"The short answer: margins.

The long answer: Intel could absolutely build a killer smartphone SoC on the 14nm process. However it would need to be Core based; the Atom CPU line isn't performant enough. They may need to go back to Ivy Bridge or strip down Skylake a bit to get there, but they could do it.

The issue is that smartphone SoCs have very low margins. MediaTek, Rockchip, etc are crushing the market. Atom is designed for margins, not performance. If Intel built a winning Core smartphone SoC, then they'd have to sell it for significantly lower margins than what their other Core parts sell for. And that in turn would put pressure on the rest of their chip stack; why should an OEM pay $250 for Core-M when you could get a similar smartphone SoC for $30?

For what it's worth Apple faces a similar challenge. But being vertically integrated means they don't have to share with others, and the total profit off of iPhones/iPads can offset the higher costs involved in developing and fabbing the A-series SoCs. However Intel doesn't have that luxury, and Asus would never let Intel have all of the profit.

Smartphone SoCs are a race to the bottom. And Intel as a business has nothing to gain from taking part in that race. The winner is the guy who got badly hurt but didn't die; a Pyrrhic victory."