As Devices Converge, Chip Vendors Girding For a Fight


The computing world is undergoing a significant shift as consumers and businesses access and store more of their information in web-based applications, get their software delivered as a service or even download music and movies to their PCs on demand. This trend is enabled by better access to wireless networks, be they Wi-Fi hotspots at a local Starbucks or cellular networks that work in the middle of a corn field.

Some people refer to this shift as everything moving to the cloud, but whatever you call it, the trend of digitizing music, presentations and even books has made information portable and ephemeral enough that it’s rocking the world of chipmakers, device vendors and even server makers, whose products ground the cloud. In this article, I’ll talk about the effects of the cloud on the consumer and corporate client devices.

The Changing World of Devices

At the consumer and business user level, netbooks, smartphones and PCs are adapting to this new paradigm in several ways — allowing users to customize their gadgets to fit different needs. For example, a smartphone is for making phone calls, but thanks to the ease of web surfing brought on by Apple’s (s AAPL) iPhone or even the Opera browser, such phones are getting bigger screens and more powerful application processors so they can handle nicer graphics and multiple applications.

Notebooks are becoming smaller and less power hungry — morphing into netbooks with smaller form factors and better battery life. Between the smartphone and the notebooks is another family of gadget, the mobile Internet device, or MID. In many ways, the MID is still undefined. But netbooks were one of the fastest-growing sellers in the last year, and ABI Research expects 35 million to be sold in 2009. That’s still just a fraction of the PC market, however.

As mobility becomes more important, thanks to ubiquitous wireless access, the traditional desktop PC market was finally surpassed at the end of last year by laptops. Part of this is because consumers love the convenience of mobility, but it’s also because when dealing with software programs in the cloud, the chips powering a desktop PC don’t offer as much of an advantage over the chips powering a laptop.

With the cloud fueling the growth in mobile devices, PC makers are trying two different strategies to combat erosion on the consumer and corporate front. The are making larger, more powerful workstations — sometimes called desktop supercomputers — and smaller, graphics-focused devices that can act as media servers.

Dell (s DELL) has shoved a bunch of graphics cards into a workstation that it plans to sell as a research-oriented superpowered desktop, and Cray has teamed up with Intel (s INTC) and Nvidia (s NVDA) to produce the CX-1 desktop supercomputer. Heavy number crunchers, such as those perfecting digital special effects for movies, are the market for these desktop supercomputers. They are joined at the other end of of the spectrum by those consuming the end result of such heavy-duty computing. Later this year, consumers will be able to buy netbooks or cheap desktops that have CPUs tied to graphics processors that enable them to play HD videos delivered via the web on a home television.

Evolving Gadgets Mean a Changing Market for Chips

As the rigid lines between our mobile devices dissolve, chipmakers see an opportunity. When it comes to the brains of these gadgets, Intel, the largest chip company in the world, launched a low-power x86 chip that could act as the engine for notebooks, netbooks and even phones. However, the traditional companies making the “brains” of smartphones aren’t letting Intel enter their market without a fight. Vendors such as Texas Instruments (s TI), Qualcomm (s QCOM), Samsung and Freescale are building applications processors based on an IP core from ARM (s ARMH), that are becoming powerful enough to run mobile Internet devices, and perhaps netbooks. Even graphics chipmaker Nvidia has built an application processor for smartphones and mobile Internet devices.

This battle for the brains of these highly portable devices is a battle between these vendors, but it’s also a battle of different chip architectures: Intel’s x86 and the IP cores licensed by ARM. Intel has the software advantage — most business software is written for x86 chips rather than for ARM cores. ARM, however, has a power advantage. Its chips are built to work on battery-powered devices that people expect to run for a full day or longer between charges. Intel has lowered its power consumption considerably with Atom, but it still sucks down 2-3 times as much energy as most ARM-based chips.

For ARM, the rise of the cloud eliminates the need for x86 software. If most of a user’s applications can be accessed via the web, ARM just needs to focus on making its chips work with various browsers and common web protocols, such as Flash. Storing data in the cloud also negates the need for large hard drives for keeping files. At smaller sizes, it might be economical to put in a solid state drive, which have a higher cost per Gigabyte than a spinning disk, but are smaller and consume less power. Given that size and power consumption are two of the biggest concerns for mobile device makers, the cloud changes the game.

For the end user, digitized content accessed over the cloud enables smaller, more portable devices. It’s also changing the market for the traditional desktop PCs, since mobile devices are becoming more competitive with desktops. As these devices go mobile, Intel has a chance to move downstream into less-powerful processors and chipmakers using the ARM architecture may be able to move upstream with their low-power application processors.



Nice Article. Some additional comments:
a) Bang on that chipmakers are now competing for a larger market share than before. And competition just got more fierce. However, I personally don’t believe cloud technology necessarily marries into convergence of devices. My prediction is that disk sizes will continue to increase even in smaller form factors (we already see 160GB today) as cloud relates to privacy as well. Either way, I don’t think convergence market for devices will heavily depend on cloud. But we will see

b) The war is also heating up on Operating Systems like those of Android being applied to all these form factors due to its open nature

Stacey Higginbotham

Arjun, great point on OSes. That’s another several hundred words that I one day would like to get to. I agree that disk size will increase, but I think the ability to access the same content across a wide variety of devices may be a killer app if content owners can get their licensing in order.

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