enough.

Intel Inside or Outside?

It might seem as if Intel is spending too much money on a mere $7-billion market. But demand for mobile devices keeps growing at a steady clip.

The company therefore needs companies like Apple to adopts its architecture. Unfortunately, whether or not that happens is questionable.

For one thing, Arm has a powerful grip on that market. Intel has to produce a vastly superior product for companies to make the switch.

And its 3D chips' true capabilities still remain to be seen.

Intel especially has a tough nut to crack in Apple. Many people forget that Apple was one of Arm's original founding companies in 1990, along with Acorn Computers and VLSI Technology.

Every so often, rumors surface about it buying the company up again due to their closeness. And even if those rumors never actualize, the two still remain very close.

Unfortunately, Intel desperately needs that business from mobile phones and tablets. If it can't get it, it will be "Intel outside" and not "Intel inside" for this market.

Good investing,

Tony D'Altorio


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