Microsoft announced at CES-2011 that its next generation Windows PC platform will run on ARM architectures. NVIDIA, Qualcomm and Texas Instruments were named as key ARM silicon partners. We think this is good news for stand-alone ARM applications processor vendors such as Texas Instruments (TI) and throws the company a lifeline at a time when the market is moving towards integrated solutions.

By our estimates, the market for stand-alone applications processors in smartphones contracted from 70 percent in 2007 to just under 30 percent in 2009. Vendors such as Qualcomm are driving the baseband-integrated applications processor market and these integrated processors are increasingly gaining acceptance in the smartphone market. The integrated approach is currently popular in the low-to-mid range smartphones but is gaining traction in the high-end as well lately.

Microsoft's decision to port the Windows PC platform to ARM architectures changes the market dynamics dramatically. However, it's too early to tell what impact it will have on Intel as Microsoft hasn't revealed any timeline for these new products. ARM hasn't yet revealed its 64-bit architecture and current generation ARM processors also cannot support graphics computing APIs such as OpenCL. It will take at least another 18-24 months for Microsoft to reengineer its platform for ARM architectures and to build a software ecosystem around it. This should give enough time for Intel to bring power-efficient processors to the market. Intel is expected to feature in Nokia's MeeGo smartphones and tablets in 2012 which we think would be a great psychological boost to counter ARM-based processor vendors.

The likely specs for Windows on ARM architectures are:

• CPU: Dual-core / Quad-core ARM Cortex-A9; GPU: ARM Mali-400 / Third-party GPU

• CPU: Multi-core ARM Cortex-A15; GPU: ARM Mali T-604 / Third-party GPU (Most likely configuration and leading chip vendors such as TI, NVIDIA and Samsung were already announced as licensees of Cortex-A15 cores)

• Custom ARM processor designed by Microsoft and its hardware partners

This move is a good news for NVIDIA, Qualcomm and TI as it opens up new opportunities. Qualcomm already has customer relationships with top PC vendors and is expected to leverage them to expand into the Windows PC ecosystem. This move equally helps the stand-alone applications processor vendors to revitalize their businesses and to compete for higher volume. Broadcom, ST-Ericsson, Samsung, Renesas, Marvell and Freescale could also potentially feature as future Microsoft's partners.

We believe diversified device and OS landscape favors chip vendors as they can avoid the risk of being sidelined by powerful vendors. With Microsoft's support, ARM chipset vendors can now look forward to new markets that were unavailable to them previously.