Don't get me wrong-- I think the Intel-TSMC alliance announced earlier this week is a good thing for both companies.
But the official explanation, that Intel wants TSMC's help to make Atom processor cores more widely available to the industry, just doesn't strike me as a sufficient reason for the deal.
Intel hardly needs TSMC's help to make SoCs (systems on a chip). Intel has been making highly integrated devices for the embedded market, as well as PC chipsets for a long time. It already has enough of the building blocks and enough experienced engineers to make Atom-based SoC products.
And it isn't as if Intel needs better process technology, or more fabrication capacity. Intel already has more of the best fabs in the world than any other company.
What's the one thing TSMC can do that Intel can't? Operate with low gross margins. In its most recent quarter, TSMC's gross margin was only 31.3 percent, while Intel's gross margin is still an industry benchmark at 53 percent. The difference is more than Intel's net profit--that is, if Intel had TSMC's gross margins, it would be losing money.
Low-margin component suppliers are a critical element of the embedded-systems market, which Intel identified as one of its target markets for this deal. Cost is king in consumer electronics, so high-margin suppliers like Intel rarely get a chance to participate.
Similarly, as average PC-selling prices decline, a growing share of the demand for processors and chipsets drops into price ranges in which Intel just can't afford to play.
The TSMC deal is Intel's way of taking a piece of these businesses without spending much money or taking much risk. For example, TSMC is already accustomed to helping its customers make SoCs for embedded systems. Intel could build such a business itself, but not at the margins it's used to.
Intel said in its press release that it will be porting its Atom cores to TSMC's technology. This is the sort of work that can get expensive in engineering time, but it's possible that the work will be made easier by a convergence between TSMC's processes and Intel's.
Last May, Intel agreed to cooperate with TSMC and Samsung in the transition to larger 450-millimeter silicon wafers (a little less than 18 inches across, up from the 12-inch wafers used today).
This doesn't necessarily mean that the three companies will co-develop fully compatible manufacturing processes, but with the 450mm transition being slated for 2012, there's still plenty of time left to drop that other shoe.
Anyway, this new TSMC deal is merely at the earliest official stage. The companies have signed a memorandum of understanding, but they have yet to work out the details. That could take a year, and it could be another year or two before Atom-based chips are ready to start rolling through the TSMC factory.
All in all, Atom SoCs might not become available from TSMC until 2012, at which point, they could, in principle, be made on a common Intel-TSMC process.
Not that Intel would provide its really good process technology to TSMC. In chips, as in other things, quality is expensive. Intel's best process technology, which it uses primarily for microprocessors, is at the leading edge of semiconductor manufacturing, with features such as a metal electrode acting as the transistor's gate, a hafnium-based insulation between the gate and the channel, and strained silicon in the transistor channel itself (where the current flows when the transistor is on). (See this Intel presentation for more details. Incidentally, did Intel ever announce which metal it's using? If so, I can't find it.)
TSMC may not need or want any of these features, and it would make sense for Intel to keep its best process technology to itself, anyway, if only to protect its high profit margins.
Even without a leading-edge process, TSMC can still make good money from Atom-based SoCs in the embedded market. That's enough to justify TSMC's participation in the deal.
But I'm not sure that explains Intel's motivation. Sure, Intel will make money it wouldn't have made otherwise, but it will also have costs it wouldn't have had otherwise. Intel may make a few bucks per chip in intellectual-property licensing fees, and perhaps this could amount to hundreds of millions of dollars a year, but that isn't a whole lot of money to a company like Intel, which makes tens of billions of dollars a year in gross revenue.
Why else would Intel be doing this deal?
Well, I think that the chipmaker could be setting itself up to kill off three of its biggest rivals.
There's already an x86 processor company using TSMC to make (some of) its chips: Via Technologies. Via isn't a big player, but it's been a thorn in Intel's side ever since it purchased the x86 processor operations of IDT (WinChip) and National Semiconductor (Cyrix) in 1999.
Via specializes in exactly the kind of processors that Intel can't afford to sell: low-cost, highly efficient designs aimed at low-cost PCs and embedded systems. Today's Atom is better than Via's best chips, but it's also more expensive. A cheaper TSMC-sourced alternative will hurt Via badly.
Most of the same reasoning applies to ARM, which licenses its processor cores to be used in SoCs made at TSMC, among other fabs. That's almost the same business model Intel is adopting with its own TSMC deal.
ARM dominates the market for microprocessors in cell phones. Intel's current Atom processors are too expensive and too power-hungry for that market. But remember, it'll be a couple of years at least before Atom-based chips start shipping from TSMC. The Atom cores of 2011 or 2012 will be more directly competitive with ARM's cores.
So put ARM on the endangered-species list too.
There's one other company that ought to be worried by this deal, and it probably isn't one you'd expect: Nvidia.
Nvidia is generally thought to be TSMC's biggest customer. It doesn't make x86 processors (though there are persistent rumors that the company is developing one), but it does make the ARM-based Tegra family, which would run up against these future Atom chips.
It's Nvidia's graphics chips that I'm worried about, however.
Intel is developing graphics chips of its own under the Larrabee code name. I wrote about Larrabee last August, and it seemed like a bad idea to me at the time. One of my key objections, however, was that graphics chips are inherently a low-margin business due to the strong competition between AMD and Nvidia, and I didn't think that Intel could afford to drag down its margins just to compete in that market.
The TSMC deal changes all that.
Larrabee's cores aren't Atom cores, per se, but they're similar enough that Intel might consider them to be covered by the language in the TSMC partnership announcement. Or if not, agreements can always be expanded later.
Making Larrabee chips at TSMC would solve the margin problem, putting Intel's graphics chips on a level playing field with Nvidia's. Larrabee would still be at a significant disadvantage because its x86-based design isn't as well-suited to graphics acceleration as Nvidia's chips, but Intel has a special ability to sell inferior products along with other chips its customers need--especially processors. That's reportedly how Intel's slow integrated-graphics chipsets ended up in so many systems during the Windows Vista transition, leading to many disappointed customers.
Or it's possible that Intel will not allow the TSMC deal to harm these companies, if only because Intel may still be in court defending itself against AMD's antitrust lawsuit.
But I wouldn't make that assumption, and I bet that ARM, Nvidia, and Via won't either. Intel isn't the only paranoid company in this industry.
It's been a big week for small systems.
On May 29, VIA formally announced (here) its "Nano" family of low-power x86 processors. These chips will be especially valuable in small laptops, UMPCs, and so-called mobile Internet devices (MIDs).
Then on June 2, NVIDIA announced (here) its Tegra 600 family, which is also being marketed for MIDs. But Tegra is a very different animal. It's based on an ARM11 processor core, which can run Windows Mobile or Linux but not Windows XP or Vista.
VIA's Nano processor. The chip itself, the silver rectangle in the center, is about 7.7mm x 8.3mm.
(Credit: Courtesy of VIA Technologies, Inc.)VIA's Nano processors are based on a new microarchitecture that is a giant step beyond previous VIA products and not far behind that of competing parts from AMD and Intel. Unfortunately, in this business, third place isn't a good place to be. VIA's older processors sold in relatively small quantities for low prices. Fortunately, they were very small and thus economical to make and sell.
The new Nano family offers much higher performance, with clock speeds from 1.0 to 1.8 GHz... but it's difficult to know what these clock speeds mean by comparison with AMD's or Intel's, and VIA isn't telling us, at least not directly. In this white paper on the Nano family, VIA only compares the performance of the new chips to its older C7 series.
But VIA does publish some numbers, so I was able to make some comparisons.
Take, for example, the Nano L2100 at 1.8 GHz vs. AMD's 2005-vintage Turion 64 ML-34 at the same speed, as found in the famous Acer Ferrari 4000 (reviewed here by PC World). The single-core ML-34 was much faster despite the clock-speed parity:
| Worldbench 6 test | VIA Nano L2100 | AMD Turion 64 ML-34 | AMD advantage |
|---|---|---|---|
| Windows Media Encoder | 585 | 467 | 25% faster |
| Adobe Photoshop | 809 | 412 | 96% faster |
| Roxio VideoWave | 507 | 381 | 33% faster |
Of course, the ML-34 consumes much more power than VIA's processor; the ML-34 has a 35W TDP (thermal design power) specification, whereas the L2100 has a 25W TDP. The L2100 idles at a mere 500mW, but the ML-34 probably consumes at least ten times as much when idle.
To be fair, I'm not sure these are entirely fair comparisons, since VIA didn't publish the details of their system configuration. Also, VIA's performance position probably looks better on simple productivity applications, but I prefer to look at multimedia performance since that's what we usually find ourselves waiting on. It's been a while since we had to worry about out-typing our word processor...
I'm looking forward to seeing some good performance and power figures for Intel's Atom; I think the VIA chips will turn out to be effectively faster but run a little hotter. When I get more data, I'll post a comparison.
But considering that the Nano is generally 60% to 200% faster than the C7 and much more power-efficient than competing products from AMD and Intel, the new product family will likely improve VIA's market position significantly over the next year.
NVIDIA's Tegra, a high-integration processor for handheld gizmos such as mobile Internet devices.
(Credit: Courtesy NVIDIA Corporation)NVIDIA's Tegra, on the other hand, offers no compatibility with existing PC systems or software, and its performance isn't even in the same class. The Tegra 600 family's ARM11 processor core runs at a maximum speed of 800MHz and, because it's a much simpler design, it offers a fraction of the effective performance of VIA's Nano.
So how can it possibly compete with Nano in mobile Internet devices?
Well, one answer is that Tegra is meant to deliver a much more complete solution with much lower power consumption. Instead of being just a core on a chip, like the Nano family, the Tegra 600 and 650 consist of a CPU core, a GeForce GPU, special-purpose hardware for accelerating digital video decoding and camera functions, and a dual-display controller that supports HDMI, LCDs, CRTs, and NTSC/PAL video. All of that on a chip the size of a dime, as you can see in the photo.
But the real answer is that what NVIDIA means by "mobile Internet devices" is different than what Intel (which coined the phrase), AMD, and VIA mean by it.
What NVIDIA means is basically any device with a size somewhere between that of a smartphone and a laptop, which can be used to access the Internet. But this doesn't strike me as a very useful definition; it boils down to encompassing anything like a smartphone with a larger screen. It's one thing to claim the Tegra 600 family supports a "full Internet experience" as NVIDIA did in advance briefings last month, but with the wide variety of sophisticated Web 2.0 websites out there, it really takes a PC-compatible system to deliver that experience.
Now, there's no doubt that the Tegra 600 and 650 will enable fun and interesting gizmos for people who buy lots of gizmos. (And honestly, I'm exactly that kind of person.) But I believe most people are not going to be interested in them. Anything larger than a cellphone is too big to carry around all the time. Anything with a screen smaller than about 7" to 9" isn't big enough for comfortable web browsing and movie watching. Anything with a screen that large might as well be a full Windows-compatible system.
Now, over time, these segments will inevitably blur together. Moore's Law will let us squeeze more performance into handheld devices. Software technologies like Adobe's Flash and Microsoft's Silverlight will allow more websites to work on simpler systems. Hardware like high-resolution LCDs and OLEDs and tiny projection displays will help solve size problems too.
But for now, I believe the Tegra 600 family is aimed at a market segment that isn't ready to develop, whereas VIA's Nano has a big market ready and waiting for it. The Nano won't sell as well as competing PC processors from AMD and Intel, but it should help raise awareness of VIA among PC buyers and encourage PC makers to keep pushing more functionality into smaller packages.
It was inevitable that someone would try to capitalize on the interest in the $100 XO laptop from the One Laptop per Child project. I'm sure we all remember the brief craze for free PCs in 1999, where a cheap PC was given away with a relatively expensive or ad-sponsored Internet service agreement. When I started hearing about the $100 laptop, I expected it would spur a resurgence in such deals.
So when I checked out Zonbu, a Silicon Valley company offering a $99 Linux-based PC, I wasn't surprised to discover there's a service agreement involved there too. The Zonbu desktop isn't really a $99 PC; it's a $249 PC. Buyers can get a $50 discount by signing up for a year of Zonbu's remote file hosting or $150 off for a two-year commitment.
The service costs from $12.95/month for 25GB of remote storage to $19.95 for 100GB. Customers must pay for the service up front, so the cheapest way to get one of these machines from the company's ordering page (here) is to sign up for the month-to-month plan and pay $261.95.
So it isn't a $100 PC. Then again, the OLPC XO isn't a $100 laptop either. It's more like $175 laptop when purchased in million-unit quantities. In the US retail market, it might cost two or three times as much.
Over time, however, the OLPC XO could become a $100 laptop. And the Zonbu desktop could become a $100 PC, too. Zonbu uses a low-cost VIA processor, 512MB of RAM, a 4G flash disk, and doesn't include a monitor at all. It's a smallish machine, about 5" x 6.5" x 2" in size, similar to an external hard disk. It should be easier for Zonbu to reach a $100 price point than for the OLPC to work the same magic with the XO, since the Zonbu machine is simpler and doesn't need to be squeezed into a laptop shape.
So in spite of the meaningless "$99" price point, the Zonbu desktop is an interesting product. It's certainly faster and more capable than any machine you could buy 15 years ago, and people got a lot of work done on those machines.
For me, the problem with Zonbu is that some of the companies behind the free-PC craze are still around, and $300 PCs are widely available with real hard disks and optical drives. The difference, of course, is that Zonbu will be lucky to sell a hundred thousand of its systems, whereas low-end PCs sell by the tens of millions.
It's good that Zonbu offers a simpler machine that costs less to build, but it needs to have a business model that lets it pass the full value of these cost savings along to customers. With time, and acceptance by the Linux crowd, it could happen...
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