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ARM High; Intel Low – What Does The Market Know? April 10, 2013

Posted by Ishmael Chibvuri in Latest Articles!!!.

The cohort of pro-Intel (INTC) and technically knowledgeable posters prevalent on SA is using arguments that seem to hold no sway over Mr Market. Much reliance is placed on Intel’s ability to stage a big come back with the next great SoC hope based on a step change in manufacturing technologies and better performance in terms of power consumption per CPU cycle. Mr Market usually knows best and waits until there is some believable proof of new capability before breaking a long-held trend. Meanwhile ARM (ARMH) ploughs on innovating in its own strange collaborative way. For example the release by Cadence on April 4, is significant :

"Fulfilling the promise of performance and power scaling at 16 nanometers, ARM (LSE: ARM; Nasdaq: ARMH) and Cadence (NASDAQ: CDNS) today announced details behind their collaboration to implement the first ARM® Cortex®-A57 processor on TSMC’s 16-nanometer (NM) FinFET manufacturing process. The test chip was implemented using the complete Cadence® RTL-to-signoff flow, Cadence Virtuoso® custom design platform, ARM Artisan® standard cell libraries and TSMC’s memory macros."

The whole article is here

Now I am quite sure that Ashraf will tell us that it wont reach the market for years and anyway it won’t be good enough to power Mickey Mouse’s wristwatch (just kidding Ashraf) but to me it says that Intel’s still yet to be deployed and much vaunted superior manufacturing process and technical lead will be pulled back somewhat quicker than is stated and believed on SA.

In addition newer markets are opening up.

Renesas SoC targets high-end automotive nav and infotainment
Full Renesas article can be read here

Now I should not be labeled as an ARM diehard as I now hold Intel too in the form of long Call Options and I believe there is room for both companies to be highly successful but there is some naivety about the changes in the market that have not been taken on board.

We generally know when something has "Intel Inside" as Intel likes us to know. However, it is not so easy with ARM. I counted and researched the Intel devices in my home. I have one Intel powered iMac from 2007. I then counted the ARM powered devices in our home. It is not easy since it does not say "ARM Inside" on any device but quite often it is inside! The results :

1 iPad, 2 iPods, 3 Android smartphones (HTC, Samsung and Sony Xperia), 1 YouView TV recorder device, 2 Wireless routers, 1 fancy Blu Ray player, 2 TVs Samsung, 3 Digital cameras (don’t ask), 2 Sat-Navs.

Now there may be others that I failed to uncover but I make that 17 known devices. Now it is highly likely that in your own homes a similar story would be repeated if you can be bothered to do the research. It is a real world measure of ARM’s penetration into some existing and high-volume markets that we are all aware of and an indicative measure of ARM’s potential for gains in future markets. It is also a measure that Mr Market can see and relate to.

Whilst the consequent revenue to ARM is far less per device than that which goes to Intel, one should remember there is little capital cost for ARM and no product cost hence the high GPM in the business model.

Mr Market ignores bluster and BS in the same way that the rest of the world does not believe that North Korea can launch anything that would reach the USA in spite of laughably alarmist language. I suspect similar reasoning explains why Intel remains mired at the $21 level in spite of all the noise about new SoC releases yet to appear this year and that Mr Market quietly awaits some real evidence with explosive implications from Intel. Until that time material SP gains will be non existent or small.

Come on Intel! It is time to show us that Haswell and other new SoCs will be more effective than a North Korean Nuke! The market wants evidence, let us see some.

Additional disclosure: I await a lower dip in the ARM SP before reinvesting but retain a token holding. I hold some Jan 2014 Intel calls

Source: http://seekingalpha.com/article/1327571-arm-high-intel-low-what-does-the-market-know?source=email_investing_ideas&ifp=0



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