Can Intel Catch ARM?

First let’s preface this discussion with some information on process nodes. It seems that others like to claim they are ahead of Intel on SOC process nodes by pointing out that they are on 28nm while Intel is still on 32nm. This is nothing more than pure marketing fluff. They are the same process node 28nm is merely an optical shrink of the 32nm node. The transistors are packed a bit closer together, but the underlying process is the same. So the following processes will be equivalent: 45/40nm, 32/28nm, 22/20nm, 14/12nm, etc.

Before I get into my main points I want to look at what I call the x86 myth. Boiled down to its simplest terms this myth states that the transistor overhead needed to support the x86 instruction set prevents x86 chips from being as small and efficient as an ARM (or other non-x86 chip). At one time this was certainly true. It is estimated that the x86 instruction set took up ~30% of the transistor budget on the original Pentium processor. The requirements for the x86 instruction set haven’t grown much with subsequent generations, but for the sake of argument, let’s pick an obscenely high number and say that the requirements have doubled. So that would give us 60% of the transistors in the original Pentium chip dedicated to the x86 instruction set that non-x86 chips can either repurpose or eliminate.

According to Wikipedia, the Pentium chip had 3,100,000 transistors. 60% of that would be 1,860,000 transistors. That sounds like a lot of transistors, but let’s put that in perspective. I can’t find a verified transistor count or die size for Medfield. (The best I could find was that the transistor count is ~1/4 of a dual core Conroe and Anandtech estimated the die size at ~53mm^2.) Again referring to Wikipedia, the transistor count of a dual core Conroe is 291 million transistors. One quarter of the Conroe transistor count is 72,750,000 transistors. Our theoretical 1.86 million transistors would be about 2.6% of the total transistor count. And that is a high end estimate. So the disadvantage Intel accrues from using the x86 instruction set is an increase in transistor count and die size of ~2.6%. I hardly call that a make or break proposition. I’ve looked for die size information on Qualcomm’s Snapdragon S4 chip and haven’t found anything. But I did find a die size on Nvidia’s Tegra 3 chip. It is listed as 83mm^2. Since this is built on a 40nm process we should look at what building this on a 28 nm process would give for a die size if we want to compare this to Medfield in an apples-to-apples comparison.

One of the chip industries dirty little secrets is that you don’t actually get a 50% decrease in die size when you move to the next process node. You achieve pretty close to this in the cache regions where the layout is very symmetrical and you can pack the transistors for maximum density, but the results in the logic regions of the chip are a lot worse. As a result you only get about a 30% decrease in die size for a typical microprocessor rather than the theoretical 50% decrease.

Applying the above logic to the Tegra 3 chip you get a reduction from 83mm^2 to 58mm^2. That puts it in the same ballpark as Intel’s Medfield at 32nm. In fact, Tegra 3 should be almost 10% larger than the Medfield chip even on the same process node. Since cost is proportional to size, Intel should be able to manufacture Medfield for ~10% less than Nvidia can manufacture Tegra 3 at 28n. So much for the cost impact of the x86 instruction set.

While I don’t see an issue with Medfield due to the x86 nature of the chip Intel still faces the challenges that any new entrant to a market faces when trying to replace an entrenched competitor. They have to provide a compelling value proposition. As you will see from the analysis below, I believe that Intel's biggest advantage in this space will be cost. That's right, I said cost. I'll be interested in any other views, but please have the courtesy to read my analysis and identify specific issues rather than making general blanket statements.

Intel’s phone (I’m looking at the system as a whole here because that is what the end user really cares about) is reported to be a middle of the road smart phone. It is a competitive entry, but doesn’t offer anything truly compelling. Intel is wisely targeting emerging markets with this smartphone that don’t have the well established base that exists in the US and Europe. This move allows Intel to avoid some of the difficulties of trying to oust a well established incumbent. In order to be successful in the long term, though, Intel is going to have to offer a compelling reason to choose their product over ARM. So Intel is going to have to offer comparable (preferably better) performance at lower power, and an equivalent (or lower) price. What I’d like to do here is evaluate Intel’s plan to achieve these goals.

The smartphone game is all about maximum performance at minimum power, but power and performance are inextricably linked. For a given process node, if you increase performance, you are going to have to use more power. If you want to lower power, you are going to have to give up some performance. If you want to improve your performance without increasing power you either have to improve your design, or change your process (i.e. a node shrink). Intel plans on two process shrinks and a redesign over the next 2 years.

Intel’s latest entry into the smartphone space, Medfield, is based on the 32nm process. Most of the competing devices are based on the 45/40nm process. So Intel has a 1 process node lead over those products. The latest and greatest ARM processors that are just starting to hit the market (QUALCOMM Snapdragon and TI OMAP5) are based on a 28nm process. Looking at benchmarks for the Snapdragon 4 (Krait) processor looks like the SOCs based on this processor outperform the Medfield offering. Perhaps more interesting is that Tegra 3 seems to also offer better performance although it is fabbed on a 40nm process. One would expect that shrinking the other processor designs to the 28nm node would give them a similar performance advantage over Medfield and possibly give Tegra 3 top honors.

Anandtech’s review of Medfield shows that Intel still has a ways to go to achieve this goal. The HTC One X/S use the Tegra3 and the Snapdragon S4 chips respectively. These phones represent the next generation of ARM based phones and generally outperform the Medfield chip. Unfortunately, battery life data isn’t available in the review, so no comparison between the Medfield phone and the newest ARM phones can be made regarding battery life. But Medfield battery life is compared to a number of other phones and generally in the bottom half but above the bottom quarter of the phones evaluated. Intel will need to close this gap. Snapdragon 4 is supposed to provide comparable battery life to it's predecessor while providing better performance. Based on that I would expect Medfield to lag behind the Snapdragon 4 in both power and performance. If Tegra 3 were fabbed on 28nm I would expect it to also edge Medfield on power as well as performance.

Intel's current roadmap shows them introducing a new design by the end of this year that is supposed to increase performance. Given the power sensitive nature of the phone market it is my assumption that this redesign will match the power consumption of the current devices. I have no data to support this, but Intel's phone effort are currently being run by Mike Bell who was involved in the development of the original iPhone, so I'm sure he knows what this market values. Based on what Intel has released on the redesign and my assumption of comparable power consumption Intel can expect an improvement over Medfield's current power/performance metric by the end of the year. The redesign should put Intel back in the lead on performance, where they are already competitive with the top phones.

I'm not claiming Intel has any magic bullet's here though. I suspect the redesign will end up increasing die size and giving up the size/cost advantage I indicated that Intel currently has over the hypothetical Tegra 3 processor on 28nm. Intel can increase their transistor budget by ~10% and still maintain size/cost equivalency. In order to stay in the same power envelope they will have to adopt more rigorous power control and/or reduce processor speed. My thought here is that going to out-of-order execution here will be Intel's approach which will allow greater processing efficiency at lower speeds while costing more transistors.

It is my opinion that the redesign will put Intel back in the lead on performance, but will still leave them lagging behind on battery power and sacrifice their cost/size advantage. Intel's roadmap calls for Intel to move to 22nm in 2013 and 14nm in 2014. I believe this is where Intel will rely on their process technology to close the gap. My expectation here is that the 22nm offering will use the same design as the improved 32nm design and the following comments are based on this assumption. Given the short time between 22 and 14nm, I believe Intel will have to use the same design on 14nm that they do on 22nm. While Intel hasn't announced anything beyond this I believe the next logical step will be another redesign on 14nm.

Shrinking to 22nm will give Intel their cost/size advantage back and will improve their power efficiency. If ARM were to do nothing between now and 2014 I expect that Intel's shrink to 14nm would give them unquestioned leadership in all three key metrics, cost, power, and performance. Intel's critics are quick to point out that ARM will not be sitting still for the next 2 years and rightly so. Let's look at what ARM's roadmap shows between now and 2014.

ARM is claiming to have 20nm products ready to go at the end of 2013. Given a typical 2 year development cycle they would see 12nm in 2015, 1 year after Intel goes to 14nm. This timeline also lines up well with TSMC’s current roadmap. Interestingly, TSMC has recently announced that they will only be offering a single 20nm process instead of the High Performance and Low Power variants they originally proposed. They cited the “lack of a noticeable performance difference” between the two processes as the reason for the change. This is very different from the data that Intel presented for 22nm. Intel showed significant differences between transistors designed for low power and those designed for high speed. This leads me to believe that TSMC’s process will underperform compared to Intel’s equivalent process.

I have been unable to find a timeline for ARM processor designs. I did find an article that indicates that ARM's future plans focus on a Big-Little theme. They will be using ARM7 cores for times when the device has less computational demand and switch to an ARM15 core when the computational demands are higher. Despite the lack of any public statements from ARM I have assumed a number of redesigns in the table below where I compare the roadmaps of ARM and Intel.

Firm	2012 Q3	2012 Q4	2013 Q1	2013 Q2	2013 Q3	2013 Q4	2014 Q1	2014 Q2	2014 Q3	2014 Q4	2015 Q1
Intel	32nm Mk1	32nm Mk2	32nm Mk2	32nm Mk2	22nm Mk1	22nm Mk1	22nm Mk1	14nm Mk1	14nm Mk1	14nm Mk1	14nm Mk2?
ARM	28nm Mk1	28nm Mk1	28nm Mk2?	28nm Mk2?	28nm Mk2?	20nm Mk1	20nm Mk1	20nm Mk2?	20nm Mk2?	20nm Mk2?	12nm Mk1?

The table above summarizes the two roadmaps. "?" marks indicate process nodes or redesigns that I'm assuming will occur. Mk1 is an initial design on a process node and Mk2 is a redesign on a given process node. Comparing the roadmaps in the table above I expect the next couple of years to unfold as shown in the tables below.

Metric	2012 Q3	2012 Q4
Performance	ARM	Intel
Power	ARM	ARM
Cost	Intel	ARM/Intel

Metric	2013 Q1	2013 Q2	2013 Q3	2013 Q4
Performance	ARM/Intel	ARM/Intel	Intel	ARM/Intel
Power	ARM	ARM	ARM/Intel	ARM
Cost	Intel	Intel	Intel	ARM/Intel

Metric	2014 Q1	2014 Q2	2014 Q3	2014 Q4	2015 Q1
Performance	ARM/Intel	ARM/Intel	ARM/Intel	ARM/Intel	ARM/Intel
Power	ARM	ARM/Intel	ARM/Intel	ARM/Intel	ARM
Cost	ARM/Intel	Intel	Intel	Intel	ARM/Intel

Note that these tables compare estimates of Intel's offerings with the leading edge ARM products. When compared to ARM's older products, Intel may well have an advantage. I've also made no assumptions that foundries would have yield issues that would delay migration to a given process node, or any assumptions regarding inferior performance of foundry processes. I also assumed that Intel and ARM had an equivalent design frequency of 3 quarters with the exception of the 20nm node where I assumed 2 quarters for ARM. In short, I have tried not to bias my evaluation based on any assumptions of process or design superiority.

Examination of these tables shows that Intel will match ARM's leading edge performance and either hold the lead or exceed their performance by the end of this year. Intel will struggle to match the power efficiency of ARM until 2014 when both companies will maintain relative parity. The analysis I've performed above shows that Intel's real advantage here, and the thing they will have to leverage to gain traction in this market is cost.

Most analysts believe that Intel will not be willing to cut margins enough to be competitive on cost. However, I bring two counter arguments to the table. First, Intel's process lead gives them an inherent cost advantage. Second, I have heard Intel's Paul Otellini state that he expects SOC products to make up the majority of Intel's production on a volume basis, but not a cost basis on several occasions. To me this indicates that he realizes Intel will have to sacrifice some degree of margin on these products to be competitive. To offset this Intel will still have server and PC revenues to maintain their margins. As smartphone sales go up, so do server sales, and servers are Intel's highest margin chips. All these factors lead me to believe that before the end of 2014 Intel will be a major player in the smartphone market and will use cost as their primary advantage.

Intel's Achronix Strategy

There have been several reports recently on Intel's agreement to build FPGA's for Achronix on their upcoming 22nm technology. As far as I know this is a first for Intel. Not only are they building someone else's designs on an Intel process, but they are building those devices on Intel's leading edge technology.

Intel makes the most money off of their leading edge process. In recent presentations Intel has made a big deal out of how quickly they are ramping their newest process technologies. Faster ramps mean earlier crossover from the old technology to the new technology. Driving towards earlier crossover means higher profit margins and shorter time to repay the development and retooling costs associated with moving to a new process node. So I have to ask: Why would Intel sacrifice any of their early leading edge capacity for what is essentially foundry work?

The articles I've seen have suggested 2 reasons. The first is that Intel is looking to offset some of the R&D costs of process development. The second is that Intel wants to get back into the Field Programable Gate Area (FPGA) game.

In my opinion, the idea that Intel is looking to offset R&D costs with this move is absolute rubbish. Anyone that is willing to take an objective look at this would come to the same conclusion. Let me give an example to demonstrate why I don't think this line of speculation is worth the pixels it takes to print it.

Suppose I can sell a product for $100 and it costs me $50 to make. Let's also say the design work costs me $1000 up front. So if I sell 1000 units, I make $50000 minus the $1000 for design work. I net a total of $49000.

In the foundry model, I save the $1000 design cost up front, I still spend $50000 to make the 1000 units, but then I can't sell them to the customer for $49000 because they want to make a profit as well. Recouping their design costs isn't sufficient. So let's say I can sell them for 70% of their market value. That gives me $35000 in profit.

The model here is grossly oversimplified, but it illustrates the point. Building my own designs I make $49000, and building product as a foundry I make $35000. That means I'm making significantly less on the foundry product, and last I checked, making less isn't going to help offset my development costs. Instead of helping me, it reduces my margins and increases the time it is going to take me to recoup my R&D investment. Remember, we are talking about Intel's leading edge technology here, not trying to fill fabs running and old technology and keep them profitable longer.

The second theory is that Intel wants to get back into the FPGA game. Intel once had an FPGA program and sold it. In the EE Times article a spokesman for Achronix was quoted as saying:

"If Intel wanted to be in the FPGA business they would be already. They certainly have the cash."

And he is right. If all Intel wanted was to be in the FPGA business, they would simply buy Achronix or a similar company.

I believe the author of the EE Times article comes close to explaining what Intel is doing when the author says:

The relationship with Achronix could be a precursor to Intel eventually combining programmable logic with its Atom cores on the same die to create a new type of device. Earlier this year both Xilinx and Actel Corp. announced products that combined their programmable logic technology with hard ARM processor cores.

In my opinion the author of the EE Times article isn't looking far enough ahead to see what Intel is really looking to accomplish. While Intel may well want to create a new device that combines Atom and FPGA circuitry, I believe there is a much larger scope to this announcement. This move is really about Intel's Atom SOC strategy, not just FPGA devices.

In order to be a real player in the SOC space (smartphones, autotainment systems, etc.) Intel needs to develop a robust SOC capability they don't currently have. Up to this point the SOC designs that I've seem Intel previewing are all in-house Intel designs. But many of the players in the SOC space have their own proprietary designs they build around the central processing core. To make that happen, Intel needs to learn how to build external designs on the Intel process.

But my reading leads me to believe that Intel's design rules are fairly restrictive when compared to the traditional foundries. Since we are talking SOC's here Intel can't just tweak the process for an individual customer. The external designs have to work well with the same process Intel is using to manufacture Atom. In order to work effectively with customers in this new space, Intel needs to learn how to work in conjunction with external design teams to get the designs laid out in a way that will take advantage of Intel's process capabilities and yield well.

I believe the Achronix move is actually a first step in Intel's SOC strategy. A strategy that will allow Intel's customers to design their unique features around an Atom core to make a truly unique product. If this strategy proves successful, Intel and their partners will be able to offer a distinct product with clear differentiation in the market place. This is how Intel intends to differentiate future Atom products from competing ARM products.

Intel and AMD Report Record 1st Quarter Revenues

What a difference a year makes. The start of 2010 ended what can only be considered a disastrous 2009, not just for semi-conductors, but for the market as a whole as we begin to recover from the worst recession in over 80 years. It is clear that Uncle Ben Bernanke's 0% interest rates are fueling the next great bubble to replace the real estate bubble which Greenspan induced as a result of the Dot-com bubble. Where this bubble will go is anyone's guess (My bet is on T-Bills and the Federal Government's record deficits.) Meaning we are experiencing a nominal recovery of increased spending, as opposed to a real recovery on sound fundamentals, but I digress. Regardless of the cause of the increased demand, businesses are doing everything they can to soak up as much of it as they can and Intel and AMD are no exception.

Both companies reported record 1st Quarter revenues. Coming off such a dreadful 2009 makes this even more impressive. Whether this is a result of a strengthening technology sector, the release of new products or the unleashing of pent up demand from consumers and businesses from last year (perhaps a combination of all), this was a great quarter for both companies no matter how you slice it.

INTC


Great numbers and results all around for Intel. Gross margins continue to improve to mind boggling levels. At this rate Intel will post the largest yearly profit in history. A few things that stand out from the report, strong growth in nearly every sector except for Atoms which were down significantly. Despite Intel's assurances that Atoms and Notebooks did not cannibalize each others sales, I can't help but see a correlation with last quarters drop in Atom sales with that of record mobile chip shipments. Whether this was "good" or not is hard to tell since both products are profitable, but it's a great hedge strategy for all market conditions. Outside of normal growth and expansion, the Atom's make for a great value segment in down markets and Notebooks are the perfect product for booms. Either way, Intel can take market share.

We also saw the release of Nehalem-EX for the MP server segment which replaces the much maligned Dunnington platform for a true competitor in this space to take on AMD in this segment in a way that has been lacking for some time. It may not have made a large impact on financials due to its late release in the quarter, but chips were shipped for revenue. In the mobile space, we saw the release of the Westmere family chip Clarkdale which likely drove the strong increase in mobile sales. Also, the conference call noted that OEM inventories were normal but Intel inventories were lean. Indicating the upside of last quarter was above Intel's internal estimations.

AMD


Gross margins are up to a healthy 47%, operational profits are reported at a strong $182M and a net profit of $257M. Considering this was a "seasonally down" Q1 makes this even more impressive. The only caveat is the inclusion of a $325M non-cash assessment due to "deconsolidation" with Global Foundries. Excluding this one-time gain will bring AMD's net profit to a narrow loss for the quarter. Which means they essentially broke even. If the market continues to improve, it's likely that AMD could even report a net profit for the calendar year in spite of one-time accounting tricks. Not only were CPU shipments strong, but GPU shipments increased sequentially due to a strong ATI lineup.

AMD didn't sit idly by with old products going into the new year. We saw the much anticipated release of Magny-Cours, the MCM 12-core server chip (2 x 6 core) to compete in the EP space which Gulftown had taken by storm. We also so a flurry of higher binned Phenom II's giving AMD a strong lineup in the mainstream segment. Overall, a very good quarter with the signs of finally breaking out of the continual slump of heavy losses.

ARM vs Atom: Intel's Newest Challenge

The ARM architecture offers several advantages when compared to Atom.

ARM has smaller die sizes than the Atom processors which gives ARM a cost advantage. Having been designed for use in space sensitive environments, the ARM core is smaller than the Atom equivalent. This is the case even though Atom is being manufactured on a more advanced process than most of the current ARM designs.

In addition, ARM is more highly integrated than Atom. Almost all ARM products for use in the mobile space are single chip SOC solutions. This offers a substantial size advantage over the current Atom solution which requires three chips and the upcoming solution (Moorestown) that is still a two chip solution. Atom won't offer a single chip solution prior to the advent of Medfield sometime in 2011. So Atom won't be able to match ARM for solution size or integration until somewhere between 1 and 2 years from now.

But the biggest advantage ARM holds right now is in power efficiency. Qualcom's Snapdragon processor is the poster child for ARMs high performance processors, so I'll use that as a reference point. The Snapdragon processor is reported to use 250-500mW under load at 10mW at idle. Atom's Moorestown, due out later this year, should use ~1000-750mW under load and ~35mW at idle. So ARM offers about a 2-3X power efficiency advantage over the Atom platform.

With all these disadvantages, one wonders what Atom can bring to the table.

First and foremost is sheer processing power. If you look at Intel's marketing around the LG GW990 from CES, you will see an emphasis on multi-tasking. ARM is closing the gap on responsiveness on single apps, but the x86 architecture that Atom is based on still seems to have more horsepower and allows you to do more things at once.

Another big advantage that Atom currently enjoys is the ability to run flash applications. However, Adobe is reportedly working with ARM to enable their processor designs to run flash applications. So this advantage is going to be short lived. It has helped Atom become the dominant netbook processor but it will not continue to drive future growth.

The last advantage that the Atom brings to the table is the ability to run Windows. By being able to run Windows, Atom brings a large software infrastructure to the table for any device it is installed on. But this advantage isn’t quite as big as it might seem at first glance.

The Atom processor was designed to be a “good enough” processor for basic PC tasks like browsing the internet, viewing video, etc. But it lacks the power to run large applications well. So while Atom may be capable of running x86 applications, the experience with many of them is poor. If the software doesn’t run well it is not much better than not running at all.

The use of Atom in small form factors further offsets the advantage of using existing software. Many of the current applications don’t fit these small form factors very well. This can be fixed, but requires that the code be modified to correct the problem. Having to modify the code for this purpose nullifies much of the advantage of being able to use the existing software.

Intel’s marketing along the software lines seems to have matured beyond the idea of basic software compatibility of late. They are placing a greater emphasis on cross platform portability. I believe that this is a more realistic assessment of the x86 advantage than focusing on the software because it focuses on one of the few real weaknesses of the ARM architecture.

ARM doesn’t manufacture chips, it sells licenses to use its architecture. Each licensee is free to modify the basic design to suit the licensee’s needs. This results in an ecosystem where the various implementations from different vendors may not be compatible with each other even though they are based on the same core architecture.

Systems built around the x86 architecture bring the guarantee of cross system compatibility. Not in the sense that you can move the software directly, but rather in the ability to link the systems together and transfer data between them. So by choosing Atom, you know you are choosing a device that will work and play well with your other devices.

In summary, ARM and Atom are rapidly converging to similar levels of computing power and energy efficiency. Within a few years I believe there will only be one key differentiator between the two architectures. The differentiator will be the ease with which you can move data between your various computing applications.

Due to the homogenous nature of the hardware infrastructure Intel is building I believe this gives them a substantial advantage. However, there is still a need for urgency on Intel’s part. If ARM becomes the entrenched incumbent architecture in this new space, it will take far longer for Intel to move Atom down into the smaller devices. I believe the x86 architecture, warts and all, will become the dominant architecture in personal computing devices. But if Intel doesn’t move quickly enough they will miss the initial growth curve and the resulting profits that come from riding that curve.

Edit: Cleaned up the spacing

Intel and AMD bury the hatchet in Anti-Trust case for $1.25B

After decades of market wrangling and years of legal complaints, AMD and Intel have settled on their long standing dispute of Intel's alleged anti-competitive practices against AMD. In accordance with the settlement, all patent disputes are resolved and AMD will withdraw all legal complaints worldwide. In addition to this, the cross-license agreement has been extended for another 5 years. In the aftermath of this historic settlement between the two largest chip-makers, there will likely be many who cry foul or vindication and the flames on forum's will reach far and wide.

We don't know the exact reason's why Intel settled now, or what the long term ramifications will be for either company, but suffice it to say, this long and storied chapter is now closed. AMD may have come away with a victory, but what about consumers and OEM's, did they gain anything from this? How about the semi-conductor industry?

The legal battles and anti-trust complaints stem from the notion that Intel is a "monopoly" and has used its position to push AMD out of the market and in the process hurt AMD and consumers. The specific complaints are against the use of discounts or rebates that Intel would pay to OEM's if they agreed to use Intel chips exclusively or at some percentage of volume. The logic goes, that Intel was able to use a dominant position and essentially "pay" companies not to use AMD chips. This is claimed to not only directly hurt AMD, but the entire market. As a result, OEM's and consumer's now have "less choice" and this will ultimately result in less competition.

Not only is this analysis short-sighted, it is missing the bigger picture of the market as a whole and will ultimately result in hurting the semi-conductor market and consumers. Despite the fact that AMD actually sold everything it made during the time Intel was allegedly committing anti-competitive behavior, there is very little evidence that consumers were ever unable to buy AMD chips. The fact that Intel was able to offer rebates and discounts to OEM's and remain incredibly profitable only speak to the efficiencies of Intel's capital structure which resulted in lower prices for OEM's and consumer's. The fact that AMD was unable to offer discounts and under bid Intel for business shows that the problem is not with Intel being Anti-competitive, but AMD being uncompetitive in the market. AMD was unable to undercut Intel's prices because they had a less efficient capital structure and were unable to profitably sell chips at those level's. In a free market, the incentive is for AMD to improve efficiencies and eliminate waste such that they can compete.

Next, Is Intel really a monopoly? It is important that we distinguish between a legal monopoly and an economic monopoly. A legal monopoly is one that is granted by the state which allows a company to be a single supplier of a good at the expense of all others (i.e. utility companies etc.). An economic monopoly occurs when a company emerges as a single source supplier by being the most efficient (poorly run companies went bankrupt) or consumer preference chose a single entity in the market. Is Intel a legal monopoly? Yes and No. The patent system is a de facto monopoly system where a company is granted a legal monopoly over an idea. Intel is technically a legal monopoly on the x86 IP and other things like chipset busses and other misc items. When Nvidia complains about Intel refusing to grant them a bus license for QPI, the argument for anti-competitive behavior has some merit. However, in the case of Intel vs AMD, the government has brokered a cross-licensing agreement for all IP and they are essentially in a quasi-free market situation. So in this respect, Intel is NOT a legal monopoly. However, Intel is arguably an economic monopoly which is why the government steps in.

Ironically, The government has very little problem with anti-competitive behavior when Intel prevents Nvidia from creating Nehalem chipsets because they were complicit in the arrangement of the monopoly and license. However, it appears they do have a problem with Intel becoming an economic monopoly because that was chosen by the market, ergo, the government didn't have any control in the situation, and therefore, must punish everyone involved.

Finally, the least realized aspect of harm is the fact that billions of dollars in capital have essentially been flushed down the toilet. How you may ask? Through a combination of fines from the EU and this settlement, over $2.5B in capital have been moved from wealth generating activities to wealth destroying activities. In a free market that is removed from coercion and government intervention, a profit occurs when you create a product that is worth more than the sum of all resources put into creating it. When this occurs, your reward for using resources effectively is a profit. On the other hand, when you are wasteful and inefficient and create a product that is worth less than the sum of all resources put into it, your punishment is a loss. In this respect, we have moved over $2.5B from one of the largest wealth generating companies in the world and blown it on boondoggles and social programs in the EU and given a handout to AMD which is nothing more than corporate welfare for a company that has a record of destroying wealth to the tune of ($7.2B) in retained earnings over the course of its lifetime.

To sum this post up, has the market benefited from the anti-trust activities against Intel. Most likely not, although AMD could surpise us with a remarkable turn around, but unfortunately that is still speculation. On the other hand, what we do know is that Intel has suffered much harm in all of this at the hand of the legal system so as of now, we can only say that a net harm has occured in the market and it's unknown how that will affect consumer's in the future.

"At heart, we're a reverse engineering design company" - AMD

"Advanced Micro Devices Inc closed a deal to spin off its manufacturing operations on Monday, and said it expects the new company to assume responsibility for paying off about $1.1 billion of debt.
The plants which make AMD's chips are now part of a $5 billion joint venture with Advanced Technology Investment Co, of Abu Dhabi, temporarily called The Foundry Co." - Reuters

In a very creative way, AMD has ridden itself of its crippling debt and the massive burden of capital investment going forward. While AMD may sound as if this strategic move brings them closer to their core expertise, it is without a doubt that this back-to-the-corner decision was the only way for AMD to remain viable. This new lease allows AMD, maybe for a few more product lifecycles to continue and remain as the only challenger to Intel.

At the bleeding edge of semiconductor technology, it has yet to be seen whether a fabless company can challenge one with a foundry. In the not so bleeding edge such as memory products companies with their own foundry like Samsung are dominating over the rest of the industry but competition remains vibrant. But in the x86 space where process leadership creates cost and performance advantages, history isn't kind to fabless companies. Starting this week, AMD is effectively what Transmeta was back in 2000. The difference is Transmeta had a lot of hype going for them and probably with a more compelling product offering in the mobile space.

Another wider-than-expected loss for AMD

SAN FRANCISCO (Reuters) - PC chipmaker Advanced Micro Devices (AMD.N) posted a wider-than-expected loss in the fourth quarter as worldwide demand for PCs continued to shrink.
AMD reported on Thursday a net loss of $1.42 billion, or $2.34 a share for the quarter ending December 27, compared with a loss of $1.77 billion, or $3.06 a share, a year ago. Excluding certain items, the company posted a loss of 69 cents a share. Analysts, on average, had expected a loss of 56 cents a share, according to Reuters Estimates.
Revenue for the second-largest maker of central processing units for personal computers fell 33 percent to $1.16 billion, compared to analysts' estimates of $1.19 billion, according to Reuters Estimates. AMD said it expected revenue in the first quarter to decrease from the fourth quarter.

If AMD never made money during the best market condition, what hope is there when the economy is at its worst. For the first time the talk of bankruptcy for this company can never be more serious. Looking at the bright side of things, the Zoners could finally get a life.