Intel Strategy – Tick Tock, System On Chip, Atom, Security And Servers

Intel Strategy Highlights

• Follows a pendulum-type ‘tick tock’ in launching minor and major processor products
• Stresses the importance of the PC as a ‘must have’ product, especially in developing countries
• Reports PC manufacturing in Japan relatively unaffected by recent disasters
• Is working on low-power and SoC products
• Has enhanced security offerings by acquiring McAffee
• Has virtually no current market share in smart phones and tablets
• Continues to support Meego operating system, despite Nokia’s decision to partner with Microsoft
• Claims a PC costs on average 4.5 weeks wages to buy
• Has introduced Xeon E7 processor, MCA recovery
• Has helped form the ODCA and acts as technical advisor to the ODCA
• Intel is working with its Eco-system partners to publish Cloud Builders Reference Architectures
• Has launched Open FCoE and suggests running it on general servers rather than LAN controllers

Intel held its EMEA Analyst meeting a couple of week’s ago. It provided an impressive number of execs to discuss where the company stands. We attended the general session and Data Centre breakout. We thought our readers would be interesting in how this company is thinking.

Forecasting Long Term Trends Is Hard For A Dominant Chip Producer

I know from experience that forecasting board trends is always difficult: for instance over the years I under-estimated the importance of the Internet and managed to take part in a massive over-forecasting of the Itanium market. I didn’t mess up by over-stating the ASP market, but would have done if the Dot Com bust had come six months later. My biggest success was in suggesting in December 2007 that there were going to be huge problems in the financial markets in 2008 – but I was certainly helped by a much smarter analyst. Over the last couple of years I’ve managed to forecast the recession and recovery reasonably well and have taken a very positive view of Cloud Computing, but it’s not easy for an analyst. So imagine how difficult it is for a chip manufacturer like Intel, where a new product can take up to 7 years to develop, to predict changes in usage. In the past it has been helped by AMD, whose early adoption of 64-bit computing and shift away from the South Bridge/North Bridge bottleneck spurred Intel action on its own products faster than it had planned.
If the x86 market is to be judged by the balance in revenues between Intel and AMD then Intel has managed to achieve a 85-91% share each quarter since the beginning of 2003: with a dominant position like that forecasting can be made more difficult by the blinkers of market success.
The analyst meeting was a good opportunity to see how much Intel was learning from the market and predicting future trends. It was open and honest – especially when answering our question about its market share in smart phones (‘none’) and tablets (‘virtually none’). As you might expect it gets involved in user groups to build Cloud Computing ideas. It’s talking a lot about the advantages of low power as well as the advantages of its largest processors – referred to once in an AMD meeting as ‘death stars’! Its usual audience is its OEMs and it has a habit of constant reference to its own technology and processes. Because a lot of information was provided under non-disclosure agreement we’ve had to check this as a draft before publication.

As a bigger chip provider Intel is protected from the market ups and downs experienced by most of its competitors. Figure 2 shows that it has achieved relatively consistent profitability, dipping into negative territory only at the low point of the recent recession. It had a 30% profitability in Q4 2010 – the highest level in recent years. AMD’s briefly took the lead at the end of 2009 largely due to the money it received from Intel as a settlement for a number of actions.

JeanAnn Nichols On ‘Tick Tock’, Japan And The Importance Of PCs

JeanAnn began by talking about Intel’s improvements in energy efficiency performance and reductions in transistor leakages over time, which has stretched the bottom end of the low power spectrum with each generation of process. In other words Intel is able to address lower powered devices as a result of transistor miniaturisation.
Intel’s latest processor design Sandy Bridge is being built from its 32nm process – a more major announcement than the previous Westmere, or in Intel terminology a ‘tock’ rather than a ‘tick’ (see Figure 1).
In February Intel revised its financial guidance for investment analysts following the discovery of a fault in its Intel series 6 ‘Cougar Point’ chips, which affected the performance of SATA drives on new chipsets for its Sandy Bridge processor. It started manufacturing a new version and is returning to full volume production this month. Its speedy recovery is one of the advantages of manufacturing your own chips according to Intel – almost all other chip designers have offloaded manufacturing (AMD to Globalfoundries for instance). For those, like IBM, which have hung on to production, the bad news from Intel is that building fabrication plants cost increasing amounts of money – somewhere between $6 and $8 billion in the case of the next generation 22nm process.
Some years ago I suggested that these increasing costs would lead to just the sort of ‘designer verses manufacturer’ splits we see today. Intel’s strong competitive position comes from the huge demand for its processors from the PC market. By offloading its manufacturing AMD has the ability to increase production far faster than before, as long as Globalfoundries has the necessary excess manufacturing capacity. If and when users believe AMD has a clear technical advantage, it will be interesting to see which approach wins out. For now Intel’s ‘actor/manager’ positions looks strong.
JeanAnn talked about the effect of the recent devastating earthquake and tsunami on PC production in Japan, specifically referencing Fujitsu, Panasonic, NEC, Sony plants alongside its own and concluding that the majority of PC manufacturing has been unaffected.
Since the Intel meeting we talked to Fujitsu, which suggests there is likely to be slower worldwide PC production because 10% of IT components still come from Japan, some from (now closed) unique producers, with some now in very short supply. When we talked to Samsung it suggested it has something of an advantage by manufacturing so many of its own components, but that silicon itself could become difficult to source. It will be interesting to see whether we see supply constraint in coming months.
JeanAnn also talked about the booming market for PCs, especially in countries outside the West. We agree that the physical PC continues to lead the IT recovery, although in the first few months of 2011 it looks as if virtual clients are becoming more ‘mainstream’.

Rob Crooke On System On Chip (SOC), Low Power

Rob is responsible for Atom processor and SoC development at Intel. He discussed the differences in design between the Atom and Core processors, pointing out that the lower power of Atom meant that the machines it is used in are fan-less.
SoCs are about more than the processor – in fact the CPU and L2 cache only take 13% of die area on a typical chip (which Rob’s team actually studied a Texas Instruments OMAP 4 platform, rather than one of its own chips).
The low power offers significant advantages in reducing the electricity used in stand by and what it terms ‘HUGI’ (Hurry Up (and) Get Idle’). From a design point of view Intel is using its SoC design to cross-fertilise developments in handheld, embedded and digital home products and is able to embed other companies’ software code such as Imagine Technologies graphics (as Apple and Texas instruments do as well). Rob predicts that the number of SoC designs will increase as new smaller processes stretch downwards into lower-powered areas. He used the ‘tick tock’ approach to compare Core and Atom processes straddling each jump in process size.
Intel’s acquisition of Infineon has allowed it to build wireless into all sorts of devices. It has mixed the IP of its handheld and netbook designs to develop a tablet version, although it admitted that it had very little market share here or in smart phones (almost all use ARM designs of course). It does claim leadership in the smart TV area and to be the only supplier of Google TV.
Rob noted that you don’t have to plan to be the market leader all the time.

Bill Savage On Software, Services and Security

Intel acquired McAffee for $7.68 billion in February 2011, picking the company based on its strong revenues ($2.1 billion in its last year) and extensive enterprise market security services. Intel’s research also suggests that security features strongly among user demands. Intel’s larger global footprint will allow McAffee products access to new countries, while Intel can use McAffee to launch new services to users. Bill was keen to point out that security at Intel means more than its new team. In particular he sees security becoming a growing issue for mobile devices.
Intel has decided not to fully integrate Havok, Wind River and MacAffee into its organisation as it sometimes ‘drove all value out of acquired companies’ according to Bill.
Bill also spent some time talking about the software Intel develops for smart phones and tablets. In particular he observed that:

• Google has recently decided to become more formal and closed in its relationship with silicon suppliers, including Intel
• He believes that ‘Web kits’ such as HP’s Web OS is an indication of the way the mobile market is going
• Nokia’s decision to partner closely with Microsoft has obviously lessened its interest in MeeGo and led to Intel spending more on the engineering of the QT interface -a critical ingredient in the MeeGo value prop to developers
• Intel’s AppUp application store currently has 43k registered developers and over 2k apps
• Intel allows code written on Android Delvic to run automatically on Atom processors, although some are being written native
• Intel will address Microsoft Windows Phone 8 as an operating system for Atom, as version 7 is exclusively tied to ARM processors

In comparing the various smart phone operating systems Bill believes that, in addition to Apple’s phenomenally successful iOS and Google Android, there may be room for MeeGo as an Open System operating system.

Karen Regis On Client Marketing

Karen talked about the way that Intel has simplified its consumer marketing messages in last year – changes based on a significant amount of research -including 160 consumer-focused studies, 100 focus groups and 100k quantitative studies. Its conclusions are that both laptops and smart phones are typically considered ‘must haves’, while netbooks and tablets are often just ‘nice to haves’. It has charted a slow but dramatic change in laptop users from business to consumer over the last year, which has led it to rethink its messages as well. When we talked to Samsung recently it was interesting that its journey has been the other way – a consumer brand finding acceptance in the business market for the first time. Intel should be careful not to base its whole approach on this one directional assessment. We also asked about prosumers and Karen admitted that Intel had developed no specific marketing material for them yet.
On the product front Karen talked about the advances from building media processing into Intel’s 2^nd generation Core processor family, giving it much better transcoding, which speeds up consumer video production. The inbuilt copy protection functions have also led to both Warner Brothers and 20^th Century Fox signing up to Intel Insider – allowing users to watch high quality current movies.
In addition Intel’s new WIDI connectors allow laptops to connect to HD TVs through a device attached to the TV’s HDMI port. Advances in Intel’s HDMI port technology itself means that PCs will now support 1080p resolution and 5.1 audio with version 2.0.
Karen showed some interesting statistics on the cost of a new PC in terms of the average number of weeks wages, which stands at 4.5 in 2010 and show some very dramatic reductions in places such as China, Eastern Europe and Brazil over the last 15 years. Intel’s predictions are that the cost will lower even further reaching 2.1 weeks work in 2015.

Alan Priestley On Servers And Data Centres

I’ve known Alan for over 20 years and it was great to hear him in the afternoon breakout talk about Intel’s Data Centre approach. He talked about the latest E7 Xeon processor, which uses a Westmere Core (a ‘tick’ in development terms) and launched at the beginning of April 2011. Of course it has very advanced features, such as a maximum of 2TB DDR3 memory, low voltage DIMM support, a 30MB on-die cache and advanced encryption as standard. It is an interconnected 4-socket system and offers up to 40% performance improvements as an application server.
Intel is adding Machine Check Architecture (MCA) to help handle errors in memory to overcome the fact that Error Checking and Correction (ECC) used in servers today can handle a single error, but not two in the same byte. This sometimes causes the ‘blue screen of death’. MCA will allow system recovery at the operating system level – so the system should keep running even if you lose a virtual machine. Alan mentioned the fact that when it checked Google was surprised at the number of times ECC had been invoked in its data centres.
Alan talked about the future of Itanium, much in the news of late due to Oracle’s decision to stop supporting it as a platform for its databases. The next version of Itanium is code-named ‘Poulson’ and will be a ‘tick’ in development terms. It will be based on a 32nm process, with 3.1 billion transistors, 8 cores and 54MB on die cache. It will also be compatible with the current Tukwila Itanium 9300 processor, and uses the same chipset as the current Xeon E7 processors.
Alan also talked about the development of Micro Servers, which Intel defines as ‘systems with many small, 1-socket servers sharing a chassis, fans, and switching to achieve higher efficiency and density’. He sees they have relevance in some situations where low power chips can lead to higher density.
Intel Works As Technical Advisor To The Open Data Center Alliance
Intel’s vision of Cloud Computing is that it should be:

• Federated – sharing data securely across public and private Clouds
• Automated – with IT focused more on innovation and less on management
• Client-Aware – optimising services based on individual device capabilities.

It has become the technical advisor to the Open Data Center Alliance (ODCA) – a collection of 140 organisations spending $80 billion a year on IT formed in October 2010. The organisation has the aim of documenting business processes and tools.
For its own customers Intel has already published a number of Cloud Builders Reference Architectures which are weighty volumes focused on IT infrastructures, these are focused in areas such as how to build a cloud or how to enhance a cloud.

Georg Monzel On Networking

Intel has around a thousand people working on networking. It is firmly connected with Ethernet, having shipped 600 million ports to date. Georg talked up the benefits of Open FCoE, which was launched by Intel in January 2011. Its approach is to integrate FCoE into the operating system, rather than running it on a separate LAN controller, which can save customers cable and infrastructure costs, as well as allowing improvements through processor upgrades. So far both NetApp and EMC have certified Intel’s approach. He also talked about how Intel is addressing the bottleneck hypervisors have when networks run at 10GB, through developing Virtual Devices Queues and LAN adaptors which support its SR-10V protocol. This is currently supported by Citrix KVS, but not yet by Microsoft or VMware.

Brad Karlberg On Storage

Finally Brad talked about storage and how this group was different from others at Intel, being more of an ‘adopter and modifier’ than builder of its own systems. His group is responsible for storage bridge bays, BIOS and boot-loaders. He noted that whereas 50% of Microsoft servers have some storage workload, storage devices are increasingly doing some type of server operations.
Brad indicated that Intel’s Data Center Group focuses on storage in four areas. In particular:

• External storage – SAN and NAS products have seen a 50% growth in the last year, although there was an ‘easy compare’ with the poor 2009 market
• Server storage – where the development of ‘super DAS’ is needed
• SMB and Home storage – where products include Atom with ECC memory have seen a 100% growth year on year
• Cloud storage – although Brad had famously described it as ‘water vapour’ 4 years ago.

In future Brad sees a massive increase in data volumes and modular platforms taking over from proprietary storage. We are particularly interested in the development of home storage, since one of the great-untapped markets is that for home servers. It is possible that Intel could play a great role in its development.

Some Conclusions – Intel Is Set For Increasing User Influence

I make no apologies for trying to cover a massive amount of (mainly technical) material in this article, since Intel is after all a technical manufacturer at the heart of so much in our industry. While it continues to have to pre-empt the shifts in computing far out into the future we notice that it is getting closer to customers in a couple of areas: most notably in working with the ODCA and in the services business it has acquired along with McAffee.
As other parts of the industry become more vertically integrated so Intel will be put under new pressures. Perhaps it’s not the difference between PC, netbook, smart phone and tablet that should concern its marketing department – rather the differences between vertically integrated companies like Apple, RIM and Oracle and the more horizontal ones like HP and Nokia. Following the needs of the vertically integrated ones will lead to very different operations from the general purpose ones Intel builds its business on today. Intel is so dominant it is highly unlikely its overall importance will wane, despite AMD’s best efforts. However we can imagine a time when it may compete with its OEM as a provider of Cloud services and – who knows – even become a systems supplier in its own right.
Intel is a big, distant company for many: but please let us know what you think of its strategy by commenting on this post

Acronym Buster

ASP – Application Service Provider
CPU – Central Processing Unit
DDR – Double Data Rate (for synchronous dynamic random access memory)
DIMM – Dual In-line Memory Module
ECC – Error Checking and Correction
FCoE – Fibre Channel over Ethernet
HDMI – High-Definition Multimedia Interface
HUGI – Hurry Up (and) Get Idle
L2 – Level Two
MCA – Micro Chip Architecture (not in this case Micro Channel Architecture, which was a feature of IBM’s PS/2)
NAS – Network Attached Storage
ODCA – Open Data Center Alliance
OMAP – Open Multimedia Application Platform
SAN – Storage Area Network
SoC – System on Chip