Intel, ARM and the Innovators Dilemma

Why succeeding as an ARM chip maker will be next to impossible for Intel and AMD

I recently received an interesting challenge to my assertion that Intel and AMD are at a crossroad, due to the rise of ARM processors from the likes of Apple, Amazon, Qualcomm and many others.

Its naive to think days of Intel and AMD are over. They are multi billion $ companies who can just as easily license ARM ISA and integrate that into their own CPUs. In a way, they can create something much better (for PC users at least): an x86/ARM hybrid CPU that can run both ISAs natively. As PC-side software developers slowly transition to ARM, so would they. Then they would use their decades worth of experience in developing ARM CPUs. No harm done..

As you can probably guess, I strongly disagree with this assertion. We can address this issue from a number of angles. Let me do one of the most obvious ones first.

The Difficulty of Competing with Your Own Products

There is a good reason why the big auto-makers struggle with beating Tesla at making electric cars. They face a very real dilemma: If they make an amazing electric car they could undermine their own gasoline car business. GM, Ford and others make more money selling gasoline cars than electric cars. Electric car production will initially be limited, due low battery volume production and many other factors. Thus EV production cannot be scaled up to the same volumes as gasoline car production. Hence GM and Ford cannot make as much money selling them.

This is not an issue for Tesla. They are not competing with themselves, since they don’t make any gasoline cars.

Intel and AMD face the same problem if they start making ARM CPUs. It would be akin to Ford making an EV, a product competing with their existing lineup. They face the problem that if their ARM chip is too good, it will cannibalize the sales of their x86 CPUs. That is not a desirable proposition for either of them. They both enjoy high markup on x86 chips because they enjoy a duopoly. Nobody else can enter the x86 market.

Thus Intel and AMD risk doing the same as GM. That they make an ARM product that simply isn’t…