Recent financial news from the big chip firms has been grim. But the bad news goes beyond worries about the global economic climate and the death of the PC. In the last five years, computing has gone from something done on a server or a PC, to all-day continuous computing on a variety of devices. And the chip giants from Intel to Qualcomm are feeling the repercussions from that giant shift.
Chip company AMD said its sales would come in 10 percent lower in the third quarter compared with sales the previous quarter. The news, which was released on Thursday evening was a shocking decline from AMD’s previously announced expectations that third quarter sales would decline by 1 percent, plus or minus 3 percent, sequentially.
AMD blamed its troubles on the macroeconomic environment, which has hurt chip sales, and others are blaming it on yesterday’s reported decline in PC sales. Intel and ARM are also leery about the sales environment. But what’s happening here goes beyond AMD’s refusal to embrace mobile a few years back, and beyond worries about a European decline. Thanks to ubiquitous broadband at home and via mobile devices as well as an increasing reliance on the internet, chip firms are embracing heterogeneity in their product lines.
From one competitor and strict product divisions to a free-for all.Instead of being a specialty vendor of a single architecture, firms from Intel to Qualcomm or AMD to Nvidia are embracing new types of chips and everyone is competing in new ways. It’s like a bakery or a butcher shop suddenly facing off against a supermarket. The competitive landscape has been altered and everyone has to adapt.
So while an overall decline is sales is occurring, and the PC market is clearly hurting as numbers from Gartner and iSuppli yesterday show, the big picture is that we’re going from two separate architectures locked into a defined space to more architectures and many vendors in a free-for-all.
This isn’t a binary competition either between ARM and x86. Because ARM licenses its IP to a variety of vendors we’re also seeing companies such as Apple, Texas Instruments, Qualcomm and others innovate and offer different features, designs and price points. On the server side ARM is making progress with vendors and we’ll see ARM-based servers in production by the end of the year. There are other new architectures out there for processing big data that are also gaining ground. Tilera, a maker of a RISC-based many-core chip has silicon running in production on a few thousand servers today.
How this macro-shift plays out in today’s world
- On Wednesday an analyst downgraded Qualcomm because of looming competition from Intel in the market for mobile chips, because Intel is prepping a combo chip that has both an Atom processor and baseband chip to act as a radio. Qualcomm has owned that market for years, but after Intel’s purchase of Infineon back in 2011, Intel may become more of a threat.
- Apple’s A6 chip inside the iPhone 5 contains a custom-build Apple CPU. This may add fuel to the almost ever-present rumors that Apple might dump Intel chips in its MacBooks for its own chips.
- ARM this week unveiled a built a networking layer into its designs aimed at the server market trying to deliver the kind of fast IO that servers need.
- In June AMD and ARM created a group of companies called the Heterogeneous Systems Architecture Foundation, pushing for new software for this heterogeneous world. Qualcomm last week joined that group, which gives it far more credibility.
So right now, chip firms are lowering their sales expectations, writing down excess inventory and keeping an eye on the global economic picture. But they are also taking strategic steps such as the creation of the Heterogeneous Systems Architecture Foundation and integrating other types of chips with their core products as Nvidia and Intel are doing.
The way we access computing has changed as people have gone mobile, while on the back end the architecture is also undergoing its own shift to deliver the type of web-based services we want and need. It would be suicide if the chip firms whose products are the basic building block of computation didn’t adapt. As they do, keep an eye on the average selling price of chips (I expect them to drop in a competitive environment) as well as how these players take on the next big disruption coming to the computing and chip space — the Internet of Things.
At that point it won’t be Intel versus Qualcomm, but ARM trying to take market share from Freescale and major firms prowling around for buys in the microcontroller, timing and maybe even embedded OS sector. What’s happened so far as Patrick Moorhead of Moor Insights & Strategy, notes, is that computing cycles that were once limited to desktops and servers have become continuous throughout the day and over multiple devices. This occurred in part because of the adoption of Apple’s iOS and Google’s Android OS helped unify the once-fragmented mobile OS market.
Moorhead expects that trend to continue even further as we connect more and more devices to the Internet. And none of the big giants in the chip world are going to let that opportunity go.