The silicon industry is a huge, mostly un-steerable giant and companies like Intel have added dead weights like in-house foundries attached to them. So what happens when the going gets tough and the Industry starts seeing a shift towards mobile, energy efficiency, and perhaps most alarmingly, lower power? While Intel cannot risk undergoing a Hewlett Packard to HP transformation, it can start to focus more on the afore mentioned sectors while at the same time we see AMD penetrating its own target markets.
Tailored for and semi custom chip designs over mass production - Intel
Don't get me wrong, Intel and AMD's mainstream offerings aren't going anywhere for the forseeable future; but a paradigm shift is undoubtedly in the works. AMD's biggest wins this past year has been the console market. Arguably one of the most important semi custom market and AMD already owns a comfortable 100% share. With chips in both next generation (or rather, current generation) consoles and another in Nintendo's upcoming latest offering, AMD has assured itself a much needed and reliable stream of revenue amidst serious financial troubles. While this isn't really Intel's market, blue has been facing severe competition in the mobile sector and has mostly been giving its SoCs away on contra-revenue basis. Though Intel can afford loss leading tactics, it needs to start making some return on investment sooner or later or the sunk cost will eventually come to haunt its finances as well.
Now heres the thing, according to a recent report, the company is betting big on semi-custom designs for next year. Infact, "Diane Bryant [of Intel] told the New York Times that she expects half of the chips it sells to public clouds to use custom designs. That amounts to about nine million units annually." To those who don't know, public clouds refer to all the big customers of Intel, namely Google, Amazon, Alibaba etc
The face of the market has changed and now is the time of custom tailored solutions. With the R&D involved in Intel's fabs and the sunk cost already, well sunk, blue' fabs are at the point where they can manufacture custom solutions with almost negligible excess cost. Ofcourse, you can be sure that Intel will charge a premium on such products and its margins will be therefore significantly larger than anything the mainstream market can offer. From a business point of view, a higher margin is always the way forward. This is why we will see Intel breaking more ground in the semi custom market, while its mainstream offerings slowly but surely shift to the back burners. One thing is for sure, the needs of the market are changing and unless companies like AMD and Intel trim the fat, they risk becoming irrelevant.
— Usman Pirzada (@usmanpirzada) December 22, 2014