But Intel is not falling for that one. They have made the Atom, a slow, cheap, low-power chip that competes directly with ARM. That's likely a wise move, but Intel now has the problem that low-margin chips are still bad business. They have to have their expensive best-in-industry fabs make low-margin Atoms, when they would much, much rather have them make expensive Xeons.
At one point they made a deal to have Atoms manufactured at TSMC, which would have helped a lot with this problem, but apparently that deal didn't work out. Even if it had worked out, the Atom would no longer have the process advantage, and then backwards compatibility would be the only advantage for x86. With Windows becoming less and less relevant, that's a big problem, considering the technical advantages ARM has over x86.
So fundamentally, Intel has a problem that CPUs are becoming commoditized, which means they will either have to take much lower margins or retreat to the high end. Both scenarios are unpleasant for them.