This past year was an exciting one for processors and platforms. Next year looks to be another one filled with technological innovation and oversold hype, business rumors that don't pan out and surprises that shock us all, and as always, winners and losers in the big game of chips. ChannelWeb assembled a panel of industry experts comprising vendors, analysts and solution providers to discuss what they think will be the most important chip stories to watch in 2008.
1. Is AMD on the Brink?
Advanced Micro Devices had a rough 2007, losing dollars by the hundreds of millions each of the three quarters it has reported earnings for this year. A good portion of that financial misery can be attributed to costs associated with the Sunnyvale, Calif.-based chipmaker's acquisition of Canadian graphics maker ATI in late 2006. But AMD also struggled to roll out a quad-core microprocessor to match rival Intel's, and ended the year with the revelation that a glitch on its already-delayed quad-core Opteron and Phenom chips had delayed volume shipments of the former until February or March.
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. And 38 percent of ChannelWeb poll respondents characterize the quad-core delays as "a disaster" for AMD. Of course, AMD has survived lean times before and has a track record of surprising everybody with game-changing products. By most estimates, the company has a year to five quarters' worth of cash reserves to turn things around. If AMD can get its quad-core offerings back on track in early 2008, build on headway it's been making in the mobile space and convince buyers that the AMD-ATI tag team has no rival on integrated CPU-GPU punch, that could happen.
"If AMD is not able to compete in the server space, it would be a devastating blow to their 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 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 biggest semiconductor company in the world continues to face lawsuits and anti-trust proceedings in a number of venues around the globe. Allegations that Intel has monopolistic practices largely stem from rival x86 chipmaker AMD's claims that Intel has offered various "rebates" to computer manufacturers in exchange for maintaining the use of competitors' chips at just 10 percent of their mix or less. Regulators in a number of markets have taken those charges seriously, and the Santa Clara, Calif.-based chip giant enters 2008 facing legal difficulties in the United States, the European Union, Japan, South Korea and other venues. Recent developments include formal accusations of anti-competitive practices by the European Commission, which if proven could result in Intel being fined 10 percent of its annual revenue, and by South Korean regulators, which could carry a fine of 3 percent of annual sales if Intel is found guilty. Needless to say, Intel denies all charges and allegations in these cases.
Two questions for the coming year are whether we will see final judgments on any of these proceedings, and if Intel winds up being penalized, to what extent it will affect the chip giant's business. On the first question, AMD insists that the nature of its assorted cases against Intel mean judgments will be rendered quickly.
On the second question, panelist F. Scott Kieff, a law professor specializing in anti-trust regulation in the technology sector, believes the comparison to Microsoft works in Intel's favor. Kieff feels that Intel is "getting unfairly beaten up" on anti-trust matters and could face stiff penalties in the coming 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.
"It's hard to predict, but we could see tough action taken against Intel," said Kieff, a professor at Washington University in St. Louis. "It's just not clear that it would make a big impact. Most people think the actions against Microsoft cost Microsoft a lot of money, but they didn't change the market much. Meanwhile, if AMD were to go away, the logic of EU regulators would make them look even harder at Intel."
3. Consolidation in the Cards?
With IT booming and the giants of technology reporting record earnings, market watchers' thoughts turn to the possibility of mergers and acquisitions. But in the chip space, it's difficult to predict who could conceivably gobble up whom. Intel, as previously mentioned, has anti-trust concerns all over the globe. The company has been humming along without making any major acquisitions in years, so why give its enemies more monopoly money to play with now? AMD, meanwhile, is probably too busy trying to pay for ATI to think about more acquisitions in 2008.
For the panel, that leaves Nvidia as the major client player with the best likelihood of entering the M&A sweepstakes. The Santa Clara, Calif.-based graphics maker could certainly use a CPU presence to reduce its somewhat parasitic relationship with CPU makers. But does Nvidia really want to directly challenge its gargantuan neighbor Intel on its prime turf? That's a game another Silicon Valley neighbor, AMD, is increasingly finding tough to suit up for. If Nvidia does make a move, a number of panelists mention VIA, a 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. Toss in wild-cards like IBM and Samsung, and as panelist Steve Dallman of Intel said, "I think next year's going to be a pretty exciting year."
Rahul Sood, CTO of HP'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 didn'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?"
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