Intel, AMD Ramp Up Chip Game


The industry’s top two chip makers are betting big
on revolutionary new architectures that combine CPU
and GPU capabilities on a single piece of silicon. But
Intel and AMD will need more than just cutting-edge
technology to win over channel partners.

Despite the hiccup Intel announced last month with its flawed
Sandy Bridge chipset, code-named Cougar Point, the company
has moved toward major new performance improvements
throughout its Core lineup and now looks to win over solution
provider and system builder partners. Intel’s Channel Chief
Steve Dallman says the chip maker saw disappointing channel
sales figures for its Clarkdale and Arrandale products last
year, but with the recent release of
the company’s new Sandy Bridge
architecture, he expects Intel’s
channel partners will turn the corner
in 2011.

Meanwhile, rival AMD’s Vice
President of Worldwide Channel
Marketing David Kenyon says system
builders are essential to the
success of AMD’s Fusion platform in
the integrated graphics space, as the
world’s second-largest chip maker
tries to stage a comeback and regain
momentum in the channel.

Which leads to these key points
for system builders and solution
providers:

• Some believe the combination
of more powerful processing, and
a stronger economy, will lead to a
significant boost for both AMD and Intel platforms;

• Other channel partners of both companies,
while optimistic about Sandy Bridge and
Fusion, say they are waiting before jumping
in because they need to hear more
specifics from the vendors and see
a stronger need by their own
customers;

• Even though new
form factors -- including
new tablets -- have caused
a significant disruption in the
market, Intel still has opportunity
with its Atom platform in an industry grappling with new computing
models and designs.

NEXT: Change Comes To Intel

Change Comes To Intel

Dallman, Intel’s vice president of sales and marketing group and
general manager of Intel’s Worldwide Reseller Channel Organization,
spoke to CRN about the excitement surrounding the release
of Intel’s Sandy Bridge integrated graphics platform -- which combines
CPU and GPU capability on a single die -- as well as Intel’s
partner strategy for its Atom products.

While many system builders partnering with Intel expressed
positive initial reactions to the launch, some see major challenges
ahead for resellers as they look to add value to Intel’s solutions
and for Intel as it looks to compete with others in the burgeoning
integrated graphics segment.

“Obviously one of the things we
were hoping for was that the adoption
of processor graphics would
go well,” said Dallman. “The team
was feeling pretty good about the
launch, and they were getting a lot
of customers calling up about it. I
was in China on Monday after the
launch and each shop in the city I
was in had Sandy Bridge products
complete with motherboards, which
I was really pleased to see.”

Yet some in the reseller channel
have yet to see the kind of customer
demand and overall enthusiasm
that they had hoped for from Sandy
Bridge, while others believe there is
a demand for the platform on traditional
PCs but not necessarily on
newer, smaller form-factor devices.

“Well, on the desktop side of things
we currently cannot get enough of the
Sandy Bridge processors to meet our
customer demand,” said Andrew
Kretzer, director of sales and
marketing at Bold Data
Technology, a Fremont,
Calif.-based system
builder. “So it is certainly
a success in the
channel. However, we
have not had much demand,
nor have we seen a lot of movement
with Sandy Bridge on mobile.”

In addition, Intel’s Sandy Bridge platform suffered a major setback in January when Intel publicly
admitted to finding and immediately fixing a design error in its
dual-core Series 6 Cougar Point chipset, which runs solely alongside
the quad-core Sandy Bridge chips. Intel said that the error in
its Cougar Point chipset will cause SATA ports in some chipsets
to degrade over time, although the 16 SATA points on the Sandy
Bridge processors will not be affected.

“The issue affects platforms using the 6 Series chipset, mobile
and desktop,” an Intel spokesperson told CRN. “We are currently
working with our channel partners to devise solutions to this issue,
and can’t provide specific details as they are still being worked out.”
Intel said it expects the recall to cost $300 million in lost revenue
for Q1 and fixing the problem to cost approximately $700
million, bringing the total cost of Intel’s mistake to $1 billion.
Intel plans to begin offering the fixed chipset to customers in late
February and fully recover the lost revenue chipset by April. The
company also pledged to contact the system builders and customers
who purchased potentially flawed chipsets or systems in order
to replace or modify them.

For Intel executives who said previous platforms Arrandale and
Clarkdale didn’t fare as well as had hoped because of the recession
and an absence of channel partner engagement, it’s hoped that the
timing is right for Sandy Bridge once the chipset issue is behind it.

However, Kent Tibbils, vice president of marketing at Fremont,
Calif.-based system builder ASI, which resells Intel’s Atom products,
disagreed with Intel executives’ assessment of Clarkdale and
Arrandale’s performance in the market. “I think that saying Sandy
Bridge has been successful doesn’t mean that Clarkdale or Arrandale
were not,” Tibbils said. “They were, in fact, very successful
in terms of generating revenue for the channel.”

NEXT: Atom Faces A Changing Landscape

Atom Faces A Changing Landscape

Beyond those platforms, Intel’s Atom platform may have been victimized
by disruption elsewhere in the market with the introduction
of tablets and other devices, at least one channel executive says.

“In terms of Atom, it’s true that netbook sales fell short of
expectations,” said Erik Stromquist, COO of Computer Technology
Link, a Portland, Ore.-based solution provider. “But Atom
for us in general notebooks sales dropped off, but with innovative
solutions like tablet and touch-enabled convertible devices led to
the growth of the Atom product line.”

Yet another perspective within the channel holds that Intel’s
new processors include several advantages that could bolster
channel sales, and that ultimately it’s up to the channel resellers
to offer solutions that will succeed in the marketplace.

As for the performance of Atom products in 2010, Steve Brown,
vice president of sales and business development at Blue Hawk
Networks, a Campbell, Calif.-based system builder, said he does
not expect that particular trend to continue. “Intel has learned
from the lack of success in last year’s go-around,” he said. “Considering
both they should fare much better with Sandy Bridge.”

Intel’s partners have noticed the shift in Intel’s strategy toward
original design manufacturers. Stromquist said Sandy Bridge has
a much better chance at doing well in the microprocessor market
compared to previous generations of Intel processors.

“Intel has done a lot of heavy lifting to improve the ODM ecosystem
and address the price gap between Tier 1 and Channel OEMs,”
Stromquist said. “The burden really lies on the channel to innovate
and offer competitive solutions to meet the changing market needs.
It’s more than the processor that
makes the price. It’s a whole ecosystem
with the chassis and a
whole environment.”

Others see this shift in strategy
as a potential source of channel
conflict as resellers look to find
ways to continue to add value
to Intel’s solutions. Todd Swank,
vice president of marketing at
Nor-Tech, a Burnsville, Minn.-
based system builder, said that
with this new approach, Intel
may no longer consider the
reseller channel to be relevant.

“What you’re seeing in the
marketplace is a switch toward
mobile, smaller form-factor
devices, so it makes sense to
shift toward ODMs,” Swank
said. “The days of guys creating
solutions in their shops, and the
days of system builders building
thousands of client-based PCs
in the U.S. are already numbered. It’s over and done with. Most
system builders have had to change their strategy toward providing
managed services, cloud solutions or reselling to Tier 1s -- but selling
mobile solutions through the channel? That seems like a dead
conversation at this point.”

Swank referred to the events of CES 2011 earlier this month,
and the excitement surrounding Android devices. He said Microsoft
must feel threatened by the presence of another OS, just as
Intel must feel the looming threat of British chip design firm ARM,
whose Cortex CPU core architecture is the basis for Apple’s A4
processor as well as Nvidia’s Tegra 2 mobile chipset. Meanwhile,
he said channel resellers are feeling the most pressure of anyone
in the supply chain.

“You have new players in the arena,” Swank said. “Verizon and
Motorola are doing tablets. Nontraditional PC manufacturers are
in a space where system builders were just competing with HP,
IBM and Dell before. Now they compete with telephone companies
and with new solutions. There are opportunities for system
builders in this space, absolutely, but the things we’re selling today
are very different from five years ago.”

Furthermore, Intel’s Atom-based products may offer system
builders and end users additional flexibility, especially the configurable
Atom processors Intel launched last year, but Dallman
said he sees the system builder channel steering away from components
and moving more toward designing PC-based solutions.

“System builders take PC-type products and build PC solutions
and some vertical solutions off of PCs. I haven’t seen a lot of them want to go down to the board level in terms of programming the
CPU for specific I/P and services and whatnot,” Dallman said.
“We’re seeing so many designs right now, including 3,800 different
engagements and 1,500 design wins. System builders will
resell products that these Atom products are in.”

Dallman added that Intel had only reached the “tip of the
iceberg” as far as the possibilities for its Atom product lineup.
It may, in fact, be too early to tell how far down the iceberg
sits, as many system builders haven’t had a chance to get their
hands on it yet, even though it stands to reason that an improved
economy will make it easier to resell any product.

“We have not worked with Sandy Bridge at all yet,” said
Michael Rathburn, senior technical specialist at Applied Systems
Associates, a Murrysville, Pa.-based solution provider. “We have
used Atom processors in some industrial panel PCs that we have
sold. They worked well and did so at a low voltage and stayed
fairly cool, which was important. All of Intel’s offerings will probably
do better this year as the economy improves.”

Despite the anticipated success of Sandy Bridge, one Intel partner
offered a long-term corrective to a problem that may be caused by
Intel’s adherence to a “tick-tock” strategy, whereby products are
brought to market based on a strict, fast-paced road map that may
not be suited for a bearish economy.

“If Intel were to launch a series of Sandy Bridge-based Atom
platforms that are available for two or more years, as they do on
some of their server and workstation platforms, and with a better
price-to-functionality ratio, they will definitely do well in the channel,”
said the partner, a system builder who asked not to be named.

NEXT: Sees Energy In The Channel Behind Fusion

Sees Energy In The Channel Behind Fusion

Compared to other integrated graphics solutions such as AMD’s
Fusion and Nvidia’s ARM-based Tegra 2, both of which launched
at CES along with Sandy Bridge and were featured inside several
consumer devices, Intel’s channel chief says the product itself will
make the difference regardless of the surrounding strategy. Dallman
said that the graphics capability on Sandy Bridge is strong
for an integrated CPU-GPU platform and that with its video and
media capabilities, Sandy Bridge will offer a much-needed refresh
for a lot of graphics applications in the near future.

“Intel’s got a lot of work cut out for them,” Stromquist said.
“They’ve been taking steps by forming a netbook and tablet division
to get some design wins. I think they’ll be a player in these
devices one way or another.”

AMD’s Kenyon said his company is confident its Fusion platform
will strike a chord with channel partners because, he said,
it provides system builders a greater variety of technical designs
and business opportunities than Sandy Bridge.

“We’ve been working hard on the channel programs, especially
our Partner Portal, which launched last year,” Kenyon said. “We’ve
started rolling out new programs and marketing campaigns to promote
Fusion as well. We see it as positive momentum.”
Some aren’t jumping in just yet with either of Intel’s or AMD’s
new platforms.

Brad Penner, manager of eBytes Computers in Manitoba,
Canada, said his system builder business uses both Intel and AMD,
but his company hasn’t started carrying either Sandy Bridge or
Fusion chips yet. As far as AMD goes, Penner said the chip maker
represents a shrinking percentage of his business. And while
Penner said he’s aware of the new Fusion APUs, he said he hasn’t
heard one word from AMD on
the technology.

“We haven’t explored Fusion
at this point, and we haven’t
heard much about it from
AMD,” he said. “Quite frankly,
it seems like they haven’t been
aggressively marketing Fusion
in the channel. AMD has a lot
of ground to make up on Intel.
They need to find a better way
to market the company and the
value proposition.”

Jon Layish, president of Red
Barn Computer, a system builder
based in Binghamton, N.Y., said
Red Barn has not started carrying
Fusion processors yet either.
“I’ve seen very little from AMD
on the Fusion technology,” Layish
said. “They’ve been a little
quiet in the channel recently,
which is strange since they just
launched Fusion.”

Layish added that Red Barn used to do quite a bit of AMD
business years ago, especially after the chip maker introduced its
64-bit processors in 2003. But the system builder’s AMD business
began to decline after the chip maker’s first entry into quad-core
chips in 2007 with the launch of the Opteron 2300 series processors,
code-named Barcelona, was derailed because of a serious
glitch in the chips’ architecture. “We haven’t done much with
AMD in recent years,” Layish said. “We haven’t done as much
business with them ever since the quad-core Opteron bug. That
really hurt them.”

Now that Intel is experiencing similar difficulties with its Cougar
Point chipset, Layish said he’s had to deal with uncertainty and
added labor as a result of the vendor’s mistake.

“It’s been a real pain,” he said. “The problem is that we’ve
shipped systems to customers that now need their boards replaced.
And while Intel is covering the cost of the new hardware, the problem
is we have to take out tech support guys and send them all
over to fix these systems, which costs us work hours.”

Despite the ripple effect of Intel’s Sandy Bridge recall, Layish
said Intel—which promptly identified the problem and offered a
tentative timetable for issuing corrected chipsets -- will resolve it.

“It’s an unfortunate episode, but Intel has been responsible and
I’m sure they’ll take care of it. I still think there will be demand
for Sandy Bridge after it’s over,” he said.

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