Rise of ARM Chips Threatens Intel’s Dominance

V-3, a UK-based technology website, reports this morning that technology leader Dell (NASDAQ:DELL) is now considering using chips made by ARM (NASDAQ:ARMH) for its servers, saying the company’s hardware offers several advantageous perks over rival Intel (NASDAQ:INTC), such as better power and density. “There are a number of customers that are extremely intrigued by ARM-based microservers, and we certainly have been doing some work there,” said Dell server manager Forrest Norrod. “Although the ARM software ecosystem is well developed on the mobile client side, it’s not there yet on the enterprise side. There’s not a good enterprise Linux distribution, and there’s not a good Java version for enterprise on ARM,” he continued, noting that although Dell was strongly considering ARM, it still holds some reservations.

ARM chips are now poised to challenge semiconductor (NYSE:SMH) industry leaders such as Intel and Advanced Micro Devices (NYSE:AMD) in the PC market as well, where its less expensive processors are expected to take up to a 23% share in global notebook PC shipments in 2011, with particular focus in the ‘value’ notebook markets (under $700). The company has seen remarkable growth in the past several years, and projects an even more staggering rise in the next five years, as PC leaders such as Microsoft (NASDAQ:MSFT) and iPad maker Apple (NASDAQ:AAPL), which is expected to announce that its Windows 8 OS will be compatible with ARM architecture, rush to accommodate its components.

“ARM (NASDAQ:ARMH) is well-suited for value notebooks, where performance isn’t a key criterion for buyers,” said principal analyst Matthew Wilkins. “Value notebook buyers are looking for basic systems that balance an affordable price with reasonable performance. ARM processors deliver acceptable performance at a very low cost, along with unrivaled power efficiency.”

Intel (NASDAQ:INTC) and AMD (NYSE:AMD) will not sit quietly and watch as ARM scoops up their market share, as isuppli.com reports that they both have new innovation in the works. “Intel is developing its Tri-Gate 3-D transistor technology, which allows X86 microprocessors to cut their power consumption in half while still delivering the same level of performance. This potentially will help Intel to maintain its position in PC processors, but also may allow it to expand its X86 business into tablets and cellphones. Likewise, AMD has been working to reduce power consumption for its X86 devices.”