by Tony D'Altorio, Investment U Research
Last week, Intel (Nasdaq: INTC) said it made the biggest breakthrough in microprocessor design in recent history. It called its new chip the most significant advance since the 1950's silicon transistor.
The company expects to begin production later this year, using a revolutionary 3D technology it has worked on for nearly a decade. With these strides, Intel claims to be three years ahead of the competition.
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Regardless, the move is a significant one.
Microchip transistors, the building blocks of electronics, are always produced in flat structures. But Intel's breakthrough involves more complex, 3D models with circuit widths of 22 nanometers.
Most industry insiders see this push as Intel's attempt to fend off a major challenge from U.K. chip designer Arm Holdings (Nasdaq: ARMH). And they're mixed on whether it'll be a serious game changer in the end.
Intel's Dominance Challenged
Intel holds a dominant 80.8 percent share of the PC processor market. According to research firm IDC, its closest competitor, Advanced Micro Devices (NYSE: AMD), has only 18.9 percent.
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But Intel's x86 chip architecture eats too much energy for today's new tech devices. It failed to create more power-efficient models for high-growth sectors such as mobile phones and tablet computers.
Arm Holdings, on the other hand, knows exactly how to take hold of that market. That shows in how Apple (Nasdaq: AAPL) iPhones and iPads use its designs.
Investors recognize Intel's shortcomings in this regard, causing the stock to lag over the past few years. It trades at just 10 times earnings, despite strong revenue growth rates.
But Intel worries even more about Arm's move into the PC market. IDC predicts that more than 13 percent of PC processors will be based on Arm's architecture by 2015.
This new 3D chip design might change the game though, as it cuts power consumption in half.