Branch analysis

That could be observed at the technology fair CES in the past few days: At her appearance Lisa Su, the boss of the Intel competitor AMD, did not have to lapse into self-praise to advertise herself. This was done by their guests on the virtual stage: “AMD is just having an incredible run,” said Panos Panay, Microsoft product manager and father of the Surface tablet PC range. Panay then listed AMD’s new chips found in Microsoft’s game consoles, laptops, and data centers.

Since October 2014, Su has transformed AMD from a bankruptcy candidate into a chip power that Intel is constantly stealing market share in the market for PC processors. While AMD’s share price has risen by almost 3,000 percent since Sus took office, Intel’s price is lower today than when Swan took office. In 2020, Intel had to surrender the title of the most valuable US chip company to Nvidia.

When it comes to the performance of laptop chips, AMD has already left Intel behind, Su emphasized in her presentation. The Ryzen 5800U chip is significantly faster than its Intel counterpart for tasks such as design visualization or video coding. Even with less computationally intensive office applications, there is a small advantage. Su also promises progress in terms of battery life: with the chip, this can be up to 17.5 hours with normal use.

“These benchmarks only show a part of reality,” says Intel’s Vice President Chris Walker of the Handelsblatt. The top manager is responsible for the laptop chip business. Intel measures the performance of its chips closer to real usage and even employs ethnographers to observe computer users at home.

Monopoly power was yesterday

However, these comparisons are also controversial and cannot cover up Intel’s fundamental problem: In all the markets that Intel still dominated a decade ago, the company is fighting against strong, specialized competitors: In graphics cards and AI chips, the Nvidia is the new one at CES Introduced chips for extremely powerful laptops for computer games. In addition, the large cloud providers such as Amazon and Microsoft are starting to develop their own semiconductors for their data centers.

Competitors nibble on the business of the world’s top-selling chip manufacturer from all sides. At the end of 2019, Swan had set the target of achieving a 30 percent market share in all chip categories, instead of the 90 percent in the market for PC processors as it was before.

2020 was actually a strong year for Walker’s division. The home office and homeschooling boom caused by the coronavirus has driven demand, and PC sales have risen faster than it has been in a decade. Nevertheless, Walker’s division had to cope with a public bankruptcy: Apple presented its new Macs in November, which run with the self-developed M1 chip instead of Intel processors. While Apple isn’t a big player in the laptop market, the M1 chip received rave reviews for its performance and battery life, as well as the improved ability to use mobile apps on the laptop – which made chip pioneer Intel look pretty old.

Walker emphasizes that Intel still offers advantages over the Apple chip for many customers, even if Apple has developed a “very good, powerful chip”. Many programs such as Adobe’s image processing program Lightroom would continue to run better on Intel PCs because they are optimized for Intel’s x86 chip architecture and have to be specially translated for M1, which costs performance. “We have the broadest range of technology for laptops,” says Walker.

Investor urges Intel to consider splitting production

Intel is trying to attack again on several fronts: The company presented four new processor families with 50 variants at the CES. The new VPro platform for work computers, for example, offers cybersecurity programmed into the hardware, which helps ward off ransomware and cryptomining attacks.

Intel plans to compete with Apple and AMD’s Ryzen chip in the second half of the year with its new Alderlake chip, which has a hybrid architecture similar to Apple’s M1 and which Intel manufactures using the so-called 10 nm process (10 nanometers).

However, production is the cause of many of Intel’s problems: the smaller the distance between transistors, measured in nanometers, the more of them fit on a chip of a certain size.

Intel has fallen behind contract manufacturers like TSMC, which already produces according to the 5 nm process and thus helps customers like AMD or Apple to achieve leaps in performance compared to Intel. Meanwhile, Intel is still struggling to get its 7 nm chip production up and running and has repeatedly failed to adhere to its own schedules.

For a long time, Intel’s own factories, especially those located in the USA and Europe, were considered an advantage. In the meantime, the company is considering handing over part of its production to TSMC and concentrating more on chip design – also under pressure from activist investor Dan Loeb.

In December, he bought a billion dollar hedge fund from Intel with his Third Point hedge fund and called on the company to consider a spin-off of its production.
The pressure from investors to make a decision is now unlikely to decrease. They just have to meet a new Intel boss.

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