Yes, it is very low margin. And it is also very demanding. But is it high volume. Look at the companies that walked away from this business, Freescale and TI. Intel has a lot of cash, but this may be more than they have the stomach to invest in.
This is trench warfare ( attrition ), Intel has to get into smartphones and tablets not to make same level of profit as for CPUs but to deny upstarts ARM and TSMC future viability. Even if it takes $ 20 billion and 5 years to get there it would be well worth it for the future of Intel. They have the money in the bank for such a strategy.
Technologies like finFET and low power dissipation transistors and architectures are the foundation for it. Once Intel brings out Medfield at 20 nm later this year, it will be very hard for system builders now tied to fabless processor vendors ( who get their chips made by TSMC, now 2 nodes behind Intel ) or even integrated vendors ( Samsung ), to ignore it.
The consumer gets to choose who's the winner. If Intel doesn't fail to deliver a comparable power saving product to any ARM based product, Intel might have a chance. Otherwise, how many people are going to buy it? Another factor would be the availability of apps and, in particular, free apps. I am happy to see more competition. At the end, consumers win. ;)
It's a lower margin business. It made no sense to use advanced technologies for the purpose of lower power consumption. 22 nm nodes' will be at least 40% more expensive than 32nm and 14 nm would be even much more when EUV litho kicks in. They should run the PC/server CPUs on new technology nodes and use the older generation technology at depreciated fabs to run lower margin products. Why can't Intel push the design architecture to get lower power same as ARM?
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