I think it's telling that the only thing people seem to think Intel brings to the table is their process.
I'd like to think that competition between TSMC and GloFlo makes both companies much more aggressive in terms of their R&D and process roadmaps.
Think about it, the first 1GHz phone, the first dual core phone, the fist quad core phone, etc. is a huge marketing win. GloFlo and TSMC would both love to be able to offer that to their customers, and they will hopefully both keep trying to leapfrog each other.
If they can catch up to Intel, and it is not inconceivable, what actual benefit does X86 have? It's a desktop platform that Intel is trying to shrink. I have a netbook-sized Pentium III-based Thinkpad 240, that was from the year 1999. Granted, it cost around an order of magnitude more than a low end atom-based netbook, but the reality is that X86 hasn't really moved too far in the past decade. The netbook form factor has been possible for a very long time. The price is cheaper, but it came at a huge penalty in terms of build quality and relative performance. I don't think my Dell Mini from 2008 will last as long as the 240, which is still ticking BTW(last I checked, anyway), and has a better keyboard than any netbook ever made. Just look at CULV systems, you can get a huge amount of power in something that is only larger than a netbook for the sake of practicality.
So Atom doesn't enable smaller devices, just cheaper ones. I think this is kind of the point, that an Atom even at 100MHz wouldn't be good enough for these form factors. A netbook is possible because it can be turned off or put into standby, the use case for a phone or tablet is different. Apple is trying to make their computers more iPad-like, and I'm not sure it is possible to achieve that with X86.
Every time Intel(or transmeta or VIA) has tried to shoehorn an X86 chip into something smaller than a netbook, it has failed. It has been failing over and over now for a decade. ARM on the other hand has done extremely well. The first modern tablet, the Nokia N770, had just a 4" display and got reasonable battery life and days of standby time. The OQO was the X86 competition, and it was a far less useful device, never mind the fact that it also cost nearly an order of magnitude more than the often-deeply-discounted N-series tablets.
So if Apple is having a hard time getting X86 to scale down for cheaper, lighter, more "connected", longer-lasting systems, it would make sense for them to be going with ARM. I think the idea of having my laptop be "on" all the time and downloading emails is useful. Not just that, but it would make doing something like streaming content from a laptop to an AirPlay Apple TV practical as well. With 1080p decode/encode it enables HD Facetime(the current Air has terrible webcam quality). nVidia is talking about Core2Duo level performance from ARM by August. Obviously, nvidia is full of shit, but even just better-than-atom performance in the 11" Air and with "PS3-level" graphics with 5 hours of runtime would be amazing. If they do this, the $1000 11" Air would be superior to the XPS M1710 from 2005 with a 7800GTX and a 2GHz Pentium M for $2000. Incredibly more battery life, 2.3 pounds instead of 8, equal performance in games and across the board, better performance for certain tasks(2GHz Pentium M is just barely too slow to play DRMd 1080p video). Browsing and typing on the XPS at moderate brightness would have 2 hours of battery life. Playing games on battery(at reduced clocks) would kill it in 45 minutes. Getting the same thing in a package that is literally less than a third the size, for half the price, and with consistent 5 hour battery would be pretty compelling. I can say for sure that Apple wants this. Can Intel deliver it?
I guess we will know more about Atoms future next week according to Anand.