Intel is endorsing Google's future Chrome operating system, but the chipmaker is being cautious as it already has a successful strategy supplying chips for Windows-based mobile devices.
Last week, makers of processors based on the ARM design, such as Texas Instruments and Qualcomm, were quick to cheer the news of Google's Chrome, which is slated to first appear on Netbooks in 2010.
"We're thrilled about the news that Google just issued," Ramesh Iyer, TI's head of worldwide business development for mobile computing, said last week. "You can see how simple the user interface is and how easy it is to access stuff," he said, referring to current Google applications available on the Web. "Think of (Chrome) as the next-gen of all of that."
Intel was more guarded in its statements. "We welcome Google's move," said Intel spokeswoman Claudine Mangano, but added: "We try to ensure Intel processors run on a variety of software." Chrome is slated to launch simultaneously on both ARM and Intel processors.
Though Intel is officially software agnostic, unofficially its chips are inextricably linked with Microsoft's Windows software as the hardware half of the most popular hardware-software PC platform on earth. And Intel's Atom is already the processor of choice for the most popular Netbooks worldwide from Hewlett-Packard, Dell, Toshiba, Sony, Acer, and others.
Atom will hold more than an 80 percent share of the 23.5 million Netbooks sold in 2009, according to a report released Monday by the Information Network, a New Tripoli, Pa.-based market research company.
Most of those Netbooks run Windows--which Google is looking to displace. "Consumers buying Netbooks so far have voted Windows," said Jeff Orr, senior analyst, mobile content, at ABI Research, in a phone interview.
The ARM chip camp is hoping to link its processors with Google in much the same way Intel is associated with Microsoft's popular Windows software. "Coming from the ARM side, they lack a Windows XP, Windows 7 solution," Orr said.
ARM processors are supplied by chip manufacturers Texas Instruments and Qualcomm, among others, and power devices such as the Palm Pre and T-Mobile Android smartphones, respectively. The Information Network projects that the ARM processor will gain a 55 percent market share of the 96 million Netbooks sold in 2012.
But for the foreseeable future, Netbooks will run Windows on top of Intel's Atom processor. And for those few Netbooks not running Windows, Intel is hedging its bets. The world's largest chipmaker also showed, as part of a technology demonstration, an Atom-based Netbook running Google's Android operating system at Computex.
Android running on devices at Computex was "snappy," while Windows 7 less so, according to a Gartner report published Monday. The report concluded that there is momentum behind the ARM chip platform.
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"Android is the first Linux OS backed by a strong consumer brand--Google," write analysts Christian Heidarson and Ben Lee in Gartner's Semiconductor DQ Monday Report.
Though they stopped short of endorsing the platform--saying that Android is a work-in-progress--they did offer some hope for future Android-based devices running on ARM processors versus Windows 7-based Netbooks running on Intel's Atom processor. "There is a sense among PC manufacturers that although Android is not ready for prime time today--or tomorrow--it will inevitably get there," they wrote.
The report continued. "When Android did work, we found that the user interface was very snappy on relatively low-performance ARM processors, more so than on Windows 7 on (Intel's) Atom. What we learned about support from critical software vendors convinced us that there is momentum behind ARM in the PC industry, enabled by Android."
In an interview last month, Michael Rayfield, general manager of the mobile business unit at graphics chipmaker Nvidia, echoed this sentiment. "Android has got a roar ahead of it," he said. But he added: "I think it's three of four quarters from a large-screen device." Nvidia is developing its ARM-based Tegra chip platform for Android as well as Windows CE.
Other chipmakers such as Freescale Semiconductor are also touting the potential for Android on ARM-based chips. "The potential that Google has--this has got everybody's attention," said Glen Burchers, director of global consumer segment marketing at Freescale, in an interview last month.
The Gartner report was cited earlier by IDG News.
Market researchers IDC and Gartner made their cases on Wednesday for worsening chip sales in 2009, with both firms predicting that chip revenue will fall by more than 20 percent.
The worldwide semiconductor market will not recover until 2010, primarily due to a very weak fourth quarter, according to IDC. The market researcher expects a decline in global chip sales of 22 percent in 2009, due, among other things, to low chip factory utilization rates and price erosion.
Memory revenue (DRAM and NAND flash) should stabilize by the second half of 2009, but revenue growth will not return until 2010, IDC said. Capital spending is expected to fall by more than 45 percent in 2009.
There is some light at the end of the tunnel, however. "The semiconductor market will begin to stabilize at the end of 2009 and improve in 2010 with a positive growth rate. However, the market will not rise to the levels seen in 2007 and 2008, until beyond 2011," IDC said.
Gartner, on the other hand, doesn't see a recovery to 2008 levels until 2013 and forecasts an even steeper revenue decline, of 24 percent, to $194.5 billion in 2009. This revises downward Gartner's December forecast of a 16 percent drop in the 2009 chip market.
Can the chip industry doldrums get any worse? Yes, Gartner says. In fact, semiconductor sales may set a record for consecutive yearly declines.
The market research firm on Tuesday predicted that in 2009, the chip industry will see back-to-back yearly declines for the first time in its history, with global chip revenue expected to decline 16.3 percent, to $219.2 billion.
Sales in the fourth quarter of 2008 will post a historic decline too, sinking to a record quarter-over-quarter decline of 24.4 percent, surpassing the 20 percent decline record set in the second quarter of 2001, the firm forecasts.
Gartner's preliminary 2008 market share results, released last week, showed 2008 revenue reaching $261.9 billion, a 4.4 percent decline from 2007.
The market researcher had to quickly revise a mid-November forecast. That report had said 2008 worldwide semiconductor revenue would grow 0.2 percent, and the market would decline 2.2 percent in 2009. "However, the financial crisis is having an unprecedented negative impact on fourth-quarter 2008 sales and profits," Gartner said.
In 2001, the semiconductor industry saw its worst revenue shortfall in history, with sales declining 32.5 percent from the previous year, according to Gartner. "However, this followed two strong revenue growth years, in 1999 and 2000, when revenue grew 22 percent and 34 percent, respectively."
One bright spot is that chip inventory is being managed better than the previous market decline in 2001.
"While many executives may try to compare this downturn to the 2001 tech bubble, this downturn is different in many ways," Bryan Lewis, research vice president at Gartner, said in a statement. "This downturn is broad-based, not limited to only technology, has a much different growth profile before the downturn, and has far less inventory buildup. Inventory levels this time have been monitored and more tightly controlled throughout the entire food chain, and this will help the market come back more quickly than in 2001."
The "wild card" for the chip industry in 2009 is DRAM, the main memory used in PCs. "The DRAM industry has been in a downturn for 18 months, and losses are now approaching $12 billion," according to Gartner.
Along with the economy, chip forecasts are heading south.
Following an outlook about weak chip industry capital spending from market researcher Gartner on Wednesday, iSuppli cut its 2008 IC revenue forecast to 3.5 percent from 4 percent on Thursday.
The memory chip industry is the canary in the coal mine. At least two memory chip manufacturers are on life support right now. Hynix, the world's second largest maker of memory, is trying to scare up cash by seeking buyers for a 36 percent stake in the company. The other ailing memory maker is Qimonda AG. Rumors have been rife that the manufacturing assets of the loss-ridden company will be snapped up.
Hynix and Qimonda won't get any help from the market in the coming months. Gartner said that the oversupply in memory, combined with a slowing consumer market, "gives little hope for an upside until 2010." Semiconductor industry capital spending is forecast to decline 25.7 percent in 2008--this would be the steepest decline since 2002--and another 12.8 percent in 2009, according to the market researcher.
The iSuppli report isn't any brighter. The outlook for memory revenue has been revised downward by 5.8 percentage points for 2008. iSuppli is citing the "credit crisis" as adversely affecting demand.
And let's not forget the Micron surprise on Thursday. The largest maker of memory chips in the U.S. said it would reduce its workforce 15 percent during the next two years. "Selling prices for NAND flash memory (are) significantly below manufacturing costs," Micron said in a statement.
SanDisk--the largest supplier of retail flash memory products--has problems of its own. It has become a buyout target as its stock price has steadily declined over the last 12 months.
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