BusinessNews

The final countdown for Intel?

pins_chip
60views

If we look at the history of Intel, we will see that it has made a full turn. In the 20th century, this made a real revolution on the market. After that, as a large corporation, it took a bold step to survive in the era of innovations.

 The two tech companies Apple and Amazon are driving a change to cut their dependence on the Intel chip technology. The same technology that controls since quite a while most PCs and bigger servers. Instead, the companies are increasingly leaning on homegrown chips, designed using technology of ARM.

The fairy tale

processor_chip

Intel is a living example of how a large corporation can survive in the age of breakthrough technology. One of the most interesting examples is how Intel decided to start producing technology, that makes very little profit and eats away at its own profitable products. This was the decision to start production of the Celeron processor in 1998. It took 35% of the entire market and cut off all the potential competitors. Intel built the chips that effectively powered the personal computer, which soon sat in every home.

In 2005 Apple offered to Intel to produce chips for the iPhone. Apple was the only one desktop manufacturer, who didn’t use x86 processors of Intel. This deal was more important to Intel, much more, than the corporation could imagine. This was an opportunity to start a business relationship with a company that thinks for the future.

How did Intel respond? We have a recording of Otelini’s interview over the last month as Intel’s general manager.  “We ended up not winning it or passing on it, depending on how you want to view it.  The thing you have to remember is that this was before the iPhone was introduced and no one knew what the iPhone would do. At the end of the day, there was a chip that they were interested in. They wanted to pay a certain price for and not a nickel more and the price was below our forecasted cost. I couldn’t see it. It wasn’t one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong, and the volume was 100x what anyone thought.”

The unwanted effect

domino_effect

The decline of Intel from king of the processor industry to a mere observer began after this decision in 2005. Despite the fact that Intel had an ARM license for the development of its Xscale business, the company did not want to focus on energy efficiency. Intel chose to dictate designs to customers, like Apple, instead of trying to accommodate them, like TSMC.

It is said that many promising clients of Intel came with some kind of offer, which, according to the company, does not give such a big deal. And Intel rejected the offers. This is a guide how to lose clients and business.

On November 10, 2020, we all saw Apple to announce the first Mac computer based on own ARM processor. Intel’s chips will no longer be used. This is the first change in Mac’s architecture since 2005, when Apple chose to use Intel’s processors.

Intel had a very good understanding how an innovation conquers the market. Even if it is nothing special in the beginning, if people like it, thanks to its drastic expansion, it takes over more and more of the market. It was what enabled Intel (and Microsoft) to win the computing market. Even though personal computers were cheaper than servers, selling something that sat in every home ends up funding more Research&Development costs, than selling a few very expensive servers.

Similarly, Apple’s initial raid into chips didn’t produce anything special in terms of silicon. But it didn’t need to – people were happy just to have a computer in their pocket. Apple has gone on to sell a lot of iPhones, and all those sales have funded a lot of R&D. The silicon inside them has kept improving and improving. And their partner, TSMC, grew up along with them.

What is the threat of the new Apple processor M1?

m1_chip_apple
Apple’s M1 chip Source: Apple

The problem for Intel, and for AMD, is not that Apple produces processors. The threat lies in what exactly M1 is. A company, which does not have an x86 license, has created a processor for the consumer market, which has successfully completed the x86 chip. If Apple saves or improves its position in relation to Intel and AMD, this will be noticed by other companies with ARM licenses. For example, Nvidia, which intends to buy ARM.  

At the moment, Microsoft supports Intel, but with Satya Nadella, the software giant changed its policy towards the cloud online services. And if Microsoft intends to integrate Linux into its own operating system, they won’t care whether the future of Windows is x86 based or Arm chips based.

The long-term consequence for Intel and AMD is a loss on the market and the market influence. 

The change will be noticed in many forms of computing. For laptop business, Gartner, the research firm, predicted that Apple’s new Macs and rivals’ options would push ARM-based PCs to 13.5 percent of the market by 2024, up from 1.1 percent this year. ARM-based laptops and related systems based on Google’s Chrome software accounted for about 11 percent of sales in the third quarter, up from about 4 percent a year earlier, according to the global provider of market intelligence IDC.

Software remains a question mark, since most popular programs were written for Intel-based systems. But even that is starting to change, because software makers like Adobe are moving to count on Arm-based Macs and Windows laptops. So far, both Apple and Microsoft rely on a technology called emulation to run existing programs on ARM-based systems.

Interesting times ahead of us and hopefully Intel does not end like other giants, that felt to innovate on time like Kodak, Yahoo and Blackberry.

Related topics: News, Business The rise of tech stocks