Jon Peddie Editorials

AS CES goeth, so goeth the industry

2012-02-03T19:51:46Z

For those of you who went to CES this year, you should have recovered by now. And if you suffered through 2011, you should be seeing some little rays of sunshine and hope for the on-coming year. And if you accept my premise about CES being a leading indicator, then you should feel pretty good about 2012.

I first proposed CES as a leading indicator about eight or nine years ago. If you look at the following chart which covers the past ten years you can see definite correlations.

What I think the data really represents is the manufacturers and dealers long-range vision, and the adjustment they make (on costs) in anticipation of it. I think the suppliers to the CE industry see order rates dropping and then cut back on expenses. That cause fewer people to go to conferences, and when the picture looks brighter, they want to be at the head of the pack and rush back to CES. Also, the suppliers will typically do massive product rework and development during the down times so they will be in a position to capitalize on the upswing—and what better place to show your stuff than at CES.

However, we may have a natural barrier, just like the one we may be facing with Moore’s Law. As extraordinary as Las Vegas is, it does have an entropic limit and can’t expand forever (although there is still lot empty lots in the town.) There were one hundred and fifty-three thousand people squeezed into the taxi queues, restaurants, and hotels, and they were all very hard to avoid if you were trying to get from point A to B. The monorail was jammed packed, the buses had lines that extended the length of the Convention Center, and if you didn’t make a reservation at a restaurant long ago, it’s a the hotel or a big Mac for you.

CES is ridiculously large, and difficult to navigate. The booth addressing system is absurd and illogical, and the whole experience is unpleasant. That pain and suffering is offset by the surprises that can be found there, the opportunity to see clients you haven’t touched for a few months, and the stories. In general, the keynotes are a total waste of time, especially since you can watch them on YouTube almost in real time.

It’s a mixed message of a show. There are technology companies like ARM, Imagination, MIPS, and Vivante selling to component builders like Freescale, Intel, Nvidia, and Qualcomm, who in turn are trying to sell to device builders like HTC, LG, Motorola, and Sony, who are trying to sell to dealers and distributors like BillyJoe’s TV Shoppee and Best Buy. But BillyJoe wanders into Nvidia’s stand, and Qualcomm wanders into Best Buy, and others just wander, often in a circle trying to figure it all out.

It is in every sense of the word a bazaar, and with almost the same degree of organization as the Grand Bazaar in Istanbul—spices in one section, leather goods over there, rugs to the left.

CES needs to be broken up. The exhibitors would appreciate it, the city’s infrastructure would appreciate it, the attendees would appreciate it, and the city’s taxes and retail turn-over would be greater.

If CES Auto was one day and it was one I missed, how would that impact me? Not a bit. And if it was important for me to see cars with seven 20-inch woofers and chrome plated DVD players, then I’d do that. Do I really need to see iPod covers, stainless steel microphones (one can only wonder why they are needed), or whatever those things over in the corner of the north hall are?

And then there is the rat population consideration—at a critical density, wars break out among rats. Are a bunch of stressed out, hung over, trade show delegates that different?

It is possible density-dependent checks on population growth through intraspecific competition will not only reduce the number exhibitors to CES, but that as in most populations when intraspecific competition manifests, the population never recovers to its original size. Anyone remember Comdex? Anyone miss it?

So CES should head off this catastrophe and divide and conquer. Multiple smaller CES’s would be much more profitable for CEA, Las Vegas, and the exhibitors. The taxi drivers and restaurant help would like it too.

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The morning after pill

2012-01-12T15:31:59Z

Did you ever wake up the morning after having had too much fun the night before and wonder if anyone got the license plate of the truck that ran over you? Everyone has, even if they won’t admit it.

Well 2011 was like that for a lot of folks. After the melt down in 2009, 2011 was a lot like stone skipping only to end up with a deadening and disappointing plop. I haven’t heard anyone say they’ll miss it.

It’s been wose than partying all year and then having to pay the piper. Instead, it was a kind of okay year until it wasn’t and we still get the hangover.

The good news? Well, growth managed to stay positive, even if only low single digit.

In other news, Disk drives took a dive; they got soaked in the Indonsian floods, and that had a ripple effect. Flash drives, the obvious replacement choice, are still too expensive and there’s not enough supply to fill the spinner’s void.

Major new GPU releases were also kind of MIA, with no major announcements, and the ones that get introduced got a ho-hum reception from stressed-out and consumption-weary buyers. Even if the disk supply chain hadn’t dried up, or rather gotten soaked, and the processors were just more of the same, it’s unlikely the consumers or enterprise were going to go on a spending spree. There was just too much depressing news about the economy worldwide.

Who can get enthusiastic about a new 60-inch 3D TV with that kind of a background? Certainly not investors or VCs. The IPO market all but vanished in 2011, and share prices on the established companies got whip-sawed by panic from the European crises compounded by too few traders using too many computers to make trades that kept the stock market on a roller coaster ride.

And now it’s the morning of 2012. The stock market is up. CES is in full swing, and folks in general seem in good, if shaken spirits. There were some hard lessons learned in 2011. For one thing the vulnerability of concentrated sources in the supply chain has been exposed (again), as the Foxcon fire and the Earthquake/Tsunami in Japan did before.

Manufacturers are taking a hard look at their supply lines. Especially manufacturers in Japan. This isn’t the first time natural disasters have affected Japan’s plants.

On the other hand, in some markets there might be a lot of talk and no real change. The capital investment needed for some kinds of manufacturing can be pretty challenging. Those who would stop up have to meet the volume demands and that takes money. Unfortunately, the capital markets are in the bomb shelters right now. They don’t know what to do. In many cases, they’re not doing anything. Since no second source mega-sized suppliers are going to show up in the near future, manufacturers will just tip-toe around this issue and pretend it didn’t happen—you know, morning after behavior.

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What the industry needs is a morning after pill. The over dependency on New and Improved needs to be thought out ... again. The ridiculous bragging about Brazil and China’s explosive growth needs to be tempered with reality—they’re still not big enough to replace the loss of the US or Europe as growth markets. But you know how it is when you’ve had one too many: reason and fear fade away and bravado takes hold—you think you’re better than you are. And then either someone shows you you’re not, or you wake up and say, what the hell was I thinking of?

In 2011 we weren’t as smart, powerful, fast, or clever as we thought we were or could be.

Now we move into 2012 and Ultrabooks, smartphones, and tablets are our new shiny things. The things that will inject adrenaline into the industry, wake up the consumers, and maybe even cause the overly cautious enterprise to buy something other than servers and talk about the cloud. Not likely, but we can hope.

I’m looking forward to NFC and never having to put a card into a turnstile, or an ATM—“It’s me, don’t you recognize me? Don’t make me take out my wallet you stupid machine.”

Everyone knows I’m really looking forward to S3D. I may never leave home again.

And, as you read in this issue, we’ve been having a lot of fun playing with our new toys.

So the morning after has promise, as all mornings usually do. Let’s celebrate the new year, CES, and the splendors’ of the modern age.

Happy New Year!

The Last Editorial of 2011

2011-12-27T20:42:11Z

It’s been quite a year for all the computer segments from mobile phones and tablets to game consoles, PCs, servers, and supercomputers. Mobile phones with two and four cores running at a GHz or higher were introduced during the year, tablets and phones got thinner, phones got bigger and they got higher resolution displays and full HD capability. Game consoles got S3D, and PCs got thin and light notebooks, all-in-one desktops and killer powerful game machines. Servers got four to sixteen core processors, GPU-compute sub-systems, and Japan’s K Computer hit 10.5 PetaFLOPS and Oak Ridge said their Titan will exceed 20 petaflops, maybe even hit 30 putting exaFLOPS in the sights of super computer builders.

AMD introduced the A8 APU, ARM rolled out the Mali T658 GPU and unveiled its 64bit architecture V8, Freescale showed the iMX6, Intel started shipping Medfield and Oaktrail and introduced Tri-gate at 22nm, Nvidia introduced Kal-El, said they’d develop an ARM based server chip named after the mile high city and would build an SoC with a modem in it, Qualcomm brought the A-series Snapdragons, while Samsung announced the Exynos processor.

Other highlights of the year

DMP went public.

HP went nuts, got in and then out of the tablet market, got out and back in the PC market, hired fired and hired a CEO.

Lenovo went to Germany and bought electronics retailer Medion AG and soared to number two in market share.

Nvidia went to the UK and bought modem designer Icera.

Qualcomm went straight up and climbed to number one in market share while TI slipped badly.

Nokia and RIM went down down down and almost ran out of bullets shooting themselves in the foot. RIM was declared the winner managing to shoot off all its toes.

Intel got jilted by Nokia who thought Microsoft was prettier—and richer.

In a bodacious move Google acquires Motorola.

Khronos introduced WebGL only to have Apple and others tell them to go away we’ll use HTML5 if you don’t mind.

HTC gets bitch slapped by Apple and buys Dashwire and S3 to protect itself. Judge doesn’t buy it—fail.

Apple sucker punches Samsung shutting down its export machine.

Intel and Logitech quit GoogleTV and look for new adventures.

What a year

Are we finished yet? 2011 was a test like no other year with the possible exception of 2009—and yeah they most certainly are related.

The stock market, highly manipulated by computer trading and clever algorithms (from the same folks who brought us the recession) has swung up and down daily on news from Europe or the US’s do nothing but backbite Congress, impacting 401s and consumer’s sense of security. You can’t get out of a recession in the US without the consumer buying engine, and they’re not going to start maxing out their credit cards until the roller coaster rides stop. Magic won’t happen at the click of midnight no matter what time zone you’re in. But at least you’ll be able to laugh, have a drink, and be happy for a little while.

Happy holidays and hopefully happy New Year

What’cha get me for Christmas?

2011-12-11T17:34:24Z

In the US there is a shark-like feeding frenzy just after our stuff-yourself-till-you-bust national holiday to celebrate the pagan Indians teaching the Protestants how to grow corn. They were thankful for the lesson and so they declared the day Thanksgiving, a holiday, they ate the corn, and as fable has it, wild turkey. That was before Best-buy, Costco, and Walmart. For reasons unknown the day of shop-till-you-drop has been named Black Friday and is the leading indicator of the holiday shopping volume. Holiday shopping in the US accounts for about 40% of a retailers annual sales, and so if its flat or down (relative to the previous year) it’s considered a disaster, and Chicken Little comes running out of the accounting rooms of all the major chains. The always-clever stock market dumps all the shares of retailers and their suppliers and starts investing in derivatives because they understand those things.

Being out of work, or worried about the possibility of losing your job tends to kill the frenzied shopping mood, and so the bonus driven market watchers had their telescopes tightly focused on front doors of the retailers looking for people coming out carry stuff. They were relieved when they saw 60-inch HDTVs in shopping carts, piles of stuffed animals, Xboxes, and coffee makers. The holiday shopping madness was going to be good, the consumers, even those without jobs, were back buying stuff they didn’t need with money they didn’t have—we’re saved.

Also in those shopping carts were tablets, big ones little ones, some as small as a phones—wait, those were phones. Life in the US is tough. With an economy based on consumer consumption, little to no manufacturing base, and giant corporate farms we’re fragile. We’re controlled by the consumer, and she can be a fickle master.

But not to worry–she likes tablets, and always has liked mobile phones, the smarter the better. It used to be automobiles were the big consumer item in the US; not any more. TVs had the crown for a while, quite a while. And PCs were always a favorite. But tablets, in the era of Facebook and YouTube, boy oh boy what a delicious treat that is.

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So you can expect to see lots of tablets under the Christmas tree this year. And they will be well received and welcome. This isn’t that stupid looking coat your husband/wife/mom bought for you, or that indescribable fruits/meat dish wrapped in holly with gingersnaps on the outside. Nosiree, this something you want.

Here’s a prediction, on Christmas day in the US the 3G network is taken to its knees as everyone sends and receives gizillions of megabytes of video to each other, or watches football games or American Idol on their new tablets.

The Grinch that stole Christmas got chased out of town by the tablet that won the west, east, north and south. And think of those unfortunate ones who don’t get a tablet for Christmas, either given to them by a loved one or given to them by themselves. Think how disappointed they’re going to be. Think how envious they’re going to be when they go visit or friends come over and show off their new tablets. What could you show and tell about to match it? Your new sweater, the chrome-plated weenie roaster, or the 26-piece tool set you got? Nope, just doesn’t stand up to a tablet.

But you’ll show ‘em. Next year you’ll get a tablet that does 3D, AR, VR, and drives your car. Then who will have the last laugh?

Sometimes a tablet is just a tablet

2011-11-18T19:34:32Z

In the past month and half we have visited three major CAD company conferences in various parts of the world, plus a dozen clients and you want to know what we found? Tablets. Mostly iPads but that’s only because it was the only choice when these companies and clients took it up.

All the execs had one (except the CEO of course because as everyone knows CEOs don’t do any real work). The tablets were being used to show design concepts, power point presentations, photos, and AR. Audience members were even using them as cameras.

In the not too distant past, these activities would have been done on a laptop—a notebook. Does the similarity in names—notebook, tablet, strike you as a coincidence or logical progression of a metaphor?

The electronic tablets have for the purpose of presentations replaced the computer notebooks. And both of those electronic devices are replacements for the paper tablet and notebook.

A tablet pad is a natural thing to write and draw on, and to use to show people what you’ve drawn. But it’s static and not easily transferable except through a Fax or FedEx. Paper tablets are thin and light weight, so are electronic tablets. Paper tablets let you draw on them, and so do electronic tablets.

There has been an unusual amount of skepticism and denouncing of tablets by the analyst community, and logically the PC makers who don’t have one. They have sought to pigeon-hole the electronic tablet as a consumption (only) or “media” tablet. A lot of the press has echoed that canard hoping to look smart and offer critical assessment. Reminds me of when I was a kid and the smart people were saying, color TV will never catch on, too expensive, too unnatural looking.

The smart people today are trying to prove that one wouldn’t be able to, or want to do “real” work on a tablet. Well I wouldn’t want to work on the Market Watch spreadsheet on a tablet, but I could do it, I’d just have to scroll a lot. Kathleen Maher regularly writes essays and major portions of TechWatch on a tablet while in an airplane or airport; she seems to do just fine creating content on a tablet. She’s adapted.

It doesn’t have to be a computer

Probably the biggest problem people have with appreciating the tablet is they are trying to make it into a computer. Someone has said that if you want to make something new acceptable, you have to make it look like something old. The problem most critics of tablets have is they are trying to make the tablet be like a computer, whereas it’s really like a tablet—a paper tablet. It doesn’t have to be a “real computer,” it’s the next generation of things, a new thing.

So the CAD companies, and the PR people, and the designers, and the 20-somethings got it right away and accepted the new tablet as it is. Tablet users averaged 30 percent more viewing time per session compared with desktops, according to data released last week by Ooyala. So yes it is a consumption device, but users are consuming far more on it than they ever did on a PC. How many times have you heard someone say, I don’t want to watch a movie on my PC. Of course those people never rode on an airplane flight longer than two hours, or if they did they were asleep and failed to notice all the people watching movies on their PCs, and now tablets.

This however scares the pants off the PC suppliers. Apple was cute and expensive and not a threat. But now, this tablet thing, it’s upsetting everyone’s spreadsheet and really disturbing the supply chain and all those hedge fund managers who used it to pick stocks.

Embrace the new—exploit it

Kindle isn’t trying to make the Fire into a computer. It’s a vehicle for Amazon’s content. Google’s Chromebook has basically failed just as the Smartbook, and Netbook did. Why? No one wants half a computer no matter how cheap it is. HP missed that point with their Slate – we don’t want a computer with a touch screen, we want a real computer AND a tablet. Tablets are only cannibals of ill-conceived PCs, not real PCs. If the PC market’s growth was based on shoving low cost and low performance machines down the consumer’s throat the PC suppliers made a bad call—the consumers don’t want them.

If the PC suppliers try to make a tablet that is a low cost PC with a touch screen and an app store it won’t work. That’s missing the point. Tablets are good at being a tablet. And one day, not too far away, we’ll walk into a lobby, and on the wall in a frame will be THE IDEA that started the company, but it will be on a tablet not a cocktail napkin.

Sometimes a tablet is just a tablet – Sigmund Freud

Of forecasts and thinking about Steve

2011-11-04T01:19:08Z

We’ve just finished a round of reports, our semiconductor quarter shipments and forecast report Market Watch, our quarterly AIB shipments and forecast report, the mobile devices report, and the HPU/EPG report and forecast.

Forecasting is a tricky business and even though we’ve been at it longer than most, it never gets easy, and it’s always scary. We had some brilliant seminal moments where we called the future correctly and one or two where we missed it. Thinking about the future and what trend might happen next, or what technology will come next got me thinking about Steve Jobs.

The future is right out there…

Jobs has done something for the industry and maybe humanity that I think has gone un-praised and maybe recognized—he got us to look out, to dream, and to expect excellence, maybe demand it. So I’m looking into my crystal ball and trying to figure out how much of an impact tablets and ultrabooks will have on our industry, as well as what else might evolve or be inspired by them. Jobs of course is responsible for both, first with the ultra-thin, ultra-light Air and then with the iPad. But it wasn’t just a thin & light notebook, or just a tablet, the Air and iPad were (and are) devices with style, charm, and a new user paradigm—we think differently about those devices than we did about their predecessors, and, we think and react to whole world differently because of them. In the last year, post iPod/iPad, what screen in your life have you not tried to interact with by touching it—regardless if it is a touch-screen or not?

Prior to Apple’s renaissance Sony was the trend and style setter. When we wanted Avant-garde products we looked to, or waited for Sony. Sony had no peers or even imitators that came close. Apple took the crown from Sony but instead of being just an Avant-garde product supplier, it became the model, the company every other company wanted to be. And so as quickly as their designers, engineers, and budgets would allow them, other companies began copying Apple, as best as they could. And that is Job’s unwitting gift. By delighting and exciting the consumers, Apple has raised the bar for product innovation and consumer expectation. And that makes forecasting even harder.

Will tablets cannibalize PCs, or will they expand the market. Yes and yes. But more importantly how and why? What new uses and users will there be for tablets, and when? What new form factor device will spring out of the imagination of some designer or engineer because of their experience with a tablet, smartphone, or ultrabook? What will come out of it, “Gee, you know if I could only…” And bam—a new product idea, category and maybe an industry may pop up.

You know you can’t see the future in the rearview mirror, and even that cliché is a forecast of a kind—“rearview mirrors” are going to disappear from automobiles, trucks and buses in the next couple of years and be replaced by cameras and screens with better visibility and even the ability to see things in the dark. And GPUs will power them and their screens. And not only will they see, they will remember like a DVR, a kind of trip recorder, which of course will feed the car’s journey to the web and cloud for traffic control, accident prevention, and forensics.

And what if your smrtphone and/or tablet, or Ultrabooks did the same thing? What if the devices you carry which have cameras, and mass storage, and always on web connections, and GPS, and gyros, and long batter life, recorded your life, storing it in the cloud. Think how many arguments you might win when you say, “You did too say that—here, let me prove it…” Think of the effect of an alibi in a crime case. Imagine that law enforcement one day requires you to have a personal recorder. Imagine your great grandchildren looking at you when you were their age, and then one day it’s in stereovision too.

Seem like a big leap to go from lebity-leben discrete GPUs shipped in Q3 to a personal recorder in stereovision that the police require you to carry just like a driver’s license? Not when you’re trying to forecast the future it isn’t.

It’s the future, it’s right out there…

Batteries are my best friend

2011-10-27T17:10:51Z

I have referred to the smart phone as a PC—personal companion. But now have expand that title to include the tablet, it too is a PC. So, maybe a smartphone is a PPC—personal pocket companion. As a matter of fact, we have lots of personal companions, battery powered mobile devices.

The demand for these devices has exploded creating a market for over two billion processors.:

Over three quarters of a billion smartphones will ship in 2016
Feature and other phones will hit 869 million units in 2016
Almost 300 million tablets will ship in 2016
E-book readers shipments could reach 100 million a year by 2016
Handheld game consoles will hit 91 million by 2016

The processors powering these devices are truly amazing, consuming remarkably little power, built in the latest nanometer technology, and delivering unbelievable performance and functionality. And although all of the devices will share some functionality and capabilities, no single device will kill any of the others … at least not immediately. Each device will have a different form, primary function, and price. All will be connected all the time, and most of them will have 3D displays and cameras.

More than 16 processor companies and five suppliers of IP are chasing this market. Compared to the four or five processor companies chasing the PC market that makes the mobile processor market over populated by four-to-one— is a consolidation coming? Are there too many suppliers chasing the same customers?

The sharp growth the devices have enjoyed recently took a long time to get started. For example, the first standalone tablet was the GRiDPad in 1989 (which presumably gave Jeff Hawkins the founder of Palm, the idea for the Palm which was realized in 1992.)

In 2001 Microsoft reinvented the concept calling it a “Pen Computer”. And then in 2010 Apple brought the category to life with the iPad. The first smartphone was the IBM Simon in 1992, then Nokia entered the market 1996 and since then, the segment has taken off like a rocket.

The concept for the e-book came from Michael Hart in 1971, and the first battery powered standalone unit was the Rocket eBook in 1998, but it was the Kindle that lit up the market in 2007.

Other popular mobile devices like game consoles, navigation units, portable DVD players, and digital picture frames all use high resolution screens and sophisticated SoCs.

All the pieces needed to make powerful, small devices with low power consumption for longer battery operation have come together and conveniently at the same time as demand for such devices is ready for take-off.

And since there’s no Moore’s law for batteries, the gain in battery life has come from the clever SoC designs and the shrinking of the size of the transistors thanks to Moore's Law. All of these devices touch our lives in some important way or another—they’re all personal devices and just as a motorcycle shares some of the features of a car and truck, we’re not going to replace one with the other. So, we won’t replace any of these personal devices with just one thing. We want all our toys. And lots of batteries.

Of hammers, horseshoes and tablets

2011-10-10T15:32:37Z

Do you have a hammer at home? Of course you do, everyone does. You might even have two, maybe three (I have four). When was the last time you bought a hammer? If you’re 40 years old, and you have four hammers, then your average buy-cycle is one hammer every ten years. Doesn’t sound like a growth market, and yet you find a hammer in every hardware store and most general purpose stores, even Walgreens sells hammers. There are websites dedicated to hammers—just hammers.

So if hammers are such low volume almost zero CAGR products, why are there dozens of hammer makers? Where’s the industry consolidation that we smart analysts predict when market growth slows down and there are too many suppliers?

Everybody has a hammer. Not everybody has a tablet. Not everybody has a PC or a mobile phone. Tablets, PCs, and mobile phones are growth markets; hammers aren’t.

There are different sized hammers, for different jobs. A tack hammer for, well, tacks, ball peen for putting dents in your neighbor's car door to teach him a lesson about blocking your driveway, claw hammers for removing nails and driving in wood screws, and sledge hammers for fixing door hinges and holding down things while the glue dries

There are different sized PCs and tablets too. Samsung, which just announced its Galaxy Tab 7.0, has a 7-inch, 7.7-inch, 8.9-inch, and a10.1-inch tablet for sale—a size for every man women, and child. RIM has a 7-inch tablet and so does Amazon, you may have heard about them if you weren’t busy in the garage pounding nails into the dog house you built.

A proper sized tablet

But Steve Jobs told us 7-inch tablets are DOA, and in HP and RIM’s case he may have been right (he was not often wrong). HP had to build a few hundred thousand of them to figure out they were wrong. And seeing how well they sold should have proved the point. Huh? Now RIM is trying to prove to themselves a 7-inch tablet is something someone wants, but they don’t know for whom: is it a business machine and entertainment machine, or a candy mint—you’re both right. You get those duality kind of problems when you have dual CEOs.

Amazon like Apple only different, doesn’t much pay attention to what anyone says and just goes ahead and does the right thing. Bezos has been doing that since he opened the store, and like Jobs he’s seldom (if ever) been wrong. And then there’s Sony. Sony makes a 7-inch tablet, and some of the folks at Sony even know about it, no one else it seems does either. At MAX, Sony was showing off a clever two-screen folding tablet. Sony used to be the style setter, and they still make beautiful looking stuff (I just bought a 13-in 2.5 pound Vaio). But Sony isn’t Apple or Amazon, not any more.

While everyone is busy predicting how many tablets will sell this and next year, and getting giddy about how Android is out-pacing iOS in shipments, Apple is running 25/8 to keep up with demand. Where are all those Android tablets going, the hinter lands of China?

And how many customers do you think HP’s fire sale siphoned off from the big tablet boom, in a worldwide economic slump? Well we know exactly how many don’t we? 300,000. Now if you count them and the 100,000 or so RIM is going to dump, and Acer’s, Amazon’s, Samsung’s, and Billybob Joe’s tablets you might get to half as many as Apple sells.

Why, they’re selling like, hammers. Everybody wants and needs one or two. In our about to be released new report on Mobile Devices and the Semiconductors in Them, we found no less than 464 suppliers of tablets, and 21 suppliers of semiconductors—21! That’s about the same number of suppliers of hammers, maybe a little less. But the big difference between tablet and semiconductor suppliers and hammer suppliers is stay-ability. Three years from now there won’t be 21 semiconductor and 464 tablet suppliers, there will be maybe a dozen of each or less. The hammer suppliers with their zero CAGR market will still be here.

The new modality of acquisition

2011-09-24T12:53:15Z

In the 1960s the idea of building a larger company through acquisitions took hold. The model was to build a conglomerate which would be immune to market variations in various segments. Litton Industries, Ling-Temco-Vought, and, ITT were some of the pioneers of the concept. A conglomerate is a multi-industry company, large and usually multinational.

The concept although still with us (e.g., GE) has diminished in popularity as investors sought greater ROI and faster stock price appreciation. Whereas a conglomerate can protect you from industry sector ups and downs, it is also is a basket of companies and not all of them have high PEs or growth rates.

One of the characteristics of the era was small companies seldom got acquired. They were considered noise and too expensive in management time to be bothered with—how different it is today.

During the 80s companies began making more strategic acquisitions, but not a lot and not quickly. Then in the 90s as the internet bubble heated up so did the M&A activity and companies that thought they had missed the boat bought properties to catch up. Few ever did, and shareholders are still paying for those missteps and misguided efforts. Some of the most famous (or infamous) were AOL-Time Warner, and GeoCities, purchased by Yahoo.

Things cooled for a while after the bubble pop, but there were a lot of companies left with expensive and questionable assets—a forerunner to diversified assets.

In the early to mid-2000s we saw the new acquisition strategies (yes, there are two), and possibly an explanation for why corporations are sitting on such huge reservoirs of cash.

The two new modalities of acquisition are:

Get vertically strong and kill the competition
Change direction

Today companies acquire other companies, of all sizes, for the technology needed to fill out their industry stack. Companies want to be vertical and own all the IP in the stack. The new T-shirt of today is this:

He who dies with the deepest stack wins.

In Japan, a different model of acquisition is practiced called keiretsu.. Whereas the Western model consists of a single corporation with multiple subsidiaries controlled by that corporation, the companies in a keiretsu are linked by interlocking shareholdings and a central role of a bank. Mitsubishi is one of Japan’s best known keiretsu, reaching from automobile manufacturing to the production of electronics such as televisions.

And in South Korea Chaebol is the acqusiton model where the company is owned and operated by a family, and therefore inheritable. Some of the well-known Korean chaebols are Samsung, LG and Hyundai Kia Automotive Group.

Get vertically strong and kill the competition

Today if a company is building a component in a system, say a SoC for a mobile phone, they want to control the platform. So if they can, they buy adjacent companies to fill out the stack for that product line. If it is a component supplier they do that to offer one-stop shopping to the OEMs and ODMs.

There are two types of vertical conglomerates today, the device builders and the component suppliers. The device builders like Apple, Samsung, and maybe Sony try to own the consumer and supply and satisfy all the consumer’s needs. So far Apple has been the prototype for this model and the emulation attempts by companies like HP, LG, Nokia, and others is a tribute to Apple’s success.

The component conglomerates are companies like Intel, Qualcomm, and Broadcom. These companies and the smaller examples (in terms of making acquisitions) like Marvel, Sigma, Nvidia, and Imagination Technologies are adding technology and people faster than they could through organic means. In the 80s companies like TI and National grew more organically.

The irony of the getting vertical via acquisition is that after ten years companies were advised by smart consultants and investment bankers to shed divisions and product lines that weren’t leverageble by the company’s core strengths. Job out manufacturing, and distribution, and programming, and, and... Famous break up artists like Carl Ichan, T. Boone Pickens, and Drexel Burnham would buy into a company, undermine the board, gain control, and sell off assets—getting as un-vertical as possible.

Change direction

The other acquisition model, which might be called the grass-is-greener model, is to make acquisitions that re-position the company into a different (and maybe adjacent) market segment. One example that comes to mind is HP trying to turn itself into SHP. Not satisfied with being a hardware supplier, HP wants to emulate Oracle, IBM, and its idol SAP because the profits and/or growth look larger and faster in that segment.

All of these acquisition-conglomerate actions are based on copycat mentality. The copycat CEOs and their lackey BODs call it a vision, and then after a year or two fire the CEO because she or he didn’t have the right vision. BODs can be so fickle.

The question remains, what will the corporations with those huge piles of cash do with it? SHP it, get vertical, or split up the company and distribute the assets to the shareholders? (giggle).

Party like it’s 1984

2011-09-13T15:50:46Z

The industry is dominated by followers and just one leader

Remember the famous ad Apple ran at the Super Bowl in 1984? It featured a woman with the sledge hammer. That was the beginning and the end of innovation for the PC cloners.

That was when Apple took the leadership position in PC design, and has never looked back or given it up. Sony couldn’t challenge it, Dell couldn’t do it. The closest the industry came to a contender was HP, but HP lacks one important characteristic—courage—with one notable exception—the all-in-one category they created. Oh wait, Apple did that first too back 1996 at CeBit for their 20th anniversary.

Apple introduced a concept PC, and built a few hundred or so of them that was a thin screen with a detached keyboard. They didn’t go into production with the idea until 2006 with the first iMac Core Duo. HP came out with their AIO in 2007; and, it was the first to offer touch-screen.

Apple, unlike the clog of IBM PC clones, has never had a sticker on any of its machines. They were never an IBM PowerPC, Windows, or Intel PC. They didn’t call out the graphics in their machines. They were and are Apple PCs.

Dell, Lenovo, HP, and the other me-too PC providers don’t have the courage to offer a PC without those stickers because to do so would deny them the marketing payola they get. And as we all know, except for Apple, the margins are SOOoooooo thin in the PC industry if it weren’t for the payback Intel, Microsoft, and AMD give the PC builders, well, they’d just die and fade away, except for Apple of course.

When Apple comes out with a new design, the rest of the PC industry makes their plans. The PC industry is a gaggle of followers, either following what Apple does, or following what Intel or Microsoft tells them to do. To do otherwise would make them different and that would confuse the consumers.

What a glorious paradox—we can’t compete because the industry is being commoditized—but we can’t be unique because we won’t be able to compete. HUH? When I’m in I’m out…..?

Earlier this summer, Apple eliminated its entry-level plastic-clad MacBook to make the just-updated MacBook Air its mainstream computer. In doing so, Apple signaled its view that the future of laptops will be lightweight machines that increasingly rely on cloud services. Leaping into action Intel announced the Ultrabook concept—the clones’ salvation.

So no longer does Dell want to beat HP, or HP beat Lenovo, or all of them wish they had the style savvy of Sony, now they just sit at the front door of One Infinite Way and wait to see what Apple has thought of lately. That’s Microsoft over there by the newsstand waiting to find out what Windows 9 will be like. There’s Samsung holding a mobile phone with a direct line to Korea ready to launch into production. And shoved over by the parking lot is grey old lady Dell. HP’s spot is empty, it’s out on the street with a big cardboard sign waving at passers-by—Company For Sale—Going out of Business Sale. Sony couldn’t make it, cutbacks and budget woes. Panasonic is throwing its laptops at the wall to see how far they can bounce and Toshiba is reading the China Daily News.

Innovation in PC land died in 1984, did anyone even notice?

The overal CG market will exceed $100 billion in 2014

2011-08-26T17:03:05Z

The computer graphics industry has been a growth industry since it was established the late 1970s. Weathering the storms of the recession of 2009, the CG industry is back on track and showing new invigorated vitality and potential.

Computer graphics hardware market reached $53 billion in 2010 and should exceed $67 billion in 2011. The market for CG software was worth $13 billion in 2010 (not counting services, maintenance and other related businesses). CG software is expected to grow to $14.8 billion in 2011 as the industry shakes off the remaining effects of the recession and customers start replacing software tools.

The industry has enjoyed 7% growth for the past 5 years

As a result of the pull back due to the recession, more people will be buying computer graphics software programs and we will see the development of traditional segments like CAD/CAM expand as new design approaches in automotive, aerospace, and architecture are brought forth. Visualization, a market that has been almost dormant for the past few years is poised now for great expansion due to exciting and lower cost technologies.

There is considerable opportunity for computer graphics software on several fronts. The tools for making movies is the highest profile market but it represents a very modest proportion of the total market. Design tools, game development, manufacturing, and scientific visualization are much larger markets and there is a great deal of opportunity as these markets adapt to changes in mobile devices, and take advantage of the vast compute power in the cloud. There has been a bubbling up of interest in computer graphics tools for mainstream and hobbyist users. It is still a tiny proportion of the overall market, but this too is an area where JPR is seeing intriguing product development and growth.

Over the course of the next five years, we will see the effects and tools used in filmmaking extend to much larger markets for small production houses, independent filmmakers, and even enthusiast/hobbyists. Game development will shift to accommodate new game platforms including mobile devices. And, most exciting, we expect to see a resurgence for imaging, vector graphics, and desktop publishing as new distribution models enable new business models for the publishing industry.

The demand for programmers, artists, scientists, and designers has picked up again and firms are actively looking for people who can use and exploit these new programs and their associated hardware accelerators. The economic recession has caused a slow down and at this point in 2011, the future is uncertain but given the larger trends in the high tech industry, the recession could look like a small bump in the road by 2014.

Given these trends, we see the rate of growth continuing to grow.

Discretes are dead–long live discretes

2011-08-09T19:11:29Z

The death of discrete GPUs by integrated graphics has been predicted every year for the past ten years and every year for the past ten years, the reports of death have been highly exagerated — even this year. If you look over time at the ratio of discrete GPUs to integrated GPUs (including the embedded GPUs in CPUs like Fusion and Sandy Bridge) you can see an obvious trend.

(I’m using the term “GPU” liberally to represent all graphics controller/processors. In reality, we didn’t have GPUs prior to 2001.)

But what the chart doesn’t show is the effect of a discrete and an integrated GPU being in one system, which has come to be known as “double-attach”; which started in 2002.

Double-attach is due to several factors: After market purchases of AIBs by DIY’ers and IT departments trying to squeeze more life out of a PC, OEMs building multiple SKUs with a one-size-fits all motherboard that has integrated graphics on it, and most recently dual mode or hybrid operation techniques like AMD’s Switched Graphics and Nvidia’s Optimus.

More GPUs ship than PCs. That’s because many systems using PC parts are built for POS terminals (from ATMs to cash registers at the supermarket), industrial, scientific, military/transportation systems, and CE devices like STBs. Those items don’t get counted by Gartner and IDC as PCs. So the graphics that go into them have to be factored out—it’s not an exact science because there are also some parts that are drifting through the channel and/or in inventory at ODMs. We think about 35% of the GPUs are in double-attach PCs, and about 3% of the discrete GPUs are double-load (two AIBs per PC or an AIB with two GPUs).

When you compare the Discrete GPUs to Integrated relative to just PCs you get a decidedly different perspective.

And when you look at the rate of change of Discretes and Integrated you can see the glory days of growth for integrated are over.

But the story isn’t over.

AMD’s Fusion and Intel’s Sandy Bridge are selling well (see Market Watch, and story in this week’s issue of TechWatch). However, they are replacing the older IGPs and not (yet) cannibalizing low-end AIBs with discrete GPUs.

Also we’re going through a secondary economic slump and when that happens people tend to put off buying new products, or they buy low cost items. This is particularly true in the US where buy cheap is the norm. In BRIC and Western Europe there is a stronger appreciation of the benefit of discrete GPUs. And the OEMs like them for the sell-up opportunities and higher margins they bring.

The US is an anomaly and still 40% of the market so it will influence the results. However the growth rates in the BRIC countries are promising and will, combined with other factors like GPU-compute, keep the growth rate of Discretes up. We may not see that this year but our forecast indicates a good future, and a long future for Discretes—long live the Discrete.

How remote can we get

2011-07-28T15:10:33Z

In our future world, which seems to arrive every day we are at first amazed by the newest development and then soon jaded and waiting for the next. We live Moore’s law, only faster. (I wonder if Gordon Moore lives Moore’s law, now that’d be ironic.)

We know our future world will be one where everything that uses electricity and most things that have warm blood will be connected to the Internet. That will be so we can communicate with them, and they with each other. My car will have conversations with my media server and my calendar and they will decide what I should listen to tomorrow on my drive to Silicon Valley. My car will also interrogate all the gas stations within range of what’s left in the tank to find the best price, at the lowest acquisition cost—i.e. the price per gallon plus the cost of getting to the gas station and back on the freeway. One day it will make the trip to the gas station, possibly at night without me.

We can now use our mobile phones and/or tablets to control our TVs and maybe game consoles. No more dedicated stupid un-IP remote control units on the coffee table. And pretty soon we won’t even need our mobile phones to change the channel or volume; we’ll just wave our hands at the TV. Or maybe we’ll even be able to simply tell it what we want. Yelling at the news takes on a whole new meaning now—what if you could yell at your TV as some (unnamed) people do in our house when some jerkoff politician is explaining to us how he or she will save the economy by shutting down the government. And then, what if those helpful comments you were making could be automatically and instantly texted, or spoken to the politician—now THAT’d be representative government!

We may get there, a step at time.

Remember when TV remote controls were connected to the TV with a wire? Remember before there was any kind of remote control. In the way old days the remote control was when one person would tell the other person, change the damn channel will ya? Have we progressed or what?

So today we can use our Smartassphones (SAP) to do the job until the other person rips it out of our hands and threatens to jam either down the garbage disposal or up a personal part of our body. But why do we have stop with the TV?

Why can’t I point my SAP at the microwave and have it make popcorn? Why can’t I point it at the thermostat and raise the temperature?

When those things finally get their own IP address I will be able to do that with my SAP via the web. Now hacking takes on a new dimension. Give me $10,000 demands the kid a few blocks away, or I’ll turn your air-condition to -25-degrees and freeze you to death, I’ll open and close your garage door opening repeatedly until it jumps its tracks and falls on your expensive German car—you can see where this leads.

It leads to remote control chaos. If everything can be remotely controlled, then everyone can do the controlling. If my personal information can be hacked by Russian gangsters or irritable teenagers, why stop with my social security number? And who is the best, scariest hacker of all? NSA, that’s right. So now big brother takes on a whole new meaning. Getting off the grid takes a whole new meaning too. Now being remote becomes something we talk about wistfully, about how good it was in the old days before everything was connected and controllable remotely.

This is the dark side of the singularity when the machines of our lives communicate and slip out of control, or maybe break out of control. This is where HAL decides we are a menace to the mission and forgets Asimov’s three rules for robots. And our only hope of regaining mastery over the chatting machines is to override them with our trusty remote control unit, if we can only find the damn thing.

The Wintel hegemony in the PC industry may be ebbing

2011-07-12T00:40:17Z

With announcement at CES by Microsoft that Windows 8 will run on ARM, thereby enabling another processor to run Microsoft applications, the world shifted. That was the promise with Windows NT back in 1993 when Microsoft declared it would run on the popular processors of the time which were Alpha, AMD64, IBM, Intel MIPS, and Motorola. That didn’t quite happen.

Now Microsoft seeing the extraordinary growth of ARM-based mobile phones, and having tried three times to get into that market, has declared that Windows 8 and associate applications (like the Office suite) will run on ARM, and x86. So far MIPS is not in the club.

The idea of using ARM processors for notebooks, desktops, and even servers has been bubbling up for the past year. Some companies have already declared ARM-based servers (running Linux) and Qualcomm has demonstrated netbook like devices they called Smartbooks using an ARM processor.

However, the main thing that has always killed such experiments has been the lack of a unified applications suite—a seamless experience on any platform. That means the APIs (Application Programming Interfaces) too, and especially DirectX and .net. DNLA (Digital Living Network Alliance), and other stacks are also needed. Microsoft says we are going to have that kind of a world in late 2012.

This brave new world will allow us to send a Word file from our San Francisco based quad-core Intel i7 to our colleague in Singapore who has an AMD Fusion-based machine. They will edit it and send it to folks in Bangalore who will further enhance it on their ARM-based HP notebook which runs Windows 8 also. They will then send it back to us in San Francisco and we’ll be able to read it perfectly as if we had done it all on our own machine. Another colleague in Paris will also read the file, which she has obtained from the cloud where it has been stored. She will read it on her tablet, and also make a few annotations.

Different machines, different locations, cloud I/O, and it all works. The application becomes the focus—not the machine it is created, read, stored, or edited on—it’s the application stupid.

Apple had this idea about a decade ago except for them the model was the file. Follow and use the file—don’t worry about the application, the OS and other tools will figure out which application is best for the file you want to work with, and the choice of the application may be based on whether you want to simply read it or edit it.

So who cares what processor is running the OS? Who even cares where or what the application is?

Tom and Mary are at Dixon’s looking at computers for their son who is going to boarding school in the fall—they grin a lot about that, free at last, but that’s a another story. Tom likes the blue computer, but Mary is partial to the yellow one. A friendly salesman comes over and asks if he can help. “What applications will Master Thomas be using in school,” he asks. They tell him and he then shows them the green computer which they both seem to like. “And, it’s only 500 quid,” he says, “VAT included.” Tom and Mary leave the shop delighted with their purchase and haven’t a clue about what processor is in it. And even though there’s a big sign on the side of the box declaring ARM Inside they couldn’t give a give a wit, they’re off to buy a train ticket for Thomas.

Sound far fetched? Maybe but I think AMD, Intel, Nvidia, and Qualcomm have their marketing work cut out for them. Just a side note: Some of the carriers who are selling LG and Motorola mobile phones were surprised to find that consumers were coming in asking for the Nvidia phone. Not the Verizon phone or the Motorola phone, or the Android phone, but the Nvidia phone. That’s how powerful Nvidia’s brand is and how many loyal customers it has.

Can that level of brand loyalty be maintained when the hardware is no longer the differentiator? No one goes into a car dealer and says I’d like a car with the Weston engine in it. No one buys a dishwasher and asked for the one with GE motor in it. Sure as hell no one buys a TV and says give me the one with STMicro chip in it. How come? Because they are consumer products and not sold on technical features, they’re sold on color, style, and end-user brand. So is the Nvidia phone phenomenon a blip? No other chip company has consumers asking for a phone with chip inside.

What happens to AMD’s Vision, and Intel’s Inside, and ARM’s ah, well whatever ARM uses? Here comes one of those inflection points the marketing folks like to talk about—I wonder if everyone is ready for this one.

We are in thrall and enslaved by the carriers ... So what are we going to do about it?

2011-06-30T15:43:27Z

I recently got a new phone, a Motorola Droid X2 to be precise. I have a few other phones, a Nokia N95, an iPhone, and a Sony Ericsson Xperia

Play. Because of tariffs and roaming charges I maintain a US phone (that was the iPhone’s job) and a European phone (the N95). The N95 has a SIM and a SD slot, and a removable battery. But it’s older technology, and the N95 has the lame Symbian OS—time to move on. So the Xperia Play has become my international phone. That took nothing more than moving the SIM from the N95 to the Xperia. My Orange account in England couldn’t care less what apparatus I use, as long as I use it and send them a check every month, thank you very much.

In the US things aren’t so easy (and even worse in Korea, but that’s another story). In the parochial US where the tower operators are xenophobic about their subsidized fiefdoms they prefer phone that are sealed, like the iPhone. Only relatively recently, under a federal mandate, were we US citizens allowed to keep our phone number if we should stray from one carrier to another.

And so I have to go to the AT&T altar and prostrate myself and beg forgiveness and ask to take my number to another carrier, forgive me father for I have sinned (and will again). I still have the iPhone, AT&T has no use for that— it is dead in their eyes, and in fact as a phone it is. However, the dead iPhones are usable (and giftable) iPod Touches. And that shall be its zombie like life hereafter, in one of my kids’ back pack.

The Droid X2 is equally non-secular and now I have to go the church of the Verizon, get a full body scan, give them the last four years of my tax records, and promise my first born if I should stray or be 25 nanoseconds late paying my bill.

I pondered this ridiculous state of affairs while enjoying a grape jelly filled doughnut at Dunkin’ Donuts and had the epiphany — carriers are like the OS in our computers. Not from a functional point of view but from on obligatory view. If you by a PC that’s not made by Apple, it comes with Windows, Microsoft Windows. Macs come with Apple. And yes, you can BootCamp a Mac, and you can Linux a PC, and you can Parallels or VM them both to have multiple OS, and only a handful of uber-geeks do that, so it’s hardly worth mentioning and totally distracting from my point. And the point is a carrier obliges you to use their network and pay their traffic just as an OS provider. Use the stuff, pay the tax. Move along nothing to see here.

The big difference is the subsidy plan. Just like a drug dealer who says, “Here kid, the first one is free...”, the carriers say, “Here kid the phone is (almost) free, just sign here.” Maybe the analogy is more like the devil with the sign here part. Regardless of which metaphor we use the result is the same, you sign, and you are owned, locked in for a couple of years, which in today’s technology it’s bullet train ride to eternity.

To some however, that doesn’t seem too erroneous. Remember back in the days before mobile phones we had push-button phones tethered by a wire in our homes (and dial phones before that). Those phones were free too. Free to the consumer, you called the phone company (we only had one in those days) then they installed the phone and you got a monthly bill—and nowhere in that bill was there any mention of equipment cost. That came later when the federal government said there shall be competition in the land, go forth and flourish. Then equipment costs started to appear on the phone bill and we were allowed to go buy our own.

And we can buy our own phones today. You can go to the Apple store and buy one of those sealed little phones with the funny antenna and it’s yours. Now you can even go to a carrier other than AT&T in the US, or T-mobile in Germany. And you can buy an Android or Symbian or Windows phone and go to a carrier and get it connected —but not any carrier, just certain ones for certain phones—we must respect the religion.

So I will toddle off to the Verizon alter today or tomorrow and get my sacrament, and give my tithe and promise to continue giving it, till death do us part.

Or till a new shiny thing comes along.