The mobile and the PC markets till date were working in their own Silos. These worlds have stayed separate since the requirements of both were different in terms of software, hardware and more importantly consumer usage. PC was for computing usage and mobiles were for communication. The major reason for Intel missing the mobile market was that it was entrenched in the PC and server domain. It had a strong partnership with Microsoft and this enabled it to have a dominant market share in the PC segment. The operating systems and the chips need to be designed to optimize power and take advantage of the chip capabilities, something that the windows OS and the Intel chips did very effectively. They were structured to give them advantage over other processors and ecosystems. Since Windows was the standard in the computing space, Intel also quickly became the standard in the chip making arena. However because it was a monopoly in the chip making arena and was making significant rents, it did not pay attention to the emerging threat of ARM which was anyways a small part of the chip making industry. It was more concerned about countering AMD processors in the PC market. Akin to the Walmart/ Kmart example, it would have to change its operating structure to adapt to the mobile ecosystem. ARM, being small and being just focused on design which was its prime capability, was flexible & created a niche for itself. The investments that Intel would have had to make would have been significant, without knowing the rate of return, as it would have been unsure of the potential of the market itself.
The lever that enabled ARM to get into this market was Apple who used acorn chips for its products early on. However, the lever that enabled ARM to hold on to such a large share was the fact that it avoided the market leaders Intel and AMD and created the mobile chip ecosystem itself. This was a small segment of the market and ARM became very efficient in this segment and grew with the system. Since it is a design organization, it remained very flexible as it did not have the constraints of the production of chips. It was the responsibility of other companies who derived returns from the manufacturing. These companies in turn supplied to the appliance makers who had a significant demand for their products and were conscious of the fact that ARM kept on improving the quality of the products making it more efficient and thereby improving the appliance itself. This ecosystem helped everyone to make good returns and enabled them to make significant investments in ramping production volumes. The strategic interaction among the players and then with the customer created the network externalities. ARM was known because of its interaction with Apple so other companies used its products and when this was successful, further companies and manufacturers queued up to license its products creating a monopoly in the mobile market.
The lever that enabled ARM to get into this market was Apple who used acorn chips for its products early on. However, the lever that enabled ARM to hold on to such a large share was the fact that it avoided the market leaders Intel and AMD and created the mobile chip ecosystem itself. This was a small segment of the market and ARM became very efficient in this segment and grew with the system. Since it is a design organization, it remained very flexible as it did not have the constraints of the production of chips. It was the responsibility of other companies who derived returns from the manufacturing. These companies in turn supplied to the appliance makers who had a significant demand for their products and were conscious of the fact that ARM kept on improving the quality of the products making it more efficient and thereby improving the appliance itself. This ecosystem helped everyone to make good returns and enabled them to make significant investments in ramping production volumes. The strategic interaction among the players and then with the customer created the network externalities. ARM was known because of its interaction with Apple so other companies used its products and when this was successful, further companies and manufacturers queued up to license its products creating a monopoly in the mobile market.
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