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Can engineering win out over marketing muscle? ARM’s Cortex A-15 is aimed at mobile computing, advanced smartbooks and servers. Intel’s MDF is aimed at keeping rivals out of mobile computing and servers, while levering x86 into smartphones.
So it’s ARM engineering vs Intel MDF.
The wild card is how far the recent FTC ruling constrains Intel in its use of MDF to stop competitors
If the FTC’s bite is as bad as its bark, then Intel will be constrained,
“We believe Intel stepped well over the line of aggressive competition on the merits, and engaged in unfair, deceptive and anti-competitive conduct”, said Jon Leibowitz, Chairman of the FTC, “the sum total of all this anti-competitive conduct unfairly prevented companies from competing, bolstered Intel’s monopoly, and harmed consumers by stunting innovation, diminishing quality, and keeping prices higher than they would otherwise be.”
So will the FTC police Intel’s behaviour and stop it preventing companies from competing?
Only time will tell.
But any OEM would be worried about using a non-Intel processor. Look at Dell – a $60 billion revenue company – but, in every quarter between 2002 and 2006, Dell would have missed its numbers if it had not been for money paid by Intel.
Intel paid the money to obtain exclusivity in the supply of processors to Dell.
In Q1 2007, Intel payments represented 76% of Dell’s operating income.
In 2006 Intel money represented 38% of Dell’s operating profit.
When, in May 2006, Dell introduced AMD-based products Intel stopped its payments and Dell profits fell 36% that quarter.
This sort of market manipulation is what Cortex A-15 is up against.
Good luck ARM.
The business case for ARM walking into the server market must look compelling on paper. New sector for ARM =’s market growth. Intel knocked back on its heels by FTC ruling (maybe), demand for green technology opens up the ARM door. Plus a healthy dose of lets get back at Intel, they’re trying to steal our market we’ll steal a bit of theirs. All of this will look compelling to the shareholders i am sure.
But the server market demands a very different type of processor to ARMs mainstream cores, and much worse it demands a very different type of ecosystem, both at the hardware IP level and the software level. Intel has many years of ecosystem investment ahead of them.
Net result – it’ll take a lot of exec and organisational time as well as $’s to show they’re serious, time and $’s that are taken directly away from ensuring they keep hold of the home market and out innovate Intel, creating new leadership proof points.
Intel has the $’s to close the gap, ARM does not, and its ecosystem is a fickle beast. But then maybe Inet’s ecosystem may turn out to be as fickle. But I suspect a lot more wary of crossing Intel.
Biggest of all for both companies is the challenge of entering a new market with fundamentally different business models, operating within those models without undermining their core businesses. Very challenging.
A brave strategic decision by ARM. But can they sustain the level of long term investment needed and still stay ahead of the game in their core market?
Wouldn’t it be interesting to see what a competitive market actually looked like?
A fine 2ps worth, john, worth a quid at least. Intel is now operating under a Consent Decree – but it’s not exactly clear what it’s consented to. If it’s consented to abandoning MDF then, Hallelujah, we may get a competitive PC/server market for the first time in 20 years.
Another thing, David. We cannot forget that MS now has an ARM architecture license, and it’s anybodies guess what they’ll do with it. Although the hegemony between MS and Intel isn’t dead, the conditions under which Intel operated their MDF aggressively in the beginning no longer exist (they are commodity now in all except servers), and as different architectures gain adoption by key pieces of the infrastructure of the computing world, MDFs will only get Intel traction with the suppliers who use them exclusively. If exclusivity is stamped out by the FTC, then there could be a future where Intel suffers from an earnings point of view as a result of their indiscretions of the past. They’ve made their bed, but is it a bed of nails?
Likewise, if the FTC don’t stamp on exclusivity, then innovation will suffer at those companies maintaining the status-quo under the old MDF, and their market share may well erode in the face of competition from more nimble competitors. The only thing keeping these companies on their toes may well be the MDF….
My 2ps worth.
100% spot on, john
This is a very interesting point. To my mind, it indicates something unsound about the way the world is doing business in the computing market.
Let’s take the case where Dell seeks processors elsewhere from Intel in the future, their profits will surely fall again. If Dell explains to the city that it is no longer operating in that way, the city will cane dell – not because it is doing the right thing, but because it is not making as much money.
But you have to ask yourself, what did Dell do to deserve or receive that money? They won’t have made that money in the way Apple would have – innovating and creating a world beating product that everyone is buying. They received that money because one of their suppliers wants them to maintain a status quo that in turn solidifies that suppliers monopoly.
I think the computing world that will come when many ARM-based suppliers enter it is one where decent competition over differentiated products will release companies from maintenance of that status quo, and allow them to make money by innovating and differentiating, and attracting people to buy what they sell. It is a dipole apart from the way it is at the moment, where the consumer doesn’t know that better exists – they see a wall of identikit computers, and assumes that that is because that is the way computers “are”.
For Dell, I’m hoping that by designing their own differentiated smartphone (Streak), they’ve got that buzz for innovation. I’m encouraged that they are looking closely at the A15, and were sat with AM at the launch.