What it is: Intel’s Atom processor was a low-cost processor that used less power than ordinary x86 processors.
At one time, the PC market ruled the computing world because everyone needed a PC to do anything from replying to email to posting on Facebook. Then Apple introduced the iPhone and redefined the smartphone market. Then Apple introduced the iPad and redefined the tablet market. To power the iPhone, Apple used low-power processors developed by ARM Holdings. Such low-power processors are called ARM processors, which are used in the majority of smartphones and tablets today.
Back in the 1990s, Apple developed their Newton handheld personal digital assistant (PDA) that needed a low-power processor, so Apple helped create ARM Holdings. Decades later, Apple used ARM Holding’s processors for the iPhone and iPad. Later, Apple acquired a company called PA Semi so they could customize the ARM technology and create their own ARM processors.
Yet while Apple was pursuing mobile devices with the iPhone and iPad, Intel decided that the iPhone business initially wasn’t worth supporting. So not only did Intel fail to get their own processors into the iPhone, but they also failed to recognize the coming shift to mobile computing that didn’t rely on the x86 processors used in ordinary PCs. When the mobile computing market took off, Intel quickly tried to catch up by offering a low-power processor based on the trusted x86 architecture called Atom processors.
Intel initially got Atom processors into netbooks, which promptly disappeared the moment Apple introduced the iPad. Suddenly, Intel found themselves locked out of the fast growing mobile computing market. Intel tried to get Microsoft to use Atom processors in their Surface tablets, but Microsoft also chose ARM processors to run their failed Windows RT Surface tablets. Rather than choose a low-powered, slower processor, Microsoft chose to adopt the ordinary x86 processors for their Surface Pro tablets. Despite improving sales, the total sales of the Surface Pro can’t make up for missing the entire mobile computing market.
That’s why Intel is quietly dropping further development of the Atom processor. It’s too slow to compete with Intel’s regular x86 processors and now fast enough to compete with ARM processors. There’s little cost savings in using the Atom processor so it’s basically a product searching for a solution. Not surprisingly, no one really wants it.
Intel is currently in trouble for what they did in the past, which was ignore the iPhone and the mobile computing market, and stick with their trusted and reliable x86 business linked to PCs. Now that PCs are fading in importance and popularity, Intel is suddenly in trouble. The PC market is never going to magically rebound any time soon to its former glory, which means Intel has a long future of declining along with the PC market.
That’s why Intel is cutting the Atom processor and focusing more on chips for other types of devices. Intel knows the future is no longer with the PC but with the so-called Internet of Things where smart devices are connected such as a furnace, refrigerator, door locks, and interior lighting can all be controlled through a smartphone or tablet.
Right now, Intel has no future in the mobile computing market and only a toehold in other markets. Can they shift in time to capture new markets while retaining the expenses and bureaucracy set up to run their x86 business as well? Maybe, but history says that most companies fail to make the shift from a dominant, older business to a fast growing newer one. Just look at how Borders Books lost to Amazon, Blockbuster Video lost to Netflix, and Blackberry lost to Apple’s iPhone. Even Kodak once dominated the photography business but is just a shell of its former self after missing the digital photography market.
The problem is that big companies reliant on mature but declining markets never seem to move fast enough to capture a smaller but faster growing market. By the time their old business fades away, their expenses are too high to compete in the faster growing market. Instead of shifting to a new market, such big companies more often simply fail.
So the future of Intel looks bleak as everyone shifts from reliance on the PC market. Dell Computers is focusing on servers, Microsoft is focusing on cloud services, and Intel must now focus on supplying chips for other devices besides PCs. If Intel does survive the shift away from the PC market, they’ll likely never be the dominant force they once were, which means Intel has nowhere to go but down.
The mobile market and now the wearable computing market will create new winners, but chances are good Intel won’t be one of them.