Companies that make CPU chips - the "brains" inside every kind of computing device - have a fresh catalyst within the mobile wave to help stimulate sales: "ultramobile" products.
Ultramobile is the term that research firm Gartner is using to describe very small and light notebooks, as well as tablet/laptop hybrids like the Microsoft Corp. (Nasdaq: MSFT) Surface.
In its projection for this year and next, Gartner sees the ultramobile category adding to the growth of mobile wave devices like smartphones and tablets, which together today form a much bigger market than that of traditional PCs.
Ultramobiles will create new opportunities for the CPU-makers as the mobile wave continues to rise.
"The 'mobile wave' is massive, and is where growth is at in the chip sector," said Money Morning Defense and Technology Specialist Michael Robinson.
Major beneficiaries in this space include ARM Holdings plc (Nasdaq ADR: ARMH), Qualcomm, Inc. (Nasdaq: QCOM), and of course Intel Corp. (Nasdaq: INTC).
At stake are billions of dollars in revenue.
The Mobile Wave Gets Bigger Every Year
To get some idea of why the mobile wave matters so much, look at it side-by-side with the state of the PC market, which not too long ago dominated the demand for CPUs.
Gartner projects that PC shipments will plummet by 10.6% this year and another 5.22% in 2014.
That has put pressure on Intel, which historically has dominated the PC CPU market with occasionally spirited competition from Advanced Micro Devices Inc. (NYSE: AMD).
But it's the differences in the number of devices sold that illustrate just how far the momentum has swung in favor of the mobile wave.
Gartner sees about 305 million PCs being sold in 2013, but more than 1.8 billion mobile phones, 201.8 million tablets and 20.3 million ultramobile devices.
Growth of mobile phones is just 4.3% as that market nears a saturation point, but tablet sales will grow 67.9% and ultramobiles are set to more than double over the previous year.
"Consumers want anytime-anywhere computing that allows them to consume and create content with ease, but also share and access that content from a different portfolio of products. Mobility is paramount in both mature and emerging markets," Carolina Milanesi, research vice president at Gartner, said in a statement.
And in 2014, Gartner projects ultramobiles nearly doubling again to 39.8 million, while tablets jump an impressive 36.8%.
Who Will Win the Battle for the Mobile Wave CPU Market
Given those juicy growth numbers, let's see how our three CPU companies might fare as the mobile wave rises:
- ARM Holdings: ARM has proven a much more capable rival to Intel in the mobile space than AMD ever was in the PC space. In fact, in mobile, ARM is the dominant player. That's because ARM isn't a chipmaker per se - it doesn't manufacture the chips themselves -- but rather a chip designer.
ARM licenses its designs out to others, who then make the chips. But those "others" include some pretty heavy hitters, such as Apple Inc. (Nasdaq: AAPL) and Samsung (OTC: SSNLF).
ARM's designs have been successful because they're more power-efficient and thus preserve battery life - a crucial feature in all mobile computing devices. ARM's latest Cortex-A15 chip design is used in such high-profile devices as the Samsung Galaxy S4 smartphone and the Google Inc. (Nasdaq: GOOG) Nexus 10 tablet.
Given its vast array of partnerships with most of the major mobile device makers, ARM is well-positioned to capitalize on the explosive growth in the mobile wave.
- Qualcomm: Yes, Qualcomm is one of those who licenses designs from ARM, but it deserves special mention because it has been particularly successful in customizing those designs into its own Snapdragon line of CPUs.
Later this year Qualcomm plans to introduce the Snapdragon 600 and the Snapdragon 800, which will add much beefier graphics performance while maintaining power efficiency. That will make it ideal for mobile wave devices with more demanding high-definition displays.
"Qualcomm seems to be readying itself for a big tablet splash in the coming months," noted financial Web site Trefis.com recently. "The second half of 2013 is about to get very interesting for Qualcomm."
- Intel: By its own admission, Intel badly misjudged the advent of the mobile wave and its Atom line of mobile device CPUs have for years lagged those based on ARM's designs. "Mobile accounts for 1% of Intel's sales. That's just pitiful," Robinson said.
But that may be about to change. The company's new "Silvermont" Atom chips due out later this year feature a new architecture and fabrication technology that should make them far more competitive with ARM's designs.
Robinson believes this new chip, along with a deal to put Atom CPUs in the Samsung Galaxy Tab 3, will revive Intel's fortunes in the mobile wave.
Ironically, because it's starting out so far behind, Intel could gain the most from the quickening sales of mobile wave devices like tablets and ultramobiles.
"Very few go from leaders to laggards to leaders again. Intel is shaping up to be one of the exceptions," Robison said.
Have you ever wondered how the experts figure out which stocks are winners? Here are the five rules that Michael Robinson uses to screen for big-profit stocks in the mobile wave and elsewhere in the tech sector.
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