When influential technology reviewer Marques Brownlee, aka MKBHD, reviewed Microsoft’s new high-spec Surface Laptop 7, he seemed pretty floored by its impressive performance and efficiency.
Not only was the 14-inch laptop praised for its best-in-class battery life (around 23 hours), but the speed, processing power and versatility of the device were highly commended.
He certainly wasn’t the only one- Techradar gave the “incredible portable machine” a full five stars out of five, while Tom’s Guide called it “a true MacBook Air rival”.
Indeed, these are the sort of gushing reviews you’d typically see an Apple cultist give the latest MacBook iteration.
Perhaps that’s because the Surface 7 has more in common with Apple’s flagship computers than you might expect.
If you rip open the Surface 7, you’ll not find an Intel processor built on x86 chip architecture.
No, despite the famed ‘Wintel’ partnership that has seen the two companies maintain close ties over the decades, the Surface 7 comes loaded with a ‘Snapdragon’ processor made by US chipmaking giant Qualcomm.
Specifically called the Snapdragon X Elite, Qualcomm’s processor differs from Intel’s processors in a big way- Instead of Intel's x86 instruction set, it is built on an instruction set developed by British tech giant Arm Holdings PLC (NASDAQ:ARM).
Microsoft’s decision to switch to Arm’s instruction set for the latest Surface laptops brings the Redmond tech giant in line with Silicon Valley arch nemesis Apple, which dumped Intel in 2020 to develop its own processors built on Arm instruction sets.
For Intel, these developments represent another significant blow to a company that was once a trailblazer but is now becoming increasingly sidelined.
For Arm, it represents a brave new world as it expands beyond smartphones, where it has an effective global monopoly, into a space historically dominated by Intel and AMD (the latter for more gaming-oriented devices).
What does Arm really do?
Currently valued at US$150 billion following a highly successful 2023 IPO, Arm is one of the leading companies in the chipmaking sector. But it doesn’t develop or manufacture any chips.
Instead, Arm makes ‘instruction sets’ that other chipmakers can license to develop their chips on.
Great, but what does Arm really do? Despite the arcane nature of microchip design, the answer is pretty simple- Arm provides energy efficiency.
Chipsets are like little towns. To perform computing functions, electrons must travel to a CPU to perform central processing functions, then across town to a GPU to perform graphics processing functions, while stopping off at the RAM centre to access random access memory functions.
The better a town is planned, the more efficient it becomes. Chipsets are no different. The key is to hire a good town planner, which is what Arm is- an exceptional town planner, but for chipsets.
That’s why the Surface 7 can last a whole day without being charged, all the while handling highly demanding software applications- it’s bloody efficient.
Arm’s efficient designs made it the defacto king of the smartphone industry, where Arm’s instruction sets are found in roughly 99% of all devices. With the ever-increasing thirst for energy efficiency in the laptop space, it becomes clearer why Arm is spreading its wings.
Of course, a well-planned town is useless if it’s not built well. To keep the analogy going, Qualcomm has clearly proven itself a top-tier construction company.
Great things can happen when town planners and builders work well together, which Arm and Qualcomm have discovered as they become more deeply embedded into the home PC market.
But this relationship has soured in recent years following Qualcomm’s $1.4 billion acquisition of CPU designer Nuvia in 2021.
Friends turn enemies
While a small acquisition in the grand scheme of things, Qualcomm’s takeover of Nuvia irked Arm because Nuvia was already an Arm customer.
In a 2022 complaint filed before the US courts, Arm detailed how Nuvia had existing licenses to use Arm’s instruction sets.
When Qualcomm acquired Nuvia in 2021, it did not obtain Arm's consent to transfer these licenses, an act which Arm states violated its agreements with Nuvia.
Arm contends that Qualcomm is using Nuvia’s CPU designs that incorporate Arm instruction sets, without having the permission to do so.
Arm wants Qualcomm to destroy any hardware it deems in breach of contract.
The basis of Arm’s complaint appears to be that Qualcomm should have renegotiated its licensing agreements with Arm after acquiring Nuvia, presumably at a higher cost.
Arm ratcheted up the dispute earlier this month when it notified Qualcomm that will be cancelling its licensing contracts within 60 days.
This threatens to scupper a relationship that has proved immensely lucrative for both parties.
Arm contends that it is “necessary to protect the unparalleled ecosystem that Arm and its highly valued partners have built over more than 30 years”, while Qualcomm has accused Arm of “more unfounded threats designed to strong-arm a longtime partner”.
So who has the bargaining chip in this dispute?
Microchip monopolies
Given Arm’s aggressive approach to litigation, it evidently thinks it does. This could be down Arm’s growing monopolisation of the instruction set space.
If Qualcomm decides not to play ball, it could find itself in danger of souring its relationship with Arm. Potentially great news for Intel, which might find its x86 instruction sets back in vogue. Not so good news for Qualcomm.
The implications get far worse for Qualcomm when you consider the fact that Qualcomm’s relationship with Arm extends far beyond laptops-, Qualcomm is a leading chip designer in the Android smartphone space.
Losing Arm as a business partner risks putting a dent in Qualcomm’s 23% share of the smartphone processor market. That could clearly be devastating for Qualcomm.
Such are the trappings of an industry built on layers of monopolies.
For an industry as far-reaching and essential to everyday life as the chip industry, it is not particularly diverse in terms of competition.
Consider Nvidia Corp’s comprehensive domination of the AI chip space, or TSMC’s domination of the manufacturing contingent of the supply line, or ASML’s complete ownership of the machinery space, or Arm’s effective monopoly of the smartphone instruction set space.
At each stage of the chipmaking process, there are really only a handful of big timers that dominate each stage.
Historically, this has meant they all need to play nicely for fear of being shut out of a key service line.
Perhaps the Arm-Qualcomm dispute will provide a case study of what happens when they stop playing so nicely.
Analysts expect the two parties to resolve this dispute outside of the courts. But if this fails, expect a landmark trial that could change the shape of the chip industry to come.