As industry leaders in chip manufacturing such as Taiwan Semiconductor Manufacturing Company, Texas Instruments, Nvidia Corp., Samsung Electronics, Intel Corp., Qualcomm Inc etc. compete for ascendancy, there’s mounting speculation that the capabilities of smartphones might soon rival the traditional dominance of laptops. All leading chip manufacturing companies are focused on creating a technology that will make Apple’s M3 chip (third-generation of Apple silicon chips) look outdated, while fully embracing AI and increasing battery life.
What is Happening in the Chips Manufacturing Industry?
News flow suggest that even Nvidia is pursuing an Arm-based solution. This motivation was part of the reason for its failed attempt to buy Arm (a British semiconductor company), which has since gone public in September 2023. RISC-V is in the wings, and as Arm struggles with its licensing model, that platform is looking ever more attractive, yet it hasn’t emerged as a threat to PCs.
Adding more twist to the story, OpenAI’s ChatGPT is exploring the development of a neural processing unit (NPU) that could supplant GPUs for high-performance large language models, such as generative AI and the like. This activity will take place mostly late in 2024, suggesting that there will be a battle royale. Yet, behind the scenes, chip manufacturing companies are discovering that smartphones increasingly may be able to make laptops redundant.
So, the winner in 2024 will need to defend against the rise of smartphones, which would favor Qualcomm and Lenovo. However, the Apple will surely try to resist this because it wants people to buy both products.
Laying Out the Battlefield
Intel has been admirably recovering from its mistakes of the past decade. It’s an well established vendor, so all it really needs to be is good enough. However, the challenging vendors must convince potential customers that Intel isn’t good enough, but that is a surprisingly high bar. Intel’s defense will depend heavily on its Lunar Lake part, which is, on paper, as powerful as what AMD has coming and as efficient as what Qualcomm has on the way.
However, Intel has lots of distractions. From the recent Israel-Palestine situation (as the Intel has one of the biggest FABs located in Israel), to the fallout from layoffs and salary reductions, Intel has more distractions than its competitors, which will stand against its timely execution. So far, we’re not anticipating any issues, but if the Original Equipment Manufacturers (OEMs) do, they’ll hedge with one of the others.
AMD has been a shining star of execution. Focused on PCs, the company continues to perform well and gain share. AMD’s Ryzen 8000 processors with Zen 5 are likely to outperform Intel’s Lunar Lake, but remember that Intel only has to be good enough, meaning that AMD’s performance must be high enough to convince buyers to convert to AMD.
Existing AMD customers are highly likely to stay with the company, but for market growth, the bar for AMD is exceedingly high. It would definitely require creating a highly competitive part and a major advertising campaign to make people less happy with Intel. Such campaigns are not something AMD typically funds, making it less likely that AMD will take a significant share from Intel even if its parts significantly outperform Intel’s.
Qualcomm’s Snapdragon X Elite is a fascinating new processor, but it isn’t x86-based; it’s Arm-based. Because of this architecture, the processor must run an x86 emulator, which can reduce the user’s perception of performance. Such a requirement demands a far larger leap of faith than AMD requires. While the battery life and AI performance numbers for the Snapdragon X Elite on paper are impressive, they might not be substantial enough to penetrate a market currently dominated by the x86 standard.
Qualcomm is getting a lot of extraordinary help from Microsoft, which loves this technology, but Microsoft’s latest showcase laptop, the Surface Studio 2, is Intel-based. Qualcomm has a greater dependency on Microsoft than AMD does, so the success of this part will be tied tightly to Microsoft’s support and Qualcomm’s marketing strategy. For marketing, Qualcomm normally depends on its OEMs to market, which seems to work fine for smartphones, but hasn’t worked out for PCs in years. Qualcomm would have a greater shot if it took a more competitive approach and attacked via smartphones. None of Qualcomm’s competitors for PCs have smartphone positions.
We’re expecting increasing testing of using smartphones to displace laptops, and someone will ultimately get this right. If they do, Qualcomm is in the best position to benefit, which would place Qualcomm’s strength against the weakness of its competitors rather than vice versa.
Nvidia is a wild card here, and we know little about its Arm-based CPU effort. Nvidia has relationships with all the PC OEMs and a leadership position in AI, which gives it a far stronger chance than it would have otherwise to be a disruptor in this market.
Having executed extremely well and anticipated market moves before its peers, Nvidia has been a force to reckon with over the last decade. It uses AI internally more than most of its competitors, suggesting it could develop a brand-new approach to finding a blend of traditional performance and AI superiority. We expect Nvidia to surprise the market. But, how big the surprise would be is still unknown.
The year 2024 will definitely be a processor cage match, with Intel still in the lead position in terms of market share and level of entrenchment. However, this new AI wave is anything but settled, providing paths for displacement that have never existed. AI is the big disruptor, and Nvidia, right now, is the king of AI, while Microsoft is the most aggressive marketer of the technology.
Moreover, if an innovator can figure out how to package technologies like head-mounted displays and better hardware voice interfaces, there’s the potential for an iPod-like market pivot. We doubt that Apple will want to do this, given it wants customers to buy both a smartphone and a PC, but it could still integrate the two things more tightly, potentially achieving the same goal.
All of this goes to say that 2024 will be a fascinating year, and by the end, we may be looking at laptops, desktop PCs, and even smartphones very differently than what they are today.