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After reading and reporting on the financial results of AMD and Intel, and reading Nvidia’s cautionary letter to its shareholders, I have been struck by the resiliency and dynamism of these companies. AMD and Intel are in their fifties, and Nvidia is 25. That may not be as old as say General Electric, Konica, or Bayer but those staid old firms can’t change direction in a decade let alone a quarter as the semiconductor firms do.
However, the market that has fueled the three processor companies has primarily been the PC and associated server market. All three of them tried and failed in the mobile market leaving it to Apple, Samsung, and Qualcomm. And those three haven’t done well in PC land.
And yet all six of them are jockeying to find space to grow where their competitors can't. Intel might even be ceding the PC market to AMD a bit, figuring the long-term growth prospects for PCs are not so great, so it’s looking for greener fields. But, for the past two decades, Intel has not demonstrated any skill at moving into new markets despite some astounding acquisitions. AMD doesn’t have the resources to be so adventurous and has concentrated in the past decade in getting its house in order and sharpening its focus. To that goal, the company has been fantastically successful. Five or six years ago, industry wisdom had it that AMD should RIP and today it has got Intel on the run looking in its rear-view mirror.
The fabulous explosive tablet and smartphone market have flattened or contracted, as the PC market did ten years ago and so Qualcomm and Samsung are entering the PC market while Apple tries to come up with the next great consumer product after giving up on autonomous cars. Meanwhile, Nvidia continues to rack up partnerships with all the car companies and eyes the data center. Intel thinks they own the data center and resents the intrusion by AMD, Nvidia, and ARM customers.
The AI everywhere gold rush has finally leveled off as firms are learning what AI can and can’t do, and how hard it is to make it work, and then verify that is really is working. In the meantime, we content ourselves talking to Alexa.
And everyone is straining their necks trying to look over the horizon to see what’s next or looking around to see what millennials are doing and buying while waiting for China to start buying stuff again.
To say the industry is in fluctuation is an understatement, and it is in moments of change and disruption when the biggest opportunities are present. Fighting for one or two market share points in a static market is very expensive and not much fun, just ask Coca Cola and Pepsi. But grabbing a new application with a new processor that does or has the potential to take off, that’s exciting. And it excites Wall street too, as is evidenced by the crazy PEs some of the semiconductor companies are getting.
The semiconductor companies fight and grow with leading, some say bleeding, edge technologies. Most of the time they get it right and astound us. Sometimes the companies miss and when they do it’s big; billion-dollar three-year bets collapse while execs struggle to re-position, re-phrase, renew, keep their jobs by making some kind of lemonade.
Volatility is built-in to the system and it’s never going to change. The semiconductor industry won’t become mundane and flatten out like the automobile or bottling industries that turn out the same thing year after year wrapped in a shiny new cover. Semiconductors are inherently changeable and, so far, constantly improving.
A smartphone, a PC, cloud-based computers have the power to challenge, entertain, expand knowledge, and most of all, trigger curiosity and curiosity makes magic.
We’re curious, I’m curious — what’s next, when will it get here, and who will own it? One thing for sure, those old semiconductor companies will be powering it. Now isn’t that curious?