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Former Intel CPU engineer details how internal x86-64 efforts were suppressed prior to AMD64's success
(www.tomshardware.com)
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They don't need to go with ARM. There's nothing inherently wrong with the x86 instruction set that prevents them from making low power processors, it's just that it doesn't make sense for them to build an architecture for that market since the margins for servers are much higher. Even then, the Z1 Extreme got pretty close to Apple's M2 processors.
Lunar Lake has also shown that x86 can match or beat Qualcomm's ARM chips while maintaining full compatibility with all x86 applications.
Hence ARM. ARM already has designs for low power, high performance chips for smaller devices like laptops. Intel is chasing that market, and AMD could easily get a foot in the door by slapping their label on some designs, perhaps with a few tweaks (might be cool to integrate their graphics cores?). They already have ARM cores for datacenter workloads, so it probably wouldn't be too crazy to try it out on business laptops.