Tablets shift chip market dynamics

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Apple's iPad and the mere prospect of other tablets to come changed the dynamics of the chip market in 2010.

A not-so-subtle change to the topology of the chip industry was the sudden appearance of Apple as a player. Apple's A4 chip first appeared in the iPad but quickly found its way into the iPhone 4 too.

That sent shock waves through the rest of the industry, as it quickly became apparent that the iPad was a hit--which meant that Apple's chip design was a hit too. Intel CEO Paul Otellini, recognizing the magnitude of the change afoot, did something unprecedented: he devoted a few minutes at the top of the third-quarter earnings conference call to calm investors and say, in effect, that Intel would prevail in tablets, despite Apple's early lead. "We will use all of the assets at our disposal to win this segment," he said.

And that's not all the largest chipmaker in the world did. It shelled out $1.4 billion to buy Infineon Technologies' Wireless Solutions business. If the acquisition goes through, that immediately puts Intel wireless silicon inside Apple's iPad and iPhone 4.

Research In Motion also stirred up the pot, with co-CEO Michael Lazaridis saying the upcoming BlackBerry Playbook will pack "1-gigahertz dual-core processors." Although no chip supplier was mentioned, a 7-inch RIM tablet with a dual-core processor, if it arrived in the first quarter of 2011, would be one of the most powerful tablets from a first-tier company to date.

Nvidia was quick to amp up its tablet chip strategy too. Nvidia CEO Jen-Hsun Huang made it clear that his company was no longer just a supplier of graphics chips, or GPUs. With the Tegra processor, Nvidia was in the CPU (central processing unit) business too, right along side its nemesis, Intel. But Nvidia's CPUs--based on the ubiquitous ARM chip architecture--weren't targeted at PCs but rather at tablets and smartphones.

Advanced Micro Devices was the odd man out, essentially admitting that it didn't have the resources to pursue the tablet market yet: "Allocating significant research-and-development resources is a wait-and-see scenario," AMD President and CEO Dirk Meyer said in a third-quarter earnings conference call. That said, the chipmaker did spell out its intention to roll out a series of power-efficient processors for Netbooks and ultrathin laptops.

All the noise about tablets didn't mean that people will stop buying laptops, however. Windows-Intel-based systems from Hewlett-Packard, Dell, Lenovo, Acer, and Sony, as well as Apple's MacBooks, are selling by the hundreds of millions on an annual basis and remain the productivity platform of choice.

Intel will introduce its Sandy Bridge processor at the Consumer Electronics Show on January 5, which will redefine the CPU. Sandy Bridge, for the first time in a mainstream Intel chip, combines the CPU and GPU on one piece of silicon, meaning that PC makers will get the GPU for free, in essence.

The leading-edge 32-nanometer manufacturing technology that Intel uses in Sandy Bridge also means that consumers should see thinner, more powerful laptops in 2011.

Ironically, Apple chose to go old-school with its newest and thinnest MacBook Air models to date--opting for older Intel processors. But that was a strategic decision that enables it to swap in updated Nvidia graphics.

Meanwhile, Apple updated its larger 15- and 17-inch MacBook Pros with Intel's latest Core i5 and Core i7 processors. And thin-and-light lines like Sony's Vaio Z, Toshiba's Portege, and Hewlett-Packard's 2540p EliteBook all moved to power-efficient Intel Core i series chips.

Laptops will never quite be the same, however, with the emergence of the iPad. And that tablet, as well as others, should bring about more and more novel designs that straddle the laptop and tablet markets.