The Federal Trade Commission needs to do a better study of Intel and chip the market before it pulls the trigger with a veritable scattershot of last-minute accusations.
In addition to the FTC's litany of charges against Intel relating to the chipmaker's alleged anticompetitive behavior in the central processing unit, or CPU, market for PCs, the FTC document also refers to "Intel's unfair methods of competition...and future competition in the relevant GPU (market)." GPUs, or graphics processing units, and CPUs comprise the two main processors in all PCs.
A more thoughtful, studied, and contemporaneous analysis by the FTC would reveal that future personal computing markets are not so much about graphics chips--which is the basis of its new found emphasis on Nvidia as the object of Intel bullying and misbehavior--but about small mobile devices. And here Intel faces a raft of competition and is at least a year behind its rivals.
And that includes Nvidia, whose tiny Tegra processor is already in the Microsoft Zune HD and the Samsung M1 and whose next-generation Tegra 2 chip will be in dozens more handheld devices and smartphones. Intel's current offerings in this space? Zero.
Nvidia's Tegra processor is based on the same ARM design that other competitors use such as Qualcomm, Texas Instruments, Samsung, Apple, and Freescale Semiconductor use. And which Nvidia's CEO Jen-Hsun Huang said is expected to account for half of Nvidia's business in a few years.
Unbelievably, the only reference to ARM in the FTC complaint is: "Another example of a non-x86 microprocessor architecture is ARM. ARM is used primarily in handheld devices and mobile phones." One sentence in a 20-plus page document seems oddly dismissive, as though ARM was practically irrelevant to future chip market competitive dynamics as relates to Intel. Especially when you look at it in the context that that FTC is referring to the world's most popular consumer chip architecture--that is, ARM.
How large is this exploding market today? The ARM processor market totaled well over 2 billion units shipped in 2008. The "x86" PC chip market, where Intel and Advanced Micro Devices compete, a fraction of this--a few hundred million.
"The growing market is...a whole swath of interconnected devices and Intel doesn't have much a presence there," said the CEO of ARM Warren East in an interview I had with him recently in Los Angeles. And he accurately asserted that ARM can either match or exceed Intel in market clout and spending because it works, to some extent, in concert with the manufacturers--like TI, Nvidia, Samsung--that collectively have a massive revenue stream to tap into for marketing and research and development. "Well, actually there's about $25 billion of ARM semiconductor revenue coming in through the front door. So, it isn't Intel versus ARM, it's Intel versus everybody else," he said.
And if there is any truth to the Google Netbook rumors, ... Read more
Rumors are a dime a dozen in Silicon Valley--and that's probably overvaluing their cumulative worth. But, on occasion, they can be fascinating, especially when they help crystallize the dynamics underlying competition between Valley heavyweights.
Recently an "Intel will buy Nvidia" theory appeared on the blog I, Cringely, written by the former InfoWorld columnist and the author of "Accidental Empires: How the Boys of Silicon Valley Make Their Millions."
The upshot of the Robert Cringely post is that the recent project cancellations and legal wrangling between the two companies (and throw in Advanced Micro Devices, too) is simply leading toward an inevitable, unstoppable merger. This, of course, supersedes older rumors about a merger. And outright statements from Intel executives that they had considered a buyout in the past.
The short version of the facts (all real events) behind the theory goes something like this. Intel cancels initial Larrabee graphics chip. That's preceded by Nvidia nixing chipsets for the newest Intel Core i series of processors, as a result of an Intel lawsuit. Intel struggles to get its (Atom) chips into smartphones, while Nvidia has some success with the Tegra chip for small devices. And then Intel's sudden inclination to settle with AMD.
All reasons, theoretically, why the two companies need each other. Other sources--some close to Intel--think it's a patently absurd notion because of the regulatory issues involved, among a dozen more reasons.
Both Intel and Nvidia declined to comment.
The Federal Trade Commission has talked to Nvidia as its probe continues into Intel's business practices.
As CNET reported earlier, Nvidia has complained loudly for years about Intel business practices. Last month, Intel agreed to pay Advanced Micro Devices $1.25 billion to settle a long-running antitrust case against Intel.
In addition to the AMD probe, the FTC has approached Nvidia about Intel's business practices. This time in the graphics chip market, according to an Nvidia spokesperson. The Nvidia-related probe was reported by BusinessWeek.
Intel commands about 50 percent of the graphics chip market. Though Nvidia is the world's leading supplier of "discrete," or standalone, graphics chips, it ranks a distant second in overall market share to Intel, which supplies "integrated" graphics built into the chipsets that accompany all of its processors. Mercury Research estimates the total market for graphics chips, including integrated graphics, at almost $10 billion in 2009.
In the third quarter, Intel had 53 percent of the graphics chip market, up from the 49 percent share in the same period last year, according to Jon Peddie Research, which tracks the graphics chip market. Nvidia took about 24 percent, down from the 28 percent in the third quarter of last year.
Nvidia claims that Intel's "bundling" tactics--the same tactics that AMD has cited for years and that were spelled out in a complaint filed by New York's attorney general last month--are causing it undue harm.
"Intel's tactics with Ion have been the most aggressive we've seen from a competitor," Nvidia CEO Jen Hsun Huang said in a statement provided to CNET last month, referring to Nvidia's Ion chipset that is used in laptops. Intel disputes this.
"We have scrubbed and continue to scrub our pricing practices as it relates to chipsets and processors," Intel spokesman Chuck Mulloy told CNET last month.
And in another feud with Intel, Nvidia has halted development of chipsets for Intel's new "Nehalem" processor technology (marketed as the Core i series of chips), following a complaint filed by Intel in February--which Nvidia then countered in March.
Updated on December 4 at 10:55 a.m. PST: adding comment from Nvidia.
Advanced Micro Devices stock was upgraded Thursday by Broadpoint AmTech analyst Doug Freedman, citing a solid product road map and debt restructuring efforts.
AMD was trading above $7 midday on Thursday, high above the $3.50 (approximate) lows seen back in July of this year.
Freedman said in a research note Thursday that he is upgrading AMD to "buy" from "neutral" and raising the price target to $10 from $5.80.
"Positive events...lead us to believe that AMD's risk/reward is now compelling," he said. One of the biggest positives was AMD's move on Wednesday to pay off $1 billion in debt using part of its $1.25 billion settlement income from Intel and a new $500 million bond offering. "We believe AMD's debt of $3.7B will be reduced by 25 percent," Freedman said.
And Future "Fusion" chips point toward a more competitive AMD. Fusion silicon--which combines the main CPU processor with the graphics chip or GPU--is due in 2011. "We believe Fusion (CPU+GPU) will deliver discrete-like performance on an integrated chip," Freedman said, referring to high-performance standalone "discrete" graphics processors. "Fusion will likely be a low-cost product--targeting mainstream and lower-end," according to Freedman.
Chips that go into servers are also likely set for market share gains, Freedman said. "We estimate that server share could grow from ~8 percent currently, by our own forecast, to ~12 percent by FY10 year-end," he wrote. High-end "Maranello" chips boasting as many as 12 processing cores are due in the first half of next year and 16-core processors are coming in 2011.
Graphics chips that are compatible with Windows 7 DirectX 11 technology for accelerating games and general multimedia tasks are also expected to do well, such as the company's HD 5000 series of graphics chips.
Advanced Micro Devices is laying claim to the world's fastest graphics card at it continues an assault on Nvidia at the high-end of the graphics chip market.
HD 5970 packs two fast graphics chips
(Credit: Advanced Micro Devices)As teased last week by AMD senior vice president Rick Bergman at a financial analyst meeting, the "Hemlock" graphics card--now officially called the ATI Radeon HD 5970--is AMD's top-of-the-line graphics product.
"It's in production. You'll be able to buy it at e-tailers around the world...Five Teraflops out of this baby," Bergman said last week. A teraflop is a trillion floating point operations per second, a key indicator of graphics performance.
Review site Tom's Hardware called it the "fastest discrete (standalone) card in the world."
The card integrates two graphics processing units (GPUs) for a total of 4.3 billion transistors. It also boasts 3,200 stream processing units and 160 texture units--tiny individual processors for accelerating graphics. And it supports Microsoft's DirectX 11 for speeding up graphics in Windows 7.
The 5970 will ship in Area-51 ALX and Aurora desktops from Dell's Alienware unit and allow "massive overclocking," according to AMD. Overclocking allows users to ratchet up chip speeds beyond the card's specified rating. "The unrivaled overclocking capabilities of the ATI Radeon HD 5970 are enabled by the unique design of the card, which features advanced fan and vapor chamber technologies and a fully vented exhaust to keep the card cool and ensure overclocking headroom using ATI Overdrive technology," AMD said in a statement.
A maximum resolution of 7680x1600 is achieved by driving up to up to three displays at once.
AMD cited games that will benefit from the card such as Electronic Art's Phenomic's BattleForge, S.T.A.L.K.E.R.: Call of Pripyat (GSC Game World), Battlefield Bad Company 2 (EA Dice), DiRT 2 (Codemasters), Aliens vs. Predator (Rebellion), and the update to The Lord of the Rings Online (Turbine).
Though prices will vary, some retailers are currently listing the price at $599.
Now comes the hard part for Advanced Micro Devices. It has to compete with Intel on the merits of its products.
After settling with Intel and walking away with $1.25 billion, how competitive is AMD's silicon? Some experts weigh in.
Two analysts that follow Intel and AMD said separately that AMD won't be competitive until 2011--at the earliest.
"The only chance for reaching any kind of parity is in 2011. They don't have anything on the roadmap until then," said Ashok Kumar, an analyst at Northeast Securities. In the interim, AMD will get by with about one-fifth of the processor market, according to Kumar. But whether AMD can expand its market share beyond this and be profitable--like Intel--isn't clear. "Intel can leave 20 percent of the unit volume for AMD but (AMD) will have to come up with a business model where it can return to profitability based on this."
AMD may have a chance to expand into more profitable segments if it executes well in 2011, according to another analyst. "AMD believes it's on the cusp of another cycle where they will have strong product offerings compared with Intel. I think this happens in 2011," said Nathan Brookwood, the principal at Insight64. "The products are innovative and have tremendous potential," Brookwood said, referring to the particulars of new chip technologies that AMD disclosed at its analyst day on Wednesday.
But these are big ifs. AMD must close a yawning gap with Intel that's not going to get any smaller because of the legal settlement. "Technically, Intel now has a definitive advantage, which may widen," said Roger Kay, president of market researcher Endpoint Technologies. Kay believes that AMD will have trouble keeping up with the feverish pace, referred to as "cadence," that Intel sets as it moves to each successive generation of chip manufacturing technologies--which, in turn, allows Intel to quickly introduce performance and power efficiency improvements in its processors. "AMD tends to be six months to a year behind Intel," Kay said, citing a statement made by AMD CEO Dirk Meyer at the company's analyst meeting on Wednesday. AMD may begin to close the gap more in the future "but there's no telling whether that will happen," Kay said.
Will AMD's 'Fusion' lead to a resurgence?
(Credit: AMD)And if it doesn't happen, AMD becomes little more than a foil to keep Intel honest. "This settlement is actually proving the very point that Intel wants to keep AMD alive and able to compete at least in some small subset of the market, otherwise Intel will be faced with regulatory issues that they would rather avoid," said Avi Cohen, managing partner at Avian Securities.
AMD's best technology play to avoid this fate is "Fusion," Kay said, referring to a technology that combines the two key processors inside a PC: the main CPU processor and the graphics processor, or GPU. Fusion, however, isn't slated to come to market until 2011, according to the road map that AMD disclosed on Wednesday.
And what about today? Dan Ackerman, a senior editor at CNET Reviews and someone who regularly reviews AMD- and Intel-based laptops, makes an important point about the challenges AMD faces in the here and now: Intel-based laptops not only dominate the high end of the market but the low end, too. "Intel CPUs are found in almost all of the high-end systems (such as Core i7 laptops), and the low-end systems (Atom-powered Netbooks)," he said.
Ackerman said that AMD will be hard pressed to beat Intel head to head. "AMD has some room in to maneuver in the middle of the market--laptops from $600 to $900--but unless they can offer better performance for the same price, or a significant price discount to consumers, it'll be hard for the company to gain additional market share."
Rich Brown, a senior editor for desktops at CNET Reviews echoes Ackerman's sentiment: AMD competes by offering lower prices than Intel, not better performance. "From a tech standpoint, AMD's...desktop chips haven't been competitive since Intel launched Core 2 Duo. Instead, AMD has had to compete on price," Brown said.
The best action plan for AMD is to keep executing on key technologies and hope this eventually translates to market share gains. "AMD is rapidly developing a reputation for timely execution of marquee products/platforms," said Doug Freeman of Broadpoint AmTech in a research note. "AMD revealed that its newer platforms...are on track for [the first half of 2010]," he said, referring AMD's high-end server chip lines.
Advanced Micro Devices CEO Dirk Meyer on Wednesday addressed the latest antitrust lawsuit filed against Intel, saying his company's claims about Intel's alleged illegal behavior have been "ratified" worldwide.
AMD CEO Dirk Meyer addresses analysts on Wednesday.
(Credit: AMD)"We've said for a long time that our success in the marketplace was hampered by anticompetitive behavior on the part of our competitor [Intel]," Meyer said. "And I think it's clear over the last 12 months that we've seen our statements be ratified...by regulators around the world. We've seen action in the EU take place this year. And just last week we saw the action of New York State's attorney general office," he said.
Meyer made the comments at the AMD Financial Analyst Day, which was streamed live from company headquarters in Sunnyvale, Calif.
"As you know, we have a court date scheduled in March," Meyer said. "So, in summary, I'm looking forward to a future in which our ability to succeed as a business is really governed by the quality of our products and the quality of our customer relationships. And I can tell you that hasn't always been true. But in the future that will be increasingly true. So, access to customer demand is key. "
Intel declined to comment.
New York Attorney General Andrew M. Cuomo filed a federal lawsuit against Intel earlier this month accusing it of paying computer makers rebates to illegally maintain its monopoly power and preventing AMD from gaining business with PC makers.
In a similar case earlier this year, the European Commission fined Intel $1.45 billion, alleging illegal rebates to PC makers such as Dell and Hewlett-Packard. AMD also made analogous allegations in its case filed against Intel in June 2005 that is slated to come to trial in March 2010.
And this may not be the last major case filed against Intel that makes these allegations. The Federal Trade Commission may also bring charges against Intel, according to reports.
Advanced Micro Devices discussed the Hemlock high-end graphics card due next week and third-generation ultra-thin laptop technology, among other topics, at the AMD Financial Analyst Day on Wednesday.
AMD Vice President Rick Bergman holds up the 'Hemlock' graphics card at AMD Financial Analyst Day on Wednesday. The product is due next week.
(Credit: AMD)"Hemlock will get launched next week," said AMD Senior Vice President Rick Bergman, speaking Wednesday morning at the conference which was streamed live. "It's in production. You'll be able to buy it at e-tailers around the world. You can see there are two GPUs. Five Teraflops out of this baby," he said. (GPU stands for graphics processing unit. A teraflop is a trillion floating point operations per second, a key indicator of graphics performance.)
Hemlock is expected to be appear as an HD 5900 series product--what some reports have called the HD 5970.
Bergman also addressed AMD's third-generation "Nile" ultra-thin laptop platform. "Bring the real PC experience into the ultra-thin. Battery life well north of seven hours," Bergman said. This is due ... Read more
Hector Ruiz, chairman of Advanced Micro Devices spin-off Globalfoundries, will resign from the company in January. The announcement follows the emergence of his name in connection to the Galleon Funds insider trading case.
Ruiz "will take a voluntary leave of absence effective immediately before resigning from the company in January," according to a statement Monday from the Globalfoundries board. Ruiz had submitted his resignation to the board in September with an effective date of January 4, 2010, the statement said.
Hector Ruiz
(Credit: AMD)The resignation comes after an unnamed executive at AMD--which turned out to be Ruiz, according to a report--was cited repeatedly in a complaint filed last month by the U.S. attorney for New York's Southern District.
The case revolves around Raj Rajaratnam, who founded the Galleon Group, a New York-based hedge fund that manages $7 billion. Federal prosecutors have charged Rajaratnam and five others with securities fraud, alleging they were involved in insider trading of well-known tech companies, including Intel, Google, AMD, and IBM.
All have said they are innocent, according to The Wall Street Journal.
The U.S. Attorney's complaint alleges Rajaratnam and others engaged in insider-trading activity when AMD was trying to reorganize and spin off its manufacturing operations--which eventually became Globalfoundries, which is a joint venture with the Abu Dhabi government.
Ruiz, who is also former CEO and chairman of AMD, has not been charged with a crime, according to The New York Times.
He will be replaced at Globalfoundries by Alan E. "Lanny" Ross, who will serve as interim chairman, effective immediately, until a permanent chairman has been appointed by the board, according to Globalfoundries. Ross, a current member of the Globalfoundries board, was previously president and CEO of communications chip supplier Broadcom.
Ruiz joined AMD in January 2000 as president and chief operating officer, and was named chief executive officer in April 2002. He was appointed chairman of the board in April 2004, and was named executive chairman in June 2008.
Ruiz was appointed chairman of Globalfoundries when it was formed in October of last year.
He spent 22 years at Motorola, and in his last post there, served as president of the firm's Semiconductor Products Sector. Ruiz also worked at Texas Instruments in the company's research laboratories and manufacturing operations.
commentary Hector Ruiz was quick to display righteous indignation about Intel's alleged unscrupulous business practices. Now--in one of life's delicious ironies--he's a central figure in the biggest scandal to hit Silicon Valley in years.
In a letter from Ruiz that still sits on AMD's Web site and is still signed above the title "Executive Chairman and Chairman of the Board Advanced Micro Devices," he rails against Intel for "breaking the law." And on another Web page bearing his photograph, there are more accusations leveled at Intel for its alleged "illegal" behavior.
In the coming months, Ruiz may face the same kind of scrutiny for illegal behavior that he campaigned against so zealously during his six-year reign as the CEO and chairman of AMD.
The 'truth' about Intel that Ruiz campaigned to expose. Ironically, the truth about the former AMD CEO is now at the center of a Silicon Valley scandal.
(Credit: AMD)And one of the operative phrases in that letter, "pattern of abuse," may turn out to be little more than facile argument that can easily be turned back on Ruiz himself, if it is established that he abused the trust placed in him by stockholders.
In short, if Ruiz was connected--however indirectly--to Raj Rajaratnam and the Galleon Group, then his--and his former company's--constant haranguing of Intel and the never-ending appeals to governments to go after Intel, lose some of their punch. Especially if it is little more than a stratagem to gain market share.
Based on the U.S. Attorney's allegations, Ruiz exhibited a pattern of behavior that would rightfully invite scrutiny on any CEO. As the deal to spin off AMD's manufacturing operations got closer, Ruiz allegedly talked freely with Danielle Chiesi, who worked for the New Castle hedge fund, about details of the deal, which at that time were confidential, insider information items. And Rajaratnam and Chiesi allegedly made large investments in AMD based on this information.
Ruiz was the man driving the spin-off of AMD's manufacturing operations. In earnings conference calls, while he was still chairman of AMD, he was the go-to man for information about AMD's efforts to streamline its manufacturing operations--which AMD at one time called "asset lite"--and ultimately the person spearheading the deal with Advanced Technology Investment and Abu Dhabi-based Mubadala Development, who invested billions in the spin-off.
And what's the greatest irony of all? As the U.S. government reportedly readies an antitrust case against Intel, the government may also be forced to examine the unscrupulous behavior of one the principals who pushed the government to move against Intel. That's some pretty heavy irony.
