Searching For A Way Forward In The Tech Industry

The past few months have not been kind to the firms that conceive, make, and sell technology to the public.

The worst public relations debacle is also the most recent: the revelation that pretty much all the firms operating large unstructured data stores have been giving the backdoor keys to the National Security Agency and other law enforcement groups for years.  Never mind how they do it from a technical perspective.  They do it, as many have now admitted.

The public, upon learning this news, has been set back on its heels, uttering a collective, “WTF?”  Reaction has spanned the spectrum from a Gallic shrug (“What can you do?) to outright outrage.  Overnight, we have come to understand just how public all our Tweets, IMs, emails, and postings are.  Some people have closed their Facebook accounts, not that it will do a lot of good, but at least it serves as a symbolic gesture.

Beyond the immediate scandal, however, are more pedestrian issues.  Microsoft ’s wiff on Windows 8 is pretty clear by now.  Intel is still promising x86 performance characteristics with ARM-like power consumption, but design wins in the phone space have come painfully slowly.  Dell and Hewlett-Packard continue to reset, trying to replace declining PC revenue with something — anything — else.

The slowdown of the smartphone and tablet markets is right around the corner.  The fact that every white box vendor in Asia is jumping into tablets is the clearest sign yet that the days of heady growth there are almost done.  And the tablet market only started in 2010.  That’s three years.  At least PCs had a run 10 times that long.

It took years for the margins to get squeezed out of PCs.  In the 1980s, they were rich across the board.  Then, desktops became commodities in the 1990s, and everyone turned to notebooks.  The notebook joy lasted for a while, but eventually competition ruined margins there as well, and it was time for servers to take center stage.  Now, with cloud providers like Google , Facebook, and Amazon buying bare-bones units, servers aren’t what they used to be, either.

So, where does the industry turn?

Advanced Micro Devices (AMD) herded a small group of analysts into its Sunnyvale headquarters last week to talk about how the company plans to move forward.  CEO Rory Read outlined five areas that the company felt it could address with strong offerings over the next several years.  AMD is a good representative of the industry because, while its roots are in the legacy PC business, it is not burdened with the heavy asset base that keeps Intel on a fairly narrow track.  With its flexibility, AMD is exploring possible product markets in which its expertise might make a difference.

These markets include end-use devices powered by accelerated processing units (APUs), chips that have both processor and graphics on the same die.  With AMD's high-performance graphics, such chips can address processing for rich visuals but still maintain a small thermal footprint.  Devices powered by these chips could include small form factors like tablets, convertibles, and hybrids as well as sleek all-in-one desktops.

Leveraging the strength of its graphics portfolio, the company is pushing ahead with next generation graphics at 28nm for gaming, professional, and general compute markets.

Another area of possible growth is the semi-custom market.  AMD and its partners — notably Globalfoundries, a chip maker composed of AMD’s former manufacturing assets and other factories purchased and built since the split-off — are working on the idea of collaborative device manufacturing (CDM).  CDM allows chip designers and manufacturers and their customers to share intellectual property to accelerate and lower the cost of making chips.  This flexibility allows the industry to make chips more economically, which opens the possibility of still-profitable but shorter manufacturing runs.  With a proliferation of device types, each needing its own optimization, semi-custom may be a way forward.  Early fruit of the semi-custom business can be seen in AMD's game console wins.  The company recently landed designs with all three major platforms (Microsoft Xbox One,  Sony  PlayStation 4, and  Nintendo  Wii U).

Implied in the semi-custom pathway is the embedded market (e.g., automotive, smart grid, home control), one which will grow enormously over the next decade as the world is instrumented with sensors and the Internet of Things becomes a reality.  These chips need to be low-cost, robust, and highly functional, and device makers can carve out specific markets with them.

Finally, the AMD plan calls for targeting dense servers.  There is a lot of disagreement about how big this market really could be.  Intel says 10-15%; others think higher.  But safe to say that it is growing in at least two ways: one, an increasing proportion of all data generated fits a profile that can be addressed by dense servers, that is, vast amounts of unstructured data accessed sparsely.  Two, the low-power chips that go into dense servers are improving in performance, allowing them to address a larger proportion of all server tasks.  As of next year, ARM Holdings will have 64-bit chips in the game, opening up huge potential.

These initiatives all point to potential growth areas for the industry.  But much of the promised joy is in the future.  Today, things just don’t look all that great.

Maybe, like folks in academia, the tech industry should just take the summer off.

Disclosure: Endpoint has a consulting relationship with a number of firms mentioned in this article, but specifically with AMD.

Twitter: RogerKay