AMD's Insurrection

Amidst the news of death and disaster in the Notebook and PC market, AMD foresees a huge opportunity in infusing advanced graphics processing and power efficiencies into the mid range notebook market, at economic price points. In fact Dell has begun to offer AMD’s Carrizo (or A series) based laptops, PCs and desktop modules this year, post an extended hiatus with the company. This was announced during Computex 2015.

Is this market dying or poised for reinvention? The latter is probably true with significant potential for growth via economic but value added products. With the launch of Carrizo, AMD is essentially attempting to capture the value spectrum that lies between high cost-high performance PCs and low end Tablets. 52% of the consumer computing space is occupied by Notebooks and Laptops, with the biggest section of this market at the $400 - $700 price point. This is the price point most people buying laptops are willing to spend.

AMD’s Carrizo is said to offer twice the gaming performance as Intel’s i7 with advanced compression and 4K support (because of High Efficiency Video Coding or HEVC). The processors will carry 4 CPU and 8 GPU cores as well. While Intel continues to see a declining market share in this space, primarily due to its pricing and its shift towards Cloud and Data Centers, AMD may be positioned to capture a bigger piece of this market with its sixth generation A-series offering.

AMD has been in hibernation with few product launches and therefore the launch of Carrizo, along with the anticipated launch of the Fiji GPUs should lift the prospects of this semiconductor leader – Samsung potentially acquiring it or not. 

Chips on the Cloud

Semiconductor majors have never before been as quickly commoditized as what has happened in the cloud arena. Though the market space is massive - for instance, NVIDIA wants to clock $1 billion in revenue (in the next two years) from cloud alone, the positioning from most semi majors is not very clear. Why would you pick one from the other, except for pricing?

Consolidation in this sector underscores this aspect. The $37 billion acquisition of Broadcom by Avago and the ~$15 billion courting of Altera by Intel, enunciates the power of scale in commodity play. Contrast this with what happened in the Communication, PC or Wireless markets, where the focus of acquisitions was IP based differentiation such as computing to power ratios, or protocol specific applications. Avago CEO Hock Tan has actually stated that Avago and Broadcom may not have the best strategic fit but have cost-cutting potential to build value.

At this point it’s probably fair to speculate that real differentiation will be at the software or SDK level with very little at the core processor level itself, except for custom chip development that Intel, for instance, is driving with its eASIC partnership. Focus therefore for all the semi majors seems to be to improve their profit margins through operational efficiencies.

This still leaves one question open – where will the next big innovation drive in the semi industry come from? 

Enterprise IoT and the Quantified Work Space

IoT or the Internet of Absolutely Everything has pretty much become core to product development for semiconductor, consumer, lifestyle, industrial and automotive companies. Include the Government into the mix as well – moonshot or not. 

However, one of its larger opportunity spaces lies in Enterprise IoT. Case-in-point being Intel, who has included IoT as part of its IT annual report and the IT leadership pyramid, to drive business strategy.

At this point, we are no longer talking about IoT within the product mix, but about IoT driving business operations and perhaps enterprise strategy. IoT is no longer a CTO priority, but a CXO priority, with CIOs, CSOs and CMOs becoming bellwethers. It shouldn’t come as a surprise when CRM systems, HRM systems, Order Processing systems, etc. carry IoT enablement and IoT compatibility.

Here are the key trends in this space –

1. Employee heat maps within an office facility highlighting space usage, driving dynamic space design for collaboration and innovation. Hospitals, Warehouses and Service Industries could adopt this first. This is leading into a discipline called Sociometric Analysis
2. Sales team management - especially in the case of distributed teams. This could range from productivity monitoring to event / presentation management. With real time data, the entire lead and presentation management process could be managed better
3. Marketing – Predictive Campaigns!
4. Hiring and People Management could rely heavily on IoT for onboarding, asset allocation, release management, etc.
5. Inventory Management, Facility Management and Administration will have a direct impact due from IoT, such as dynamic parking space allocation, energy management, ERT, etc.
6. Finally – Finance. Finance will be able to better predict its operational costs, assess deprecation in a much more accurate manner and focus on granular reporting with traceability

There are several others popping up as this space evolves, with a key concern being privacy and security. These are problems that may in turn have IoT solutions themselves. The business opportunity here is certainly undeniable.

Samsung and Apple - Tectonic Shifts

Samsung’s cell phone business is on the decline. Though Samsung has continued to overshadow Apple since 2011 in terms of sales volumes, this Samsung business actually lost market share down to 24% in 2015 compared to 31% the previous year. Profits are down 35% Y-o-Y as well. One would have assumed that Samsung would rejig its mobile phone business; however something else altogether has been announced.

This week Samsung announced that it is investing $14 Billion in setting up a Samsung Silicon Valley! This new structure is going to be as large as 400 soccer fields, located at Pyeongtaek, Korea. 

Layer this with the other key trend in this space – Apple and Samsung’s massive growing collaboration. Samsung will now manufacture chips for Apple’s iPhones as well as displays for other Apple products. Samsung is also going to move away from Qualcomm for its own phones and will use its Exynos chip for the S6 series and beyond.

This creates the following impact points in the Semiconductor and Consumer Electronics industry – 

1. Samsung will focus on grabbing Intel and Qualcomm’s market share much more aggressively than it will Apple’s
   
2. Samsung’s Pyeongtaek facility will focus on DRAMs, which will threaten memory semi companies that have Apple among their top 3 clients (ex: Micron Technology, SanDisk, SK Hynix, etc.)
   
3. Qualcomm will feel the heat as Samsung reverts to its own Exynos Chips

Another focus of this facility, the second largest in the world after Intel’s, will be IoT chips. Apple can now further collaborate with Samsung to smoothly introduce fresh products into the IoT arena.  It will be interesting to watch this space as Samsung begins Pyeongtaek operations in 2017. 

IoT Platform Winner? - Microsoft vs. Google vs. Apple

Image courtesy - AxeeTech.com

I am intrigued by Daniel Kline’s prediction on Motley Fool in his article - "The Best Way to Invest Money in the Internet of Things" - http://bit.ly/1ORgwy8. Daniel picks that Microsoft will make its investors the most amount of money in the IoT space compared to Apple or Google. 

Here’s my dissection of this forecast followed by caveats.

Daniel purports the above because –

1.   Apple has isolated itself to the apple ecosystem

2.   Google has given away its OS for free and its current app-leveraged revenue model won’t work for IoT

Google has not directly made money from the Android OS, but from the app-fees. In the IoT world, essentially, no big money can be made from pure OS licensing since a significantly stripped down version of the OS (for device implementations) will be deployed. In the Android world, this makes it tough for apps to be designed that have sufficient volume of application and an exceptionally difficult standardization problem. For Apple, it still holds sway within the apple ecosystem, but not beyond.

This is where Microsoft will offer more control, especially with its new push towards cross platform interoperability. Microsoft is becoming more and more open towards its products running on iOS or Android. It can pretty much control its own OS licensing model, from free to charged. It can offer up apps that will have a much wider interoperability and application. This coupled with Azure analytics (Azure IoT suite) make Windows adoption for IoT devices compelling.

However, there are gaps - device level reliability and security. In this area, Apple still has the lead.

In summary, the speculation seems to be that Microsoft has more “structural control” over the IoT space because – (a) The device OS will be stripped down and (b) MS is open to interoperability.

If any of the above parameters change or Apple decides to up the game outside of the apple ecosystem, then the market share numbers could change dramatically. 

Intelligence of Things vs. Internet of Things

Bryan Krzanich, CEO of Intel in his CES 2015 speech, pointed out at the 3 key forces shaping the consumer electronics space -

1. Computing Unleashed
2. Intelligence Everywhere
3. The Wearables Revolution

In my opinion, these paradigms apply not only to the Consumer Electronics space, but to the entire IoT arena in general. Intel wants to be numero uno in the IoT space and what Bryan is stating here is actually Intel's investment strategy to dominate and grow.

Of the three above, the Intelligence Everywhere is most significant, because it will soon give rise to a new expansion of the IoT acronym, where I stands for intelligence and not just Internet. Intel will eventually foster the Intelligence of Things more than a mere Internet of Things.