Microsoft Hints at a Transition toward Its Very Own Chipsets with an Updated Surface Lineup to Compete with Apple’s Arm Architecture

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4Q 2022 | IN-6750

Microsoft held its Surface Event 2022 in October, dedicated to the Surface lineup with the latest upgrades to the predecessor devices. It launched a suite of new upgraded devices, including the Surface Laptop 5, Surface Pro 9, and Surface Studio 2+, followed by accessories and a brand-new Microsoft 365 app. While Microsoft revealed these new products, the interesting news of the event remained the transition of Microsoft toward its co-produced processor SQ3 with Qualcomm, which is based on Arm architecture. Although the transition to Arm on windows has been slow, Microsoft is attempting to offer better tools and use cases to help move things along. With the mindset of a developer in mind, Microsoft looks forward to assembling an environment where it can add more use cases and build a strong Microsoft ecosystem.

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Upgraded Surface Devices from Microsoft with 5G and Arm-Based Processor Options


Microsoft recently unveiled a suite of new Surface devices during the Microsoft Surface Event, which took place on October 12, 2022. The launch involved of trio of devices—the Surface Laptop 5, Surface Pro 9, and the Surface Studio 2+—all of which come with upgraded processors. The company also unveiled work-from-home accessories and a brand-new Microsoft 365 app. Potentially, the prime news of the Microsoft Surface Event was the launch of the Surface Pro 9 that is available with either an Intel processor at a starting price of US$999 or an Arm-based processor that begins at US$1,299. Microsoft has long been working on its very own custom processor, but has not yet achieved enough success in terms of performance and stability. Microsoft co-engineered an Arm-based SQ1 processor with Qualcomm for its Surface Pro X in 2019, followed by an updated version with a SQ2 processor in 2020. The latest SQ3 processor co-produced with Qualcomm will power the 5G connectivity in the Surface Pro 9 with a huge upgrade in terms of performance and stability compared to its predecessor. The move by Microsoft to produce its very own processor is a smart one because it can demonstrate hardware capabilities to other Original Equipment Manufacturers (OEMs) in the future and have control of the ecosystem through vertical integration and cost management. Microsoft will also look to enhance the utility and performance for its Azure servers, which will help lower its reliance on Intel. The partnership with Qualcomm will strengthen the capabilities of Microsoft in areas like design and manufacturing of new products in the years to come.

Microsoft also claimed that the new Surface Pro 9 device with the Intel processor will have a 50% more powerful performance than the previous model, and the version with 5G connectivity based on its very own SQ3 processor will have longer battery life. In addition, Microsoft has tailored its new product lineup according to consumers’ requirements; for instance, you have a choice between a Surface Pro 9 with a 12th generation Intel Core processor (either i5 and i7) or a 5G-enabled version that runs on Microsoft’s SQ3 processor. One the Random Access Memory (RAM) side, the Wi-Fi model in the Surface Pro 9 comes with either an 8 Gigabyte (GB), 16 GB, or 32 GB RAM, while the 5G version comes with 8 GB and 32 GB options. The device ports are also different for Intel-based variants compared to the Qualcomm SQ3 versions, as the latter does not support Thunderbolt 4 connectivity and instead has a Subscriber Identity Module (SIM) port.

Microsoft Looks to Expand Its Hardware Offerings, Reducing Its Dependence on Intel


In comparison with Apple’s moves to create a series of Arm-based M-series chips designed for desktops, notebooks, and tablets, Microsoft is following in similar footsteps and building its very own strong and effective ecosystem for chipsets based on the Arm platform. This is already happening with the Surface lineup and Azure Services for now, and is expected to increase in terms of technological advancements, which might also entice ecosystem players to opt for Microsoft’s platform.

Microsoft is already a leader in providing Windows-based software and solutions to various Personal Computer (PC) OEMs and wants to expand its services in the hardware domain, which currently is dominated by x86 chips from Intel and AMD. Such a move will help Microsoft manage attributes like chipset shortages, and provide better product lineups, while also controlling costs and the ecosystem of products through vertical integration. However, this task will not be easy for Microsoft because, unlike Apple, it has a much wider footprint in terms of technology and its products are used by different manufacturers, meaning that Microsoft needs to have wider and more universal compatibility to make this happen.

The transition to Arm-based processors will not be about Central Processing Unit (CPU) power, but it will fill the growing gap between traditional CPUs and Systems-on-Chip (SoCs), as Qualcomm bundles graphics, modems, Machine Learning (ML), and sensor hubs into its Snapdragon 8cx Gen 3 platform, which will help Microsoft build apps to run on Arm-based processors.

While Microsoft’s processor based on Arm provides better battery life, thinner fan-less designs, and complete integrated solutions, the overall performance is compromised because the Windows software works through emulation, rather than native apps. So, in comparison, Intel includes CPUs, integrated graphics, and security enclave features in its chipsets and is more focused on the traditional workhorse paradigm than an all-inclusive approach like the Arm SoCs, which does not require external components to provide additional solutions like 5G and neural processing units. Qualcomm is assured of an exclusive deal with Microsoft, which will help in co-developing many underlying software and hardware solutions to run on processors based on Arm architecture to provide better performance and longer battery life.

Building Revenue Fields in Collaboration with Various Ecosystem Players


With less than a 5% share of the overall PC hardware industry, Microsoft should highlight more products and increase overall share with its Surface lineup, which will help the brand generate more revenue fields than what comes from its Windows Operating System (OS) across different device segments, associated applications, and now cloud services. When looking at the competition, it’s worth remembering that Microsoft is not only competing against other vendors for hardware share, notably Apple, HP, Dell, and Lenovo, but also with other platforms, such as Mac OS/iOS, Android, and Chrome OS. This move will enable Microsoft to take on these vendors and grow the overall Microsoft ecosystem.

With more innovation to take place, longer battery life, combined with advanced networking options like 4G or 5G, and ultra-slim form factors are going to be key selling points for most OEMs. Microsoft needs to collaborate with the ecosystem players to focus on making an integrated system for the use case of 5G services with the help of universal hardware and software capabilities, and a better form factor, which is handier and lightweight. It should opt for an industry-first approach to share its platform with other manufacturers, which will generate opportunities and revenue fields for the brand. HP, Intel, and MediaTek jointly launched 5G-connected PCs earlier this year featuring Intel’s 5G Solution 5000 powered by the MediaTek T700 5G modem. With the Microsoft’s launch of its SQ3 5G-enabled solution, MediaTek’s 5G solutions might face stiff competition in the market.

The 5G notebook market is poised to see exponential growth in the years to come. Microsoft can gain the upper hand in providing custom-based integrated hardware solutions to the industry, which, in turn, will help Microsoft’s Windows- and Azure-based businesses increase market share. After Apple’s significant step toward implementing 5G in notebooks, it is now Microsoft’s turn to work on cost-effective integrated solutions and build an ecosystem where other partners can more widely use its Windows platform and services.