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January 13, 2011

Chipmakers Churn

Michael Feldman

This week’s maneuverings by Intel and AMD point to a couple of inescapable realities for the legacy x86 chipmakers, namely, mobile computing platforms are the new PCs and serious GPU technology is no longer optional. In short, the playing field for general-purpose computing is being leveled, and this relandscaping is working to the detriment of the x86 dynasty.

That realization appears, at least in part, to have encouraged Intel to agree to a new six-year cross-licensing deal with NVIDIA. The lawsuit settlement between the two chipmakers announced on Monday puts the rivals back on speaking terms. It also puts an extra $1.5 billion in NVIDIA’s pocket, the amount Intel has agreed to pay the GPU maker over the next five years.

Given Intel’s lack of a mobile computing presence on smart phones or tablets, and the fact that the Larrabee fiasco essentially foreclosed the company’s visual computing aspirations, Intel probably didn’t have much of a choice. NVIDIA, who offers viable technologies in both the mobile computing space, with Tegra, and the graphics/visualization space with its discrete GPU offerings, has managed to expand into two areas Intel deems critical to its future.

In a nutshell, the agreement provides cross-licensing access to each other’s patents. However, it’s not a license to repurpose one another’s chip designs; rather its an understanding not to sue each other when they bump up against their competitor’s patents. This is important because both NVIDIA and Intel own rich patent portfolios that apply to many areas of computing. Without such an understanding, it’s nearly impossible for engineers to design anything without inadvertently stepping into someone else’s territory. It gives both parties the freedom to build CPUs, GPUs, and everything in between without having to worry about who came up with the original ideas.

The agreement explicitly prevents NVIDIA from licensing Intel’s x86 cores, flash memory, and certain chipsets. But since NVIDIA just revealed its ARM-based “Project Denver” strategy for CPU-GPU integration last week, that doesn’t seem nearly the sacrifice it once might have been. Furthermore, NVIDIA has decided to exit the chipset business, so there was no reason to include those terms in the new agreement.

On the other side, Intel will not be slapping NVIDIA GPUs onto x86 chips. The CPU maker has had access to NVIDIA’s GPU portfolio since 2004, the year the original six-year cross-licensing agreement was made, but they don’t get to see the patents until about three and a half years after they’ve been filed. (This is very different from what NVIDIA is doing with its ARM core license deal. Under that agreement, the GPU maker will be provided with the netlist, the IC floorplan, and support — everything it will need to develop its CPU-GPU heterogeneous processors.) It’s unclear how Intel will use the new cross-licensing arrangement to move forward in the graphics/visualization space, but it certainly has more latitude to develop and use GPU technology than it otherwise would have had.

The fact that the transfer of wealth is going in NVIDIA’s favor indicates Intel needs the GPU maker’s intellectual property far more than the other way around. NVIDIA’s patents in mobile, graphics/visualization, and data parallel computing technologies are especially valuable, whereas Intel’s x86-based patents are of much less value to a fully-ARMed NVIDIA.

While this is great news for NVIDIA, and at least good news for Intel, it’s bad news for AMD. With Intel freer to use its considerable resources to pursue graphics and mobile technologies, AMD could face increased competition, especially on the GPU side of the house. And since NVIDIA is pursuing a very Fusion-like heterogenous computing strategy with Project Denver (and now has more patent leeway to design such chips), AMD is going to be hit harder from both directions.

It’s almost certainly a coincidence that the “resignation” of AMD CEO Dirk Meyer was announced on the same day the NVIDIA-Intel agreement was revealed. But according to many who cover the mainstream computing segment, Meyer was forced out by the board for some of the same troubles that are plaguing Intel, namely a lack of product in the red-hot tablet and smartphone segments. Like its larger rival, AMD has been heavily focused on the PC and laptop space and is a late entrant into the mobile computing market.

In a GigaOM piece this week, Stacey Higginbotham writes:

[Intel] has revised its architecture for better graphics performance with its Sandy Bridge platform and isn’t sleeping like AMD seems to have been when it comes to the threat to its business from ARM and mobile computing. On that note, AMD’s CEO Dirk Meyer resigned today, most likely as a result of AMD’s failure to move quickly a few years back into the mobile computing and now the tablet market. Even as recently as last June, AMD had no mobile story, with executive Rick Bergman telling me at our Structure conference that AMD doesn’t have “any immediate clients to serve the mobile form factor,” but that it planned to move forward on that.

Apparently though, Meyer was also blamed for losing market share in its server business. The Opteron, once the darling of server makers, has been steadily losing ground to Xeon, thanks to a rearchitected CPU, beginning with Intel’s Nehalem generation. Even though the company essentially invented 64-bit x86 computing, AMD never fully managed to capitalize on that accomplishment.

To blame Meyer for all this seems a little silly, though. AMD’s fortunes have been tied to its volume CPU and future volume CPU-GPU Fusion business for some time, certainly before Meyer took over the reins from former CEO Hector Ruiz in 2008. More than anything else, the company’s declining share in the server space was a result of Intel adopting features from AMD’s superior architecture.

It’s even more problematic to point to Meyer for AMD’s poor showing in the mobile space. Even Intel, with much larger R&D resources, has not managed to crack this market yet. The fact the x86 architecture is not particularly competitive with say an ARM, or even a MIPs architecture for low-power mobile and embedded platforms doesn’t help. And in any case, the software ecosystem in this segment now favors ARM over any would-be competitors.

Thomas Seifert, AMD’s chief financial officer and senior VP, has been appointed interim CEO, but the long term plan is to fill the role with someone more visionary and dynamic than either Meyer or Ruiz. Given the company’s dependence on x86 and its somewhat fragmented product set — CPUs (client and server), CPU-GPU Fusion processors, and discrete GPUs — it remains to be seen whether a new face at the top will have much effect.

The chipmaker churn we’ve witnessed over the past couple of weeks reminds us that there’s a new dynamic at work. Gone are the days when the x86 dictates everything in mainstream computing. The rise of mobile computing, the spread of graphics processor technology, and the importance of power efficiency are realigning the industry and shifting alliances. And this is likely just the beginning.

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