10 Predictions For The Chip Market In 2008
1 Is AMD On The Brink?
Sunnyvale, Calif.-based Advanced Micro Devices Inc. had a rough 2007, losing hundreds of millions of dollars each of the three quarters it has reported earnings for this year.
AMD CEO Hector Ruiz doesn't expect profitability until the third quarter of 2008. So, the question becomes, can AMD survive any more setbacks? Some on the panel fear that if all doesn't go well, the company could be broken up in 2008 or 2009.
"If AMD is not able to compete in the server space, it would be devastating to [its] recovery," said IDC analyst Shane Rau. "If AMD misses a Q4-Q1 cycle, we're going to be looking at Q4 '08-Q1 '09 for the next big opportunity."
Joe Toste, vice president of marketing at Minneapolis-based Equus Computer Systems, said the irony is that the industry needs a strong AMD. "But this is the year that Intel shifts their paranoia from AMD to Nvidia. [Intel CEO Paul] Otellini was really upset that Apple notebooks went to Nvidia."
2 Intel's Game Of Monopoly
The world's biggest semiconductor company continues facing lawsuits and antitrust proceedings in a number of venues worldwide. Intel denies all charges and allegations in these cases.
F. Scott Kieff, a law professor at Washington University in St. Louis, who specializes in antitrust regulation in the technology sector, said Intel is "getting unfairly beaten up" on antitrust matters and could face stiff penalties this year. But he also contends that assorted rulings against Microsoft show that you can penalize a market dominator and scarcely cause it to break stride.
"Most people think the actions against Microsoft cost Microsoft a lot of money, but they didn't change the market much," Kieff says. "Meanwhile, if AMD were to go away, the logic of EU regulators would make them look even harder at Intel."
3 Consolidation
The panel believes Nvidia is the major client player with the best likelihood of entering the M&A sweepstakes. The Santa Clara, Calif.-based graphics maker could use a CPU presence to reduce its somewhat parasitic relationship with CPU makers. If Nvidia does make a move, a number of panelists mentioned VIA Technologies Inc., the Taiwanese maker of ultra low-voltage x86 chips for ultra-small PCs, as a possible acquisition. Then there's the blockbuster a few panelists dare to predict: An Nvidia-AMD merger.
Rahul Sood, CTO of Hewlett-Packard's global gaming business, said, "Nvidia should probably get into the business of making CPUs, or pushing hard on GPU computing. Who knows? Maybe they'll look to buy VIA, or perhaps they are watching AMD closely. Either way, they could seriously turn this industry upside down."
Dean McCarron, president of Mercury Research, Cave Creek, Ariz., doesn't agree. "I don't think acquisitions will be a big story in 2008. But a lot of eyes will be on AMD changing their manufacturing arrangements. Are they going with an asset-light strategy? Fabless or limited ownership?"
Next: 4. Virtualization
4 Virtualization
As IT professionals continue to fret about reducing the energy consumption of servers, virtualization will be regarded as the No. 1 cure.
Patrick Moorhead, vice president of advanced marketing at AMD, described 2006 as the "proof-of-concept" year for server virtualization, 2007 as a year of testing and small-scale integration, while "2008 is the year in which you're going to see actual volume."
Keith Millar, vice president of product management at Liquid Computing, Ottawa, Ontario, added, "There's going to be a race to support virtual machines with processor features, such as memory mapping and virtual page management."
5 Graphicspalooza
With the explosion of high-definition digital media and gaming, graphics and video processing is integral to PC performance across all form factors and price points. Nvidia and AMD's ATI division are the obvious drivers of this trend, but watch Intel, especially in the ultra-mobile space, panelists said.
"The strongest part of a mainstream [whitebox] business is the $1,000 system. That's not the biggest part of the market, but we see it as the strongest and the biggest growth area. Every one of those systems has a GPU in it, so that tells you something," Equus' Toste said.
Meanwhile, the particular strengths of GPU processing—like grinding through critical computational algorithms in mathematically demanding work—is being exploited to accelerate system performance. Areas to watch include stream computing, where Nvidia and AMD will continue to go at it with competing products in 2008.
"On the mainstream client, all things Vista, like Google Earth and PowerPoint, have become 3-D-aware and that's just the start. You'll see software that will take video encoding and use the GPU to bring what would be a 10-hour rendering process into real-time," Moorhead said. "On the server-workstation side, you're looking at real-time rendering for not just movies, but pharmaceutical firms running intense math computations. Or weather modeling, which is just one giant mathematical computation, taking current data and doing what's called pattern-matching. This is the year the whole graphics thing is going to bust out of the seams."
6 Small Victories
Is this the year we finally get "the whole Internet in our pocket?" The iPhone got the biggest buzz, but slightly larger x86-based UMPCs from companies like San Francisco-based OQO Inc. are arguably more impressive, ounce-for-ounce. OQO's O2 UMPC runs on a CPU from VIA, an up-and-coming maker of ultra low-voltage chips.
Apple Computer Inc. showed us that smartphones can sell like hotcakes. But to get the full Internet experience on a tiny device, a lot of work remains to be done. According to Intel CEO Paul Otellini, the hardware—from those ultra low-voltage CPUs to solid state flash drives the size of a penny—is already there. But at September's Intel Developer Forum, Otellini said two big hurdles stand in the way of the full PC experience on a UMPC or handset. First, software developers must figure out clever ways to squeeze the large-format, graphically rich interface of the Web onto the smallest of screens in user-friendly fashion. The other big challenge, Otellini said, is connectivity. On that front, Intel is putting a whole bunch of its eggs in the WiMAX basket. However, a list of currently deployed WiMAX networks around the globe shows how far we are from widespread adoption of that standard, let alone whether it will ultimately be the one we adopt.
Intel has its first UMPC platform, the Silverthorne "system-on-a-chip," coming out in 2008. Our panel members are not as eager to bet it all on small just yet, however. They have questions as to whether progress on UMPC technology will live up to its hype, if a stable ecosystem of OEMs will emerge, and to what extent sales of such devices will grow.
"2008 is a very interesting year for UMPCs, with lots of hype. The technology will be catching up with the vision of the product. VIA plays in this segment. They've picked up some wins and we should see some competition between them and Intel in this area," Mercury's McCarron said.
Added IDC's Rau: "You need an SOC [system-on-a-chip] to create a performing device. It's a well-into-2009 development. Demand for UMPCs is still very slight, representing about 1 percent of volume, according to IDC numbers for UMPCs out of mini-PCs."
Next: 7. Tick And Tock
7 Tick And Tock
While AMD's woes have put a bit of a damper on that horse race, it will still be exciting to see whether the smaller chipmaker gets its next die shrink rolling before Intel succeeds in ramping its scheduled micro-architecture reboot, code-named Nehalem—or vice-versa.
Nehalem is widely expected to be a major redesign that will bring Intel's micro-architecture in line with AMD's, meaning independent power supplies to individual cores and a memory controller on the CPU die. The folks at AMD believe that's a tacit admission from the market leader that the smaller guys got it right in the first place.
"Our architecture with Barcelona and Phenom is the one Intel wants to get to," AMD's Moorhead said. "And we'll ramp up 45nm in the second half of next year, so we'll be on the same footing there. It will in some ways break Intel's business model, because they'll have a memory controller on there also. How will they price that?"
From Intel's perspective, Nehalem is going to bring a lot of opportunity for many system builders in the second half of this year. "It's an opportunity for high-end products, and later on, a tier below that," said Steve Dallman, general manager of the Worldwide Reseller Channel Organization at Intel. "Nehalem will probably be one of the biggest architectural changes the channel will have seen in the past few years."
Brian Corn, vice president of marketing and development at Source Code Corp., concurred. Source Code is in Norwood, Mass., and Columbus, Ohio. "With Nehalem, we'll finally be able to compare Intel with AMD. All this time, we've been comparing apples and oranges because of the fundamental differences in their micro-architectures. Now the technology, like the way the memory architecture is built, is going to be really, really similar."
8 More And More Platforms
Intel's vPro and Centrino Pro platforms got the most channel ink in 2007, and it's no wonder. Those platforms are designed to enable secure, dynamic remote system management below the operating system, giving vPro and Centrino Pro broad appeal to internal IT administrators and managed service providers alike.
AMD closed out its year with the release of its Spider platform, a mid-priced integrated building block for enthusiast systems that incorporates its new quad-core Phenom CPU, new graphics cards from its ATI division, its 7-series chipset and overclocking tools for hard-core gamers. Somewhat lost in the shuffle of AMD's struggles was the news that AMD is only just beginning to capitalize on the synergy between its CPU and GPU divisions since acquiring ATI. Going forward, AMD will unveil its third-generation mobile platform, Puma, and a commercial client platform called Hardcastle in 2008. Meanwhile, Intel has platforms a-plenty in store for next year, including a 45nm refresh of Santa Rosa (desktops/notebooks), Montevina (fifth-generation Centrino platform set to succeed Santa Rosa), and its SOS Silverthorne (UMPCs) and Canmore (consumer electronics devices) platforms.
Nvidia, too, will be making platform plays, such as its late-2007 release of integrated graphics chipsets for lower-end Intel CPUs. Nvidia is also working on a systemwide standard called Enthusiast System Architecture. That initiative establishes an information-sharing protocol between PC power supplies, chassis and water-cooling systems that can be used to adjust operating parameters for those components, giving builders and users of high-performance PC systems a new way to fine-tune primary system support components.
Said McCarron: "Platform-wise, Nvidia is moving into the Intel chipset market. This is the year of the battle between Intel and Nvidia. Both have very good track records on execution."
9 Whitebook Wonderland
For system builders, the question is whether the growing demand for mobile PCs—particularly in custom-hungry verticals like education and health care— justifies entering the whitebook fray in the face of intense competition from major notebook vendors.
The profitability of whitebooks will probably never match that of white boxes in their heyday, panelists said. What's more, few in the channel will be pure-play whitebook builders—most system builders with whitebook offerings will also have managed service offerings and even branded notebooks in their mix. So while the sheer demand for mobile PCs guarantees that a whitebook ecosystem is going to grow and thrive, it's going to look a lot different than it did in the past.
"There is a transition from desktops happening. But the whitebook will only be successful if Intel makes it successful," Toste said. "Intel first did Common Building Blocks, then VBI. It's moving the whole ecosystem for the worldwide channel based on these standards. They want to really leapfrog the Asuses, etc., and go directly to the people making the cases, the power supplies, the displays. What to watch is what Intel does in mobile strategy for the channel."
Intel says it's still committed to improving the channel's ability to integrate and provide notebooks. "It won't go to the degree of integration that they were able to in desktops, because the parts are somewhat molded together," Intel's Dallman said. "But Common Building Blocks has been taken on by even HP. With the rapid changes occurring in technology, the channel can be really successful at being first to market with the latest platforms."
10 The Shift To Service
Two developments will make vendors and VARs pay even more attention to managed services in the coming year, panelists said. The first is the burgeoning ecosystem of OEMs, software developers and MSPs that's growing around Intel's vPro and Centrino Pro platforms. Expect rival chipmakers to make their own moves in this space in 2008. The second is the realization by the industry that today's small businesses have IT needs that aren't being met—and piles of untapped dollars waiting to be spent on the right service offering. For VARs adrift on the enterprise sea, SMBs look like giant, cartoon pork chops.
"The reason we've been successful is a perfect storm of technology coming together with vPro and other tool sets becoming so robust," said Michael Drake, CEO of masterIT, Bartlett, Tenn. "You've got the ubiquity of the Internet, so businesses need to have nonstop uptime. And now you see the CEO's or the business owner's willingness to let go of IT, because we [MSPs] have matured enough to show them the money."
Intel's Dallman, too, sees the shift to services. "Even the system builders are saying, 'Maybe I should buy a done mobile unit and provide services to my customer. The channel is probably touching or shipping as many systems as they've ever shipped, and anywhere they're not building, they're touching with managed services."
Added Moorhead: "The highest value-add [for] a custom system builder is configurations where people are looking for choice, like hard drives, memory and special skins. The custom guys don't go after lowland desktops anymore. With more commodity-level notebooks, channel guys will take in a branded notebook and wrap services around that to make a profitable business."