Mobile computing's rise from niche market to the mainstream is among the most significant technological trends in our lifetimes. And to a large extent, it's been driven by the bounty of Moore’s Law—the rule that transistor density doubles every 24 months. Initially, most mobile devices relied on highly specialized hardware to meet stringent power and size budgets. But with so many transistors available, devices inevitably grew general-purpose capabilities. Most likely, that wasn't even the real motivation. The initial desire was probably to reduce costs by creating a more flexible software ecosystem with better re-use and faster time to market. As such, the first smartphones were very much a novelty, and it took many years before the world realized the potential of such devices. Apple played a major role by creating innovative smartphones that consumers craved and quickly adopted.

To some extent, this is where we still stand today. Smartphones are still (relatively) expensive and primarily interesting to the developed world. But over the next 10 years, this too will change. As Moore’s Law rolls on, the cost of a low-end smartphone will decline. At some point, the incremental cost will be quite minimal and many feature phones of today will be supplanted by smartphones. A $650 unsubsidized phone is well beyond the reach of most of the world compared to a $20 feature phone, but a $30 to $40 smartphone would naturally be very popular.

In this grand progression, 2013 will certainly be a significant milestone for mobile devices, smartphones and beyond. It's likely to be the first year in which tablets out-ship notebooks in the US. And in the coming years, this will lead to a confluence of high-end tablets and ultra-mobile notebooks as the world figures out how these devices co-exist, blend, hybridize, and/or merge.

Against this backdrop, in this two-part series, we'll explore the major trends and evolution for mobile SoCs. More importantly, we'll look to where the major vendors are likely going in the next several years.

Tablet and phone divergence

While phones and tablets are mobile devices that often share a great deal of software, it's becoming increasingly clear the two are very different products. These two markets have started to diverge and will continue doing so over time.

From a technical perspective, smartphones are far more compact and power constrained. Smartphone SoCs are limited to around 1W, both by batteries and by thermal dissipation. The raison d’etre of a smartphone is connectivity, so a cellular modem is an absolute necessity. For the cost sensitive-models that make up the vast majority of the market, the modem is integrated into the SoC itself. High-end designs favor discrete modems with a greater power budget instead. The main smartphone OSes today are iOS and Android, though Windows is beginning to make an appearance (perhaps with Linux or BlackBerry on the horizon). Just as importantly, phone vendors like HTC must pass government certification and win the approval of carriers. There is very much a walled-garden aspect, where carriers control which devices can be attached to their networks, and in some cases devices can only be sold through a certain carrier. The business model places consumers quite far removed from the actual hardware.

In contrast, tablets are far more akin to the PC both technically and economically. The power budget for tablet SoCs is much greater, up to 4W for a passively cooled device and as high as 7-8W for systems with fans. This alone means there is a much wider range of tablet designs than smartphones. Moreover, the default connectivity for tablets is Wi-Fi rather than a cellular modem. The vast majority of tablets do not have cellular modems, and even fewer customers actually purchase a wireless data plan. As a result, cellular modems are almost always optional discrete components of the platform. The software ecosystem is relatively similar, with Microsoft, Apple, and Google OSes available. Because tablets eschew cellular modems, the time to market is faster, and they are much more commonly sold directly to consumers rather than through carriers. In terms of usage models, tablets are much more PC-like, with reasonable-sized screens that make games and media more attractive.

Looking forward, these distinctions will likely become more pronounced. Many tablets today use high-end smartphone SoCs, but the difference in power targets and expected performance is quite large. As the markets grow in volume, SoCs will inevitably bifurcate to focus on one market or the other. Even today, Apple is doing so, with the A6 for phones and the larger A6X for tablets. Other vendors may need to wait a few years to have the requisite volume, but eventually the two markets will be clearly separate.

Horizontal business model evolution

Another aspect of the mobile device market that is currently in flux and likely to change in the coming years is the business model for the chip and system vendors. Currently, Apple is the only company truly pursuing a vertically integrated model, where all phones and tablets are based on Apple’s own SoC designs and iOS. The tight integration between hardware and software has been a huge boon for Apple, and it has yielded superb products.

Samsung is one of the few others companies that takes a vertically integrated approach to phones and tablets, although in truth its strategy seems to be ambivalent on that point. Unlike Apple, Samsung’s SoCs are readily available to third parties, and some Samsung devices, such as the S7562 Galaxy S Duos, use SoCs from competitors. More recently though, there has been a trend of Samsung devices using Samsung SoCs, at least for the premier products. For the moment, Samsung’s approach is best characterized as a hybrid, particularly as the company lacks a bespoke OS.

The rest of the major SoC vendors (e.g., Intel, Qualcomm, Nvidia, TI, Mediatek, etc.) have stayed pretty far away from actual mobile devices. These companies tend to focus on horizontal business models that avoid competing with customers or suppliers.

In the long term, mobile devices are likely to evolve similarly to the PC and favor a horizontal business model. The real advantage is one of flexibility; as costs drop and the market expands, it will be increasingly necessary for vendors like HTC to offer a wide range of phones based on radically different SoCs. While a vertically integrated company like Apple can focus and maintain leadership in a specific (and highly lucrative) niche, it would be very difficult to expand in many growing areas of the market. The differences between an iPhone 6 and a $20 feature phone are tremendous and would be very difficult for a single company to bridge.

However, SoC vendors will attempt to reap the benefits of vertical integration by providing complete reference platforms to OEMs. Conceptually, this is a form of "optional" system integration, where the phone vendor or carrier can get the entire platform from the SoC supplier. This has the principal advantages of reducing time to market while also providing a baseline quality and experience for consumers. Currently, this approach has mostly been tested in emerging markets, but it's likely to become more common over time. There is a crucial distinction between reference platforms and vertical integration. Namely, OEMs can always choose to customize a platform to differentiate, and the SoC vendor avoids dealing with consumers directly. Typically, most of the customization is in terms of software on top of a base operating system.