ARM Plunges After Samsung Picks Intel Chip for Tablet

ARM Holdings Plc, whose technology is at the heart of the chips that run most of the world’s smartphones, plunged after Samsung Electronics Co. said it will use an Intel Corp. chip in one of its tablet models.

Samsung’s choice overshadowed ARM’s unveiling of a new design today to boost the performance of mid-range smartphones. Cambridge, U.K.-based ARM, whose chip technology is used by Apple Inc., fell 7 percent in London, the biggest drop since August 2011, after customer Samsung said it will use an Intel chip in its latest 10-inch tablet.

ARM is pitching the new technology for mobile devices in the mid-range market. Demand for smartphones in this category has declined to less than 30 percent of total shipments, according to Bloomberg Industries. Intel’s win may be a breakthrough for a mobile push that new Chief Executive Officer Brian Krzanich said needs to be accelerated after more than a decade of failing to gain market share from ARM customers such as Qualcomm Inc.

“The news Intel has finally landed a tier-one tablet design win could take a bite out of ARM’s share price,” Gary Mobley, an analyst at Benchmark Co., said in a note to clients.

ARM fell 69 pence to 919 pence in London trading, paring the gain to 20 percent this year and giving the company a market value of 12.8 billion pounds ($19.6 billion). Intel rose 3.6 percent to $25.15 at 1:24 p.m. in New York.

Mid-Range Growth

ARM designs chip cores, the heart of a processor, which are then incorporated into semiconductors by customers such as Qualcomm Inc., Apple and Samsung.

While Intel’s chips have been used in designs for Acer Inc. and Asustek Computer Inc., landing Samsung gives the Santa Clara, California-based company access to the world’s second-largest tablet maker behind Apple.

ARM’s Cortex-A12 chip design will deliver a 40 percent performance improvement over earlier versions, the company said today. ARM’s strategy to promote the Cortex-A12 for use in devices priced between $200 and $350, may set up another battleground with the world’s largest chipmaker.

“Intel has been talking about coming into the mobile space for at least five years, and for ARM we’ve taken that very, very seriously,” Ian Drew, ARM’s chief marketing officer, said in an interview in Taipei today.

In addition to Cortex-A12, ARM today released Mali-T622 chip technology for graphics processing, and Mali-V500, which provides high-definition video processing functionality.

ARM is counting on competition among fancier models to reignite growth in the mid-range segment, which it predicts will swell to 580 million devices by 2015, compared with about 200 million today.

High-End Features

The company is targeting users of smartphones and tablets who want to enjoy high-end features without a high price tag, Director of Segment Marketing Jeff Chu said in a phone interview. This could be anything from the ability to unlock a device just by looking at it to being able to use a phone to pay for a cup of coffee, he said.

“We’ve looked at this opportunity for years and recognized where the market is going,” Chu said. “Consumers want the latest apps and features, and are flexible on device specifications because they have to fit into a budget.”

With Cortex-A12, a processor could run multiple apps simultaneously while minimizing battery drain, ARM said.

The company’s new graphics chip design will be the smallest of its kind on the market, while improving energy efficiency by 50 percent compared with its predecessor, ARM said. The company is partnering with Globalfoundries Inc. for the release of the new designs, with the first devices featuring them expected to begin shipping toward the end of 2014.

Competition in tablet chip designs is intensifying, and ARM’s new products follow Intel’s own revamp, which it announced last month. Intel’s new low-power designs may be able to outperform equivalent ARM products, and could “mark the end of ARM’s monopoly on smartphones and especially on tablets,” Exane BNP Paribas said in a note to clients on May 22.

Since then, ARM’s share price declined 7.2 percent through last week.

Before it's here, it's on the Bloomberg Terminal.