Where is Intel going to place its next strategic bet?

Intel is the company that powers the majority of the world’s PCs, servers, and data centers. But while it is the market leader, it is not the most valuable semiconductor company. That accolade goes to Nvidia, which last September made the bold decision to buy ARM, whose microprocessor design dominates the smart device market.

Intel’s announcements during the Consumer Electronics Show in January may be good news for PC makers, but it’s questionable whether the new iterations of microprocessors are likely to give the company the boost it needs to stay ahead.

Intel positions its latest EVO family as a way for more partners to provide “the best thin and light experience.”

The fact that Pat Gelsinger takes over as CEO of Intel shows that the chipmaker must look beyond its existing capabilities and experience.

In a letter posted on Intel’s website on January 13, Gelsinger wrote: “I look forward to working with all of you to continue to shape the future of technology. While Intel’s history is rich, the transformation from a CPU to a multi-architecture XPU enterprise is exciting, and our opportunity as the world’s leading semiconductor manufacturer is greater than ever.

“I will share more in the short term about my vision and strategy for Intel, but I know that we can continue to accelerate innovation, strengthen our core business, and create value for our shareholders, customers and employees.”

Going beyond traditional processors (CPUs) is an important step that Intel must take to remain competitive against its rival Nvidia. The PC market has been in decline for several years, and while the coronavirus pandemic has caused a rebound in PC sales, this is more of a problem.

“In early 2020, the expectation was that Covid-19 would have a negative impact on all end-equipment markets, but the actual effect was more nuanced,” said Andrew Norwood, research vice president at Gartner. “Automotive, industry and some areas of the consumer market were hit hard by the reduction in business and consumer spending. However, the confinements greatly increased working from home and e-learning, and any market that facilitated those activities benefited. “

According to Gartner’s Global Semiconductor Revenue Report, released in early January, with a market share of 15.2%, Intel was the number one global semiconductor company by revenue in 2020, followed by Samsung Electronics, SK Hynix and Micron. Nvidia was the 10th largest semiconductor company. Its market share is only 2.2%, but the company has grown 37.7% since 2019 and has improved its global ranking in six places.

“Server demand was strong as hyperscale customers, which accounted for more than 65% of server demand in 2020, scrambled to add capacity to cope with additional demand during crashes in the first half of 2020.” Norwood said.

He added that strong demand for PCs from businesses and consumers due to increased work and home study led to strong growth in CPU, NAND flash and DRAM. In fact, Gartner reported that memory was the best performing semiconductor category in 2020. Sales benefited from increased server builds and demand for PCs and ultramobiles due to the shift to work and learning from home. Global memory revenue increased by $ 13.5 billion in 2020, representing 44% of the overall semiconductor revenue growth in 2020.

In the transcript of Intel’s fourth quarter 2020 earnings call, posted on Seeking Alpha, outgoing CEO Bob Swan spoke about the XPU strategy and how Intel had previously unveiled its first graphics chip. “In the expanded market opportunity before us, CPUs are critical, but multiple architectures or XPUs will be required to help customers optimize for specific workloads,” he said.

“We had a huge XPU jump in Q4 when we entered the discrete graphics market with Intel Iris Xe Max graphics, the first discrete GPU based on Intel Xe. We are now delivering discrete graphics to thin and light notebooks from Acer, Asus and Dell and are introducing our first discrete GPU for the data center. ”

During the earnings call, Gelsinger described Intel as an “American national asset.” As its new CEO, he said he looked forward to the opportunity to put Intel and the US in a position of technology leadership. What is perhaps interesting about their comments is not necessarily the XPU strategy, but the largely untapped potential of 5G virtual infrastructure.

Swan said the company had projected 20% growth in its chips for the 5G market by 2022. But it experienced 40% growth in 2020, as telecom customers replaced equipment with application-specific integrated circuits (Asics) and specialists in field programmable door arrays (FPGA). chips with general-purpose processors that execute virtualization of network functions and software-defined networks.

Gelsinger said he started discussing 5G with Swan a while ago when he was leading VMware’s 5G roadmap. He believes there is great opportunity for Intel as 5G migrates from a vertically controlled industry with proprietary network hardware to one that is more horizontal, built around software-defined infrastructure.

“5G is going to represent a platform that is redefining cutting edge computing, it will open smart cities, smart factories, it will displace Wi-Fi,” he said. “This is a powerful technology; It will also be rolled out in private 5G environments. So Intel is not only establishing a bridgehead in a very important market that was never a major source of revenue in the past, but it is redefining all aspects of distributed computing in the future.

“So this leadership position that is established today is one that we will reap over the next decade.”

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