Editor's note:
The "explosion" of AI big models has driven the rapid development of the AI PC market, and has also changed the original competitive landscape of PC chips. A new iteration cycle on the PC side, driven mainly by AI, has begun. Faced with a new iteration cycle, technology giants such as NVIDIA, Intel, AMD, Arm, Qualcomm, MediaTek, Microsoft, Apple, HP, etc. need to adjust their strategies and innovate their technologies to seize the "new blue ocean". The "gunpowder smell" emanating from the AI PC market is becoming increasingly intense.
With Qualcomm's release of AI PC chips and their integration into Microsoft's recently released products, Windows on Arm (WoA), one of the AI PC chip camps, has added another major player.
In the early stages of computer system development, Microsoft (Windows) dominated the vast majority of the PC chip market for a long time by forming the Wintel alliance with Intel. But in recent years, with the rise of more chip companies, especially after Apple wanted to break away from Intel's influence and chose to cooperate with Arm to develop its own chips, the WoA camp is accelerating its competition with the Wintel alliance.
However, the recent variable is that the lawsuit between Arm and Qualcomm will be officially heard at the end of September, which may cast a shadow over the future development of the camp.
Under the new trend of AI PC, the development of WoA camp is also accelerating. According to reports, more participants including Nvidia and MediaTek are also eyeing the field. So how will the two camps of AI and PC chips continue to compete?
WoA adds another tiger general
During the last two earnings seasons, Microsoft CEO and President Satya Nadella emphasized new opportunities in the AI era.
This year, Microsoft announced that it will cease maintenance support for Windows 10 by 2025 and release a new AI PC product for Windows 11, thus initiating a new iteration cycle on the PC side driven primarily by AI.
Guotai Junan Securities believes that the development of AI PC can be divided into two stages: AI Ready and AI On. The AI Ready stage is from October 2023 to present. Most AI PCs on the market use API to call end-to-end large models to implement AI noise reduction, AI video conferencing, text and image generation, PPT generation and other AI functions, but cannot achieve AI system level applications.
The hallmark of the AI On phase is that Microsoft recently restructured Windows 11 and officially integrated Copilot into the operating system. Copilot, based on GPT-4o and over 40 large end side models, has excellent contextual and visual perception capabilities. It can deeply understand screen display content and engage in emotionally rich voice interaction with users based on information on the screen. In the era of AI On, AI PCs will grow into dedicated AI assistants through fine-tuning and training of end-to-end large models based on personal data.
Differently, the Surface series products equipped with Windows 11 released this time use Qualcomm Snapdragon X Elite and Snapdragon X Plus series processors respectively. Behind this is Qualcomm's self-developed Oryon CPU based on the Arm architecture.
You should know that for many years, the PC market has been dominated by the X86 architecture led by Intel and AMD. In its early years, Windows formed the Wintel Alliance with Intel, which continuously strengthened the release of Intel's CPU hardware capabilities through system adaptation, and was only applicable to X86 architecture series chips. This allowed the two to occupy a considerable market share in the PC era, almost equivalent to a "duopoly monopoly". It is not easy for new entrants to enter the PC field thereafter.
Afterwards, Microsoft made some attempts to install Arm architecture chips in its PC hardware products, but the reputation was poor due to the lack of a sound ecosystem. With Apple announcing its self-developed M-series chips for PC products, adopting the Arm architecture core, and gaining Apple's appeal in the software ecosystem, Arm architecture as a latecomer began to actively break through.
This year, Microsoft released the "Copilot+PC" for the AI PC era, which first adopted Qualcomm chips. Although Intel chips will also be included in Microsoft PC products in the future, it is not difficult to see that in the AI PC era, the old order is waiting to be changed, and the WoA camp is accelerating its market capture.
Canalys senior analyst Ye Maosheng analyzed 21st Century Business Herald reporters that it can be observed that Microsoft no longer focuses on the X86 market in its long-term development strategy. The expansion of Windows on Arm is a long-term trend, but it still takes time to bring a wider range of software into the Arm ecosystem.
We believe that although there is still a lot of room for improvement in Qualcomm's current generation of products to attract consumer attention and discussion, with the continuous improvement of the operational capabilities of various software and the expansion of the market by more competitors in the future, it is expected to further affect the market pattern in the next 3-5 years. "He further stated that Qualcomm's product is not the first generation, and it has been trying to operate the Windows ecosystem for many years." In fact, Snapdragon 8cx series products had products as early as 2018, but the number of developed products and product penetration are very limited
Eric Smith, Director of TechInsights' Interconnected Computing Channel, also pointed out to 21st Century Business Herald reporters that Qualcomm has been quietly promoting the application of Snapdragon 8cx chips in PCs in recent years and collaborating with Microsoft to improve simulation in Windows. Since acquiring Nuvia in 2021, Qualcomm has spent several years developing and releasing the Oryon CPU, which is the basis of the Snapdragon X series. I believe that artificial intelligence is an important new feature for Windows on Arm devices, and it will have long-term AI use case potential and selling points
Regarding WoA's competitiveness in the AI era, he also believes that "all signs indicate that the demand for Copilot+PC is higher than expected, but the scale is still small. Currently, there are only a few models available for selection, and these devices are priced above average and have only been on the market for five weeks. Any changes in market share will take months or years, so there is currently no significant change
The Battle between Wintel and WoA
With the help of the Wintel Alliance, Intel and AMD have always held a dominant position in the PC market with the X86 architecture. Until recently, even though Intel's overall performance has been under pressure, the revenue of the consumer PC market has been in a year-on-year growth trend.
21st Century Business Herald reporters have found that in the past three fiscal quarters, Intel's Client Computing Division (CCG) has been the only business among the three major business units to continuously achieve year-on-year growth, and it has also been Intel's main source of revenue. The latest Q3 financial report shows that Intel has shipped 15 million AI PCs since December 2023 and is expected to achieve over 40 million AI PC shipments by the end of this year.
But strong competitors are also quietly developing.
In 2012, Microsoft began experimenting with launching the Windows RT system and running it on Surface products equipped with Arm chips. But obviously, the moat formed by early Wintel was too strong, and products based on new chips lacked sufficient software adaptation and ecological maintenance, ultimately being seen as a failed attempt.
In 2016, Microsoft signed an exclusive agreement with Qualcomm to enable the Windows operating system to run on Arm processors, forming the core foundation of "Windows on Arm" (WoA). But as mentioned earlier, there are many obstacles to early exploration.
In 2020, Apple launched PC products equipped with its self-developed M1 series chips, which was considered a key event in breaking away from its dependence on Intel for independent development. This also pushed the WoA camp, which has been facing resistance in the PC market, to gradually improve its ecological capabilities.
Eric Smith analyzed to reporters that Apple has achieved vertical integration in software and hardware. Therefore, by independently designing efficient and powerful PC chips to enter the semiconductor design business, it has indeed proven that the Arm architecture can bring huge advantages such as better battery life and scalability. According to our research, since Apple launched its first MacBook with M-series chips, its laptop market share has increased by two percentage points to 10%
Ye Maosheng also told 21st Century Business Herald reporters that PC products equipped with Apple's self-developed chips have revealed to the public that, with certain ecosystem adaptation, Arm architecture processors are fully capable of replacing the X86 ecosystem.
In addition, with the continuous increase in product computing demand in the future, the power consumption and heat dissipation of X86 products will become unavoidable challenges. Excessive power consumption will suppress battery life, while the challenge of heat management may affect product performance consistency - because overheating requires the processor to operate at a lower frequency, but the Arm architecture has advantages in this regard. In the future, the demand for AI side devices will continue to expand, and the advantages of the Arm architecture will be more apparent He added.
More and more characters are participating and leading the attitude of manufacturers is changing, which also brings new variables to the competition between WoA camp and Wintel camp.
Ye Maosheng analyzed that the implementation of Arm architecture and NPU has led Intel and AMD to make relevant mergers and acquisitions in the past few years and bring NPU into X86 processor products. In the future, it cannot be ruled out that existing X86 manufacturers may invest in the development of Arm architecture products. For PC manufacturers, there is also an opportunity to provide consumers with more diverse product choices through the adaptation of different processors.
We believe that Qualcomm's Snapdragon X series chips have injected new competitive vitality into the PC market. Not only Intel and AMD, which have X86 architectures, have accelerated their innovation pace in NPU energy efficiency and AI processing, but it is rumored that Nvidia may collaborate with MediaTek to release Arm based PC chips, and AMD is also developing Arm based PC chips. With many simulation issues being resolved in Windows, we believe this is a logical development trend for the industry Eric Smith told reporters.
Competing in the era of big models
However, some variables lie in the fact that Arm and Qualcomm, the two major players in the WoA camp, are facing some pending lawsuits.
In 2021, Qualcomm announced the acquisition of Nuvia for $1.4 billion, a company specializing in Arm CPU development. Many members of the team are from Apple and have played an important role in Qualcomm's recent launch of the Snapdragon X series chips.
But in 2022, Arm sued Qualcomm and Nuvia for the aforementioned acquisition without its permission. The reason is that Arm had previously provided licensing agreements for Nuvia, stating that the licensing agreement between the two parties was terminated in early 2022 after the latter was acquired; However, Qualcomm continued to use Nuvia's design products developed under the Arm license agreement without Arm's permission and integrated them into its own product line, which Arm believes violates the standard restrictions of the license agreement.
This lawsuit has been ongoing for many years and will face a verdict by the end of September this year.
One industry perspective suggests that this lawsuit may not bring much change to the existing development trend of the WoA camp.
Arm is fully committed to developing its own PC and AI solutions, including client-side Arm Compute Subsystems (CSS) and developer supported KleidiAI software. Regardless of how litigation, licensing, royalties, or other aspects develop, we believe there are enough participants in this ecosystem to make the Windows on Arm camp an important part of the market in the next five years, accounting for up to 15% of the entire laptop market, "Eric Smith analyzed to 21st Century Business Herald reporters.
Previously, Arm CEO Rene Haas pointed out that as the exclusive agreement between Qualcomm and Microsoft is about to expire, consumers may see a large number of new Windows on Arm devices appearing by the end of this year or early next year. He expects that by the end of 2025, there will be over 100 billion Arm based devices (including smartphones, PCs, and other types of terminals) available for AI.
Regardless of the instruction set architecture, the value of chips in PCs will continue to grow Eric Smith told reporters, 'Because in addition to the new NPUs in Intel, AMD, Qualcomm, and Apple chips, large language models (LLMs) reside in the computer's RAM (memory), which means additional memory and SSDs are needed to meet Copilot+requirements.'. In the coming year, the degree of differentiation in support, sales, and Arm based PC products among different PC original equipment manufacturers (OEMs) will be worth paying attention to
In addition to the continuous improvement of product specifications, Qualcomm needs to face the gaming needs of users. If this weakness is resolved, it will have the opportunity to encourage some leading manufacturers/brands in the esports field to develop products for them, "Ye Maosheng analyzed to 21st Century Business Herald reporters