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Opinion: The shifting semiconductor sands

A sizzling potato: There was a time—and it wasn’t actually that way back—when if you happen to requested anybody who tracked the chip enterprise about Intel, they most likely would have mentioned they have been invincible. After all, they owned 99% of the datacenter CPU market, near 90% of the PC CPU market and even made bold acquisitions in different “alternative” architectures, resembling FPGAs (Field Programmable Gate Arrays) and devoted AI processors. On high of that, they’d a decades-long historical past of impeccable execution and industry-leading improvements within the technique of semiconductor manufacturing.

And then, final Thursday hit.

During what was in any other case a stellar second quarter earnings report, with spectacular revenues and development numbers throughout the board, the corporate acknowledged that their already delayed transition to 7nm course of expertise for future era CPUs was delayed for one more six months.

Now, arguably, that basically shouldn’t be that massive of a deal. After all, that is ridiculously advanced expertise. The firm mentioned they knew what the issue was and, due to this fact, had a transparent path to fixing it. They additionally definitely wouldn’t be the primary main tech firm to face some technical challenges that precipitated delays within the launch of eagerly awaited new merchandise.

“There appears to be some loss of faith in Intel’s previously irreproachable reputation for delivering what they said, when they said they would do it”

But the market didn’t see it that means, and subsequently, Intel inventory has misplaced almost 20% of its worth within the final week. To be honest, that is additionally a inventory market that over the previous few months has proven completely no sense of rationality, so it’s a must to take any dramatic inventory value strikes within the present atmosphere with a really massive grain of salt.

Fundamentally, nevertheless, there seems to be some lack of religion in Intel’s beforehand irreproachable status for delivering what they mentioned, after they mentioned they’d do it. While some view the latest information, in addition to the forthcoming and certain associated departure of chief engineering officer Murthy Renduchintala, as the first catalyst for this angle, you can make the argument that the issue began earlier.

In the case of devoted AI accelerators, for instance, Intel made a big funding in Nervana and put Nervana’s foremost execs answerable for their devoted AI investments again in 2016. Then, shortly after they launched their first Nervana chips to clients, they primarily deserted all that work to buy Habana Labs for $2 billion late final yr and moved in a unique course. Obviously, leading edge applied sciences like AI accelerators can definitely shift rapidly, and, on this case, Intel clearly acknowledged that they wanted to make an aggressive transfer. However, it definitely raised some questions.

At the identical time, there are additionally a number of different very attention-grabbing developments within the semiconductor market that look like driving some basic shifts in how individuals (and buyers) are viewing it. One, in fact, is a vastly reinvigorated AMD—a proven fact that’s been mirrored within the firm’s spectacular development and much more spectacular inventory value run over the past a number of years (in addition to the great enhance it obtained final week on account of Intel’s information).

“AMD has been shaking up and enlivening the previously static CPU market and that it will continue to do so for many years to come”

To their huge credit score, AMD’s CEO Lisa Su, CTO Mark Papermaster and crew have performed a outstanding job in turning an organization that some felt was headed for extinction only a few years again, right into a formidable competitor and an vital pressure within the chip {industry} total. You might argue (and plenty of have) that, from a market valuation perspective, the corporate has obtained extra credit score than its gross sales numbers mirror. However, there’s no query that AMD has been shaking up and enlivening the beforehand static CPU market and that it’ll proceed to take action for a few years to return.

In addition, there’s been an excessive amount of momentum not too long ago in direction of Arm-based CPUs in each datacenters and PCs. Apple’s latest announcement to modify from Intel to its personal Arm-based CPU designs in future Mac, for instance, highlights among the high-level modifications which might be taking place within the CPU market.

Despite all this dangerous information for Intel, it is very important maintain every little thing in perspective. Intel remains to be by far the most important CPU producer on this planet and can be for a while to return. The firm will definitely be going through a extra aggressive market than it has needed to fear about for a really very long time, nevertheless it’s undoubtedly as much as the duty. Also, in the long term, good competitors will inevitably be higher for all of us.

As a long-time Intel follower who primarily discovered most every little thing in regards to the significance of course of expertise from Intel (they’ve performed a incredible job of training analysts and press about these points for a really very long time), I’ve to confess that it’s considerably stunning to see Intel on this state. At the identical time, it’s additionally vital to do not forget that not all numbers within the semiconductor course of sport are created equal. While it’s definitely up for debate, Intel has argued for years that its 7nm course of is nearer to what different distributors name 5nm.

“It is clear that Intel has slipped from its mantle of invincibility and will need to reprove itself to the industry and market at large”

Regardless of the numbers, nevertheless, it’s clear that Intel has slipped from its mantle of invincibility and might want to reprove itself to the {industry} and market at massive. The proven fact that the corporate has already mentioned working with third-party foundries on superior course of nodes for a few of its upcoming chips (together with its extensively anticipated new GPU) is a testomony to that.

In the Intel of outdated, that call would have most likely been unthinkable. But we’re in a brand new period, and regardless of these short-term issues, it’s encouraging to see Intel’s CEO Bob Swan keen to confess the challenges they’ve and take some aggressive actions to deal with them.

The sands beneath the semiconductor market are clearly shifting, and it’s going to be very attention-grabbing to see how issues look over time.

Bob O’Donnell is the founder and chief analyst of TECHnalysis Research, LLC a expertise consulting and market analysis agency. You can observe him on Twitter @bobodtech. This article was initially printed on Tech.pinions.

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