I don't know that X86 can't grow over time (servers) but I think you're spot on that dirt cheap chips, and big companies that want to keep them dirt cheap, are in some sense Intel's deeper problem. Intel could make up any given technical gap eventually, but it's hard for them to shut down competition when other, very well-funded players want to maintain it.
But on the flipside, ARM right now is very, very low-end -- the fancy new Cortex-A15s only match up against Atoms in single-thread CPU performance, and Atom < ULV < LV < desktop/server. You get away with it in mobile because of lower user expectations and heavy use of the GPU. When you look a little further out (Cortex-A53/57 on newer processes) you can picture ARM in actual client computers, or at least in super-zippy mobile gadgets that some people will happily replace their computers with. (Consumer software will probably adapt to an ARMy world too--use the GPU well, adapt to slower cores, use UI tricks to hide some CPU-caused delays.)
But I can't see an ARM chip that acts exactly like a Xeon within the next few years. I bet ARM finds some niches in the datacenter, where servers today have far more CPU than they need, or applications adapt well to a sea of tiny slow cores, or both. (For instance, Facebook uses AMD memcached boxes; they could just as well use ARM, and are looking at it. Intel will make cheap slow cores for those use cases, too.) And I bet ARM will put some price pressure on Intel. But all the things a top-of-the-line Intel chip does to maximize instruction-level parallelism will be really hard for anyone to copy for a very long time.
But on the flipside, ARM right now is very, very low-end -- the fancy new Cortex-A15s only match up against Atoms in single-thread CPU performance, and Atom < ULV < LV < desktop/server. You get away with it in mobile because of lower user expectations and heavy use of the GPU. When you look a little further out (Cortex-A53/57 on newer processes) you can picture ARM in actual client computers, or at least in super-zippy mobile gadgets that some people will happily replace their computers with. (Consumer software will probably adapt to an ARMy world too--use the GPU well, adapt to slower cores, use UI tricks to hide some CPU-caused delays.)
But I can't see an ARM chip that acts exactly like a Xeon within the next few years. I bet ARM finds some niches in the datacenter, where servers today have far more CPU than they need, or applications adapt well to a sea of tiny slow cores, or both. (For instance, Facebook uses AMD memcached boxes; they could just as well use ARM, and are looking at it. Intel will make cheap slow cores for those use cases, too.) And I bet ARM will put some price pressure on Intel. But all the things a top-of-the-line Intel chip does to maximize instruction-level parallelism will be really hard for anyone to copy for a very long time.