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2007 Jon Peddie and a year in review


Year End Wrap up

2007—what the hell was that?

By Jon Peddie

"THOSE WHO don't remember the past are doomed to repeat it," said George Santayana. The staff of JPR will help you avoid that fate with this year's retrospective issue.
(Source: Jon Peddie Research)

This had to be one of the most exciting, confusing, and disturbing years in the PC market in a long, long time—maybe ever. All the rules and allegiances changed, all the players changed, and the consumers changed too—maybe driving all the other changes. Here's my summary of the events, as best as my old memory will serve.

Companies

2007 started out with major consolidations in the market, AMD had recently acquired ATI the previous July, and Intel divested itself of the Xscale product line. In January 2007, Nvidia announced that it had completed the acquisition of PortalPlayer and ended the year deep in negotiation for the acquisition of a major software company. In September, Intel acquired Havok.

Processors

In late 2006, Intel brought forth a new line of processors to the seeming surprise of AMD but no one else, and then launched a price war that drove AMD into the red—the deep, deep red.

Intel taught us how to tell time with a tick and a tock, and introduced a new line of chipsets. Intel also taught us that leaky gates were a bad thing, and that 45nm was a good thing and by some strange twist of fate, leaky gates stopped being a problem due to the use of an old compound called hafnium dioxide, a shiny silvery, ductile metal that is corrosion resistant and chemically similar to zirconium. It is used in control rods in nuclear reactors, which has a strange irony with Pat Gelsinger's comment a couple of years ago about CPUs needing a nuclear reactor to power them...

Integrated

AMD showed how the IGP market would end when they brought out their Fusion CPU with integrated graphics.

Intel said, we're going to do it too, and announced Nehalem. Not only that, Intel told us hyper transport wasn't such a bad idea after all and the front-side bus was on the way to the computer history museum. What will VIA and Intel fight about after that?

Super

In February, Intel showed us an 80-core terascale chip and then leaks about Larrabee started to appear—just a coincidence. Intel also said the idea of a coprocessor socket like AMD's Terrazzo wasn't a bad idea either and one would soon appear in Intel systems.

Nvidia productized the GPU computing concept and came out with four levels of Tesla products plus a software suite called CUDA.

Late in the year, at the Supercomputer Conference, AMD showed their version of Stream Computing and called it FireStream and also introduced the R670 GPU with double-precision floating point capability. Nvidia said it didn't count because it wasn't IEEE, AMD said, does too. They're still discussing it.

In September, AMD announced and then delayed its 450 million transistor four-core Barcelona, and then announced the consumer versions of a four-core processor to be called Phenom, and delayed it, and then announced and delayed its three core version of it.

Meanwhile, Intel glued two of its core2duo chips together and called it a quad processor and bragged about it being built in 45 nm, even though it still was hobbled by a FSB.

Mobile

The ATI division missed design windows for laptops, and was late with its newest high-powered AIB, the much awaited and somewhat disappointing R600 which hasn't been spawned into a mobile device yet.

Nvidia introduced a mobile version of its DirectX10 G9x series in the form of the GeForce 8600M and 8800M.

AMD a announced the low power Griffin CPU and Puma platform, and said it would go into production toward the end of the year (Better hurry, there's only a few days left.)

Intel announced Menlow, a low-power mobile chip, as part of the Silverthorne CPU platform. It will go into Mobile Internet Devices—MIDs—among other things.

And VIA came out with their C7-M ultra-low-power x86 processor for ultra mobile devices—UMDs.

ARM smiled politely at all them while its OEMs continued to ship a billion or so chips.

Chipsets

Q2 2005-2006 Q3 2005-2006 Q2 2006-2007 Q3 2006-2007
Discrete Desktop 7.0% 6.8% 8.2% 19.5%
Discrete Mobile 0.8% 9.3% 34.2% 54.7%

Figure 1: Share prices and market indexes in 2007.
(Source: Jon Peddie Research)

Nvidia entered the Intel IGP market, something it said it never would do, and particularly curious given that the IGP business is going away soon—or is it?

Both AMD and Nvidia introduced IGPs that could do DirectX 10, and went “naa naa” to Intel. Intel said, who cares there ain't no DirectX 10 and when there is one we'll have one too, so there.

In the last quarter rumors about Nvidia's three-way SLI system started to leak out. Shortly thereafter, rumors about AMD's 7-series quad Crossfire chipset started circulating.

AMD broke the unwritten law about either/or on IGPs and AIBs and introduced the 690 series that would let you run both giving the consumer the opportunity to support four displays with a low-cost system. The other chip makers quietly copied the idea.

Talk of hybrid solutions with a discreet and an IGP began, promised for next year. Nvidia even claimed it would do an SLI version of such a configuration, after hearing about AMD's hybrid. Then AMD showed their PowerExpress 780G chipset doing hybrid CrossFire.

Platforms

Also in the last quarter, just a year and half after the acquisition, AMD finally showed its first all-AMD platform called Spider with four AIBs, an ultra-fast chipset and the Phenom CPU.

The market

Figure 2: Market shares of graphics chip suppliers.
(Source: Jon Peddie Research)

AMD continued to lose enormous sums of money, Nvidia continued to make it, and Intel raised its stock price too.

The stock market climbed nicely till the late fall and then it fell and wobbled back and forth for the rest of the year, Nvidia's share price defied gravity and either went up or stayed up.

AMD-based box 360s and Nintendo Wiis flew off the shelves while Nvidia-based PS3 moved slowly until Sony started chopping prices.

Q2 GPU shipments didn't drop like a rock like they had for the past 10 years and Q3 showed the biggest gain since the internet bubble—what's going on here?

With the growth in sales, market share in the PC graphics industry shifted, and they will again next quarter— don't try to predict the future from the past.

Basically, any model you wanted to use got broken in Q3, and the year was about as unpredictable as any since 2000.

In other news…

2007 saw some other interesting developments beyond the graphics chip and CPU suppliers.

Displays

This was the year that USB-based displays came into being—for real. Along with that, DisplayPort got ratified and supported by a various suppliers. HDMI reigned supreme on CE devices, and high-end PC chipsets began supporting it.

Multi-display has become almost the norm, and super-wide screen displays like Microsoft's Radius 320 was shown as was Ostendo's curvy groovy display.

Disks

Blu Ray (BD) and HD DVD (HD) drive suppliers received accolades, usually in the form of studios and platform suppliers who took the positions, with one lone soul, LG, offering a dual Switzerland-like solution. Although it's still too soon to say with certainty, it looks like BD will be the winner. Ultimately, it's the content, stupid, that will decide which one wins.

Meanwhile the chip suppliers like AMD, Intel, Nvidia, and VIA declared they supported and accelerated both varieties and whichever one you choose they would do it best.

Pointing—it is polite

Logitech announced in late 2006 and brought out in 2007 the MX Revolution, the world's first motorized super mouse Meanwhile, a small start up in Japan, Sandio, introduced their three-axis 3D mouse, and a team of five WPI undergraduates introduced MagicMouse, a ring-like 3D ultrasonic input device.

Apple showed us the iPhone and popularized the idea of dual-touch screen manipulations, while Microsoft amazed us with the Surface, a coffee-table shaped computer that responds to touch and to special bar codes attached to everyday objects.

The Nintendo Wii wand continued to be applied to new and amazing games and forms of entertainment, and thanks to an excess of CPU power due to all those cores, the idea of doing real-time trig from a camera promised hands-free 3D gesture pointing and control.

What's it all mean?

Well as exciting and innovating as some of the technology was in 2007, and as dramatic and dynamic as some of the company moves have been, this will not be remembered as an unusual or unique year—this is the way the industry, the world, has become. Globalization is putting new pressures on old ideas and habits, and the companies and consumers that can't adopt and change will disappear.

The march of technology will not slow, despite the ratings and protests of the Luddites and religious fanatics. Those folks are welcome to go lock themselves up and pretend the rest of the world isn't there.

Chips will continue to shrink in process while increasing in transistors, and try to maintain a constant ASP. Functionality will expand and devices will do more, and be more overlapping with other formally isolated and unrelated devices.

And software will continue to be a couple of years behind and buggy as hell.

The revolution isn't coming—it's here and has been, and will be for as long as you're reading this magazine or its ultimate web equivalent. Welcome to the revolution comrade, all you have to lose are your chains.

Happy New Year.

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2007 and the game industry

By Ted Pollak

This was great year for the video game industry for many reasons. It saw the resurgence of a healthy PC gaming industry, which was actually never sick—just riding a natural product cycle curve. Nintendo, the former underdog in the console wars, is selling products so successful, that they have, and will continue to set, sales records around the world. 2007 saw the juggernauts Microsoft and Sony work the bugs out of machines that have graphics and game play of a quality that was unimaginable for family room machines just a few short years ago. The year brought us wonderful games and the emergence of new macro-genres such as physutainment and the re-emergence of genres such as edutainment. We got better handhelds, better peripherals, better physics, more frames per second, better texture rendering, higher resolutions, massive multiplayer, character customization, OK—OK, I could go on and on but will stop and focus on a few different areas.

The Console Market

Figure 1: Nintendo vs. Sony and Microsoft.
(Source: Yahoo Finance)

No doubt about it, Nintendo has already won this phase of the console war using my criteria (and my criteria are not what everyone else's is). I run a video game industry public equity investment fund (with an approximate 100 company universe). And in the interest of full disclosure I have owned Nintendo for three years. (See Figure 1)

The fact that Nintendo is making a profit on the Wii hardware (as opposed to it being a loss leader for a number of years like the other guys) is an incredible business achievement, as is the fact that, month after month, Wii continues to sell out. It is quite possible that, not only will the Wii be the most desired entertainment device of holiday 2007, but possibly also for holiday 2008.

Despite the Wii's success there are tens of millions of dollars of profits slipping away from Nintendo and into the pockets of auctioneers because of production shortages. Just take a look at these Ebay prices (Figure 2) for the $250 machine. These auctions end every few minutes and have been doing so for months and months. (Notice the fourth auction, which is the barebones machine with included games.)

Considering the fact that the Wii's acceptance was really an unknown until E3 2006, I think the company's production planning was reasonable but it has caught them up short. Nintendo prepared for 14.5 million units of sales in fiscal 2007. I had a chance to meet with the CEO of Nintendo America, Tatsumi Kimishima, and the topic of the production shortages came up. I told him that I thought despite the shortages Nintendo did the right thing in not creating too much production capacity initially because "to assume overwhelming success when taking a relatively untried and untested route is not entirely prudent when one has a responsibility to employees and shareholders, and ultimately to customers." It was if I had inadvertently quoted something similar to a line out of some strategic guide he was currently reading because he responded with a murmur, a barely noticeable smile, and a slight bow. (Though it's quite possible what he murmured was "Dude you have a chunk of salad in your teeth.")

Anyway, the company has historically been prudent in their decision making and this is exhibited by their cash position of over $7 billion, no long-term debt, and consistently rising dividend payments.

So what about Microsoft and Sony? Their consoles have amazing specs, but all this power seems wasted (at least for now). Where are the Xbox 360 and PS3 home productivity suites? If you are going to sell me a machine with personal computer processing power, let me surf the web, edit photos, write emails, and finish this article with a wireless keyboard from the comfort of my couch. The machines are incredible game-processing platforms—but this comes at a price, and the price for most people is the cost of an HD television. So, the true cost of these consoles is in the range of $800 - $1000+, about the same as a nice white box gaming PC with monitor. Another cost is game flexibility and ceding environmental control. By game flexibility I mean that, with consoles, gamers can only play games approved by the respective manufacturer. (Nintendo, however, has no formal "approval" process). By environmental control, I mean that the manufacturer will attempt to monetize many of the creative additions that modders have been making for free.

All that being said, console gaming offers a more portable, stable, user-friendly and "family/friends on the couch" oriented gaming environment. The tightly controlled hardware and software environments of a gaming console work to eliminate any and all "crashes." I think this phenomenon will help both Sony and Microsoft bring high-definition gaming to the masses.

The PC Gaming Market

The PC gaming market had a great year, and I believe it produced more revenue than ever in the history of PC gaming. It's difficult to quantify PC gaming since there are significant revenues generated from subscriptions, micro-transaction, and many other business models that rule in Asia and have made their way to western markets, not to mention the massive expenditures on rigs and modding. China's tens of millions of gamers virtually all use the PC and there may never be any significant console business there. 2007 saw World of Warcraft come up just short of 10 million registered users—an incredible achievement. 2007 saw professional race car drivers openly admitting that playing racing games on PCs is actually part of their training regimen. The year brought us GPUs from AMD and Nvidia with almost three quarters of a billion transistors, hundreds of stream processors, more video RAM than an average laptop's system memory. These GPUs coupled with CPU, system RAM, and motherboard, now produce computing power rivaling yesterday's supercomputers.

Figure 2: The Wii on Ebay, Nintendo is missing out on some serious cash ... for now.

I think the most significant trend was the major PC manufacturers realizing that winning the hearts and minds of PC gaming enthusiasts, and wealthy luxury goods consumers can create a "trickle down" or "halo" effect which sells more mid-range and entry-level machines. HP's purchase of Voodoo and the launching of their Blackbird brand are probably most emblematic of this phenomenon with Dell's diversification of the XPS brand setting the mark to beat from a marketing perspective.

Handhelds

Here again, Nintendo, viewed as the underdog by many, seemingly came out of nowhere and is dominating the landscape. However, if one were to look at the historical sales of Game Boy, this success is not surprising at all. Nintendo has sold twice the amount of machines versus Sony with their PSP. Like the Wii, the DS dominated because of its innovative game play making use of a touch screen and microphone on a dual-screened device. Nintendo has gained tremendous momentum as it reverses the "Razors and Blades" model. Instead of creating a negative margin device and making the money on blades, Nintendo was able to create game titles so desirable that people bought the device just to play the games. One of these titles was Nintendogs. It can be argued that the true price of Nintendogs is $180 because many users bought the $150 device in order to play a $30 game. Imagine Gillette having such a superior razor blade that people buy the razor with little thought to its cost.

Happy New Year!

So 2007 was an amazing year and 2008 has the potential to be even better. Microsoft and Sony will remember 2008 as a banner year in the development of their consoles' online capabilities, perhaps even breaking new ground in innovation versus PC gaming technology. 2008 will also see growth in the HD television market which should help 360 and PS3 sales. PC multiplayer gaming will become more mainstream, and the graphics/physics capabilities of PCs will match the HD consoles in the lower performance segment, while the enthusiast segment will again prove that PC gaming is the king of the industry from a technological and financial perspective, taking into account hardware sales and trickle down.

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On the workstation front: shifting status quos and more

AMD back on the ropes

By Alex Herrera

After riding a wave of momentum from '04 to mid-'06, '07 was not the best year for AMD. The company delivered a breakthrough product in Opteron—and, thanks to a lack of competitive technology and poor execution from Intel, AMD dramatically cut into the market leader's share in a range of markets, especially servers. But starting in '06 and escalating in ‘07, AMD's financial and competitive position has changed dramatically, triggered by an untimely confluence of events: the company's costly acquisition of ATI, its own hefty capital expenditures (notably fabs), a revitalized Intel, and—last but certainly not least—its own uncharacteristic misstep in execution with its latest processor, the quad-core Barcelona.

With Opteron out of the bag, AMD showed near-flawless strategy and execution, while Intel stumbled. But in the past 18 months, it's been Intel that's been making the right decisions and sticking to schedules. AMD, meanwhile, perhaps bit off more than it could chew hoping to follow-up the very successful Opteron with another tour d'force effort in Barcelona.

Aggressively shooting for a native (i.e. monolithic integrated) quad-core part in 65 nm, the company ended up launching the part six months late. And worse, a hardware bug in the initial part that has proven to significantly dampen performance in key applications has forced AMD to hold up broad availability until it can get out a new spin with a hardware fix (samples now expected in January '08, according to AMD's disclosure to ChannelWeb).

And what's up for '08? First off—at a bare minimum to stave off further decline—AMD must get Barcelona (and sister quad-core Phenom) shipping broadly, and bug-free, with competitive clock rates and at competitive prices. But to regain a more solid footing, they need to once again stabilize their roadmap and execute on it. Most notably, the company (with partner IBM) needs to get 45 nm up and yielding in volume, and it needs to deliver on its next-generation x86 cores and hybrid CPU+GPU Fusion program.

Closing out ‘07 with another slip-up doesn't bode well for the company, but it's proven in the past that it can respond with its back up against the wall. We wouldn't be surprised if we wind up telling a more heartening story on AMD this time next year.

Second life for workstations better than the first?

The market for workstations isn't flying under the radar any longer. While many may have long dismissed the workstation as the domain of obsolete technology, dead vendors and niche business, the market has been experiencing a very healthy second life that has caught the attention of more than a couple of aspiring vendors.

Reinventing itself, today's workstation is largely indistinguishable from its gloried ancestors of the 80's and early 90's, but in some ways it's proving far more vibrant. While the Traditional Proprietary workstation of the past is all but gone, today's dominant workstation model—built upon core silicon components from AMD, Intel and Nvidia—is surpassing expectations. JPR closely tracks the market as part of its Workstation Report series, and expected the above-average growth witnessed in the '05 and '06 years, as IT budgets loosened while the economy improved.

But '07 perhaps showed best that the workstation market isn't just scaling with the ebb and flow of the economy, nor is it simply keeping pace with the broader PC market. Rather than slowing down to a PC-like rate of 9% or so (Gartner's quote for Q1'07) the workstation market's results from the first three quarters of '07 are showing anything but moderation, with year-over-year unit increases of 18.8%, 17.4% and 23.2%, respectively.

No, the workstation market isn't dying, and it's not just chugging along with the broader client computing markets either. It's developed its own momentum, buoyed by a growing pace of home-grown innovation, rather than relying on purely trickle-over technology from the PC industry.

Figure 1: Vendor revenue market share.
(Source: Jon Peddie Research)

Yes, market forces have demanded that workstations leverage the economy of scale of processors from Intel and GPUs from AMD and Nvidia. But some of the more exciting computing trends to appear recently are finding their roots within the workstation ranks, such as general-purpose on GPU (GPGPU) computing. GPU computing (or stream computing as some call it) is no longer just a curious little niche of concern only to a few academics with extra time on their hands; it's the launching point for a fundamental wave of change in emerging system architectures. For evidence, just take a look at AMD's Torrenza or Intel's Larrabee programs.

The workstation market's robust performance hasn't gone unnoticed. As vendors shook out during the transition from the traditional, proprietary model to today's IHV-driven one, more PC industry players are finding the market interesting. Sure, the margins of today's workstations don't look great compared to the proprietary machines of yore, but when viewed in the context of razor-thin PC metrics, they look a heck of a lot more appealing.

Lenovo, for one, is licking its chops. After a couple of years as caretakers of (formerly IBM's) Thinkpad mobile workstations, the company in '07 announced a big step into the broader market for deskside workstations, ranging from entry-level Core-based systems up to higher-margin dual-socket Xeon machines.

Those who have dismissed workstations as a dead-end or dull offshoot of the PC market have missed the big picture. Rather than focusing on the fall of yesterday's proprietary systems, the real story is the growth of the new breed. While technologies, architectures and business models may change, the demands of the workstation professional—higher reliability, application-tuned performance and application-specific features—haven't.

Today's workstations continue to fit the bill, and the industry's more PC-like business model has only improved the situation, enabling not only higher performance levels but dramatically lower prices as well. And, in turn, better pricing means more and more are finding their way to the users that really need them. In '07, we saw that trend unmistakably, and in '08, we expect the workstation market to continue to outpace the broader, PC-based market for client computing.

Digital media rights...or lack thereof

Progress on the contentious issue of Digital Rights Management (DRM) restrictions for music has long suffered from an ugly Catch-22. The music industry says it can't eliminate DRM, when it claims so many would-be buyers are opting to steal music rather than pay for it. But a large contingent refuses to buy legal digital music while it comes shackled with the DRM handcuffs.

Fortunately, in '07, the music industry and digital retailers did finally start breaking the cycle, loosening the leash on unencumbered digital music. More online retailers began making legal DRM-less music available, including Amazon and the largest provider, Apple (with its premium iTunes content).

Of course, this loosening is a consequence not of any newfound altruism from either the music industry or the dominant online digital music provider, Apple. On the contrary, both are feeling the pressure to open things up, Apple from consumer advocates, as well as the courts (to date, more in the EU, but here as well), and the music industry from direct-to-consumer models available now in the age of the Internet. And that pressure's there, regardless of how much stealing is or isn't going on.

A handful of headstrong artists like Aimee Mann have been modestly marketing their music independently online for several years. More recently, social networking sites like MySpace have blown the direct-to-consumer model wide open, enabling even small artists to grow big audiences virally, without the backing of a label. And in '07, we saw a big name artist in Radiohead circumventing the normal channels in favor of directly downloadable, DRM-less MP3. At this point, the music industry has probably come to grips with the fact that it will never again see the old model of a captive market rife with fat middlemen, so it appears to be positioning itself to bend its model, rather than see it break altogether.

So what should we expect in '08? We expect—and hope—more of the same. The volume of legal, readily available DRM-less content still pales in comparison to the DRM'd alternative. But at this point there appears only one end in sight, with or without the support of the major labels. With their backing, we get there a lot quicker, and the middlemen will still get to share in the spoils. Without their support, it will take a lot longer to get there, and the middlemen end up with nothing. Who knows, if all parties in this equation—the artists, labels, distributors and customers—show some ethics, we might find a lot more dollars being spent on music once the DRM handcuffs come off.

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2007 Recap, 2008 Fog

By Andy Marken

The challenge of viewing the past 12 months and forecasting 2008 requires separating the early adopters from the mass market. For the early adopters, the home entertainment network is here; the converged mobile content/communications device is here; content when you want it, where you want it, how you want it is here. But, for the mass market…it's an awkward transitional period.

2007's Time Magazine's Person of the year was …You.

The yous of the world are connected and have the choice of an almost limitless variety of online content—written, photo, music, video. This may not have been the best year for the screen writers to go on strike (although we do empathize with them) because personal content is certainly gaining momentum. If the personal content is hassle free, it could mark a major shift in how people entertain themselves. As a result, micromarket segmentation could become increasingly important to manufacturers and suppliers.

Consumer advocacy/protection groups historically view Microsoft as the big evil one located in Redmond with tentacles around the globe. Ironically, we don't view the kind, fun-loving kids of Google in the same manner even though they touch almost everyone on the earth in one way or another multiple times…every day.

They've helped us get over concerns of privacy. In just a few minutes you can find out almost anything/everything you want to know about any company, any individual. Privacy? Get over it!

They're so helpful they are going to make a move to build out the communications infrastructure and begin offering location tracking “services” all just to help…you!

How could you ever consider any of the Google-ites activities/efforts evil when they have vowed they will do everything in their power to regreen the planet?

Jostling for Their Futures

Mobile device convergence got off to a rocky start as bandwidth providers, content owners, portal services and manufacturers tried to determine exactly how they were going to get their unfair share of the consumer's dollar. This could be a long, bloody battle because it will determine the shape and future for each segment well into the 22nd century.

  • Significant improvements in ease of use.
  • Flexibility in allowing users to customize applications to suit themselves.
  • Managing the bloating storage issues.

With the explosion of content on the iNet we're seeing a dramatic increase in the demand for higher bandwidth.

Legacy applications like email and simple web browsing require relatively little bandwidth. The three-minute call was easily handled by landline and thru-the-air phone services. But add the expectations of flawless HighDef and future Ultra HD content and video on demand and we will be faced with two options that only the bandwidth providers want to consider:

  1. Dramatic investment in bandwidth infrastructure (higher rates to pay for the expansion).
  2. Tiered services and payment schemes to support managed QoS service provisions.

Year of Storage

Because of the glut and demand for content, Time Magazine's person of the year for 2008 will undoubtedly be…Storage!

  • Storage for the home.
  • Storage for the mobile device.
  • Storage for the personal stuff.

While everyone still has closets, drawers, storage sites stashed with dusty analog content; the cost and work of bringing it into the digital era is more than anyone wants to contemplate.

But today's stuff is a different matter! The new product, new technology buzz of solutions for the home is just beginning this year and it will have a ways to go before it reaches mass market. A few manufacturers like HP are delivering first generation home network storage solutions that kinda work with and for the customer rather than in their own engineered manner. True, you can:

  • Network them.
  • Move content from one system to another.
  • Back up the stuff locally and remotely.

But none of it is easy and natural, as they need to be for mass market adoption. The industry over the next several years will be focusing on:

  • Increasingly delivering on the promises of UPnP.
  • Providing self-diagnostic, self-healing storage devices.
  • Delivering more intelligence to make it easier to move content from one system to the home storage device when the content needs to be archived/protected offsite.

That's a heavy workload and will still require evolutionary consumer adoption until we reach a point where the technology use is just too easy, too logical, too economical and to useful not to use.

In the meantime, 2008 - 2010 will be a great period for storage devices, media, and solution providers of hard drives, flash, and optical. People will still be comfortable in storing and sharing digital files on blank media. CD media sales have been flat to slightly down this past year. DVD media sales have probably reached their peak. Once we see more BD/HD DVD burners hit homes/offices we'll see the recordable media format sales increase because it is a logical extension, an evolutionary step in storage for consumers.

A DVD burner—which stores content on both CD and DVD—lasts five plus years before it needs to be replaced. That replacement price is well under $50 today. The media costs virtually nothing. People “know” their content is archived.

While the save-and-sneakernet product market will remain stable, the hard drive/flash market will grow significantly this coming year.

Home Storage

By the end of 2008, 1TB/2TB home servers will become normal.

250GB storage in notebook and desktop systems will become standard.

80GB mobile devices will be “expected” as we use them to carry our music, photos, video, web shows, and TV fare.

The biggest winner in this HD space will be the one who does more than just offer higher capacity, and cheaper bit buckets.

The edge will go to the producer who can deliver diagnostic and health maintenance intelligence, not the one who can simply squeeze more data on a single platter.

Mobile play

Flash technology, which is working to find a home in lighter, more power-efficient notebooks, will be a niche solution in 2008. Advertised and wished for performance probably won't be achieved for two to three technology generations. Even with the early adopters, SSD units in notebooks will be a “bragging rights” niche product until at least 2009.

But there is still an almost insatiable demand for flash-based solutions. In the coming year, “everyone” will have a couple of 8-12GB USB drives, four or five 8-16 SD cards for their cameras, a couple of 16-24GB cards for their camcorder and three to four 4-8GB cards for their cellphone.

Of all of the storage applications, we believe the mobile phone usage will be the most exciting and aggressive.

Now that the cellular services of the Americas have come to realize they are service providers, not device sellers, we should see a rapid succession of new mobile phones both here and abroad that will make life on-the-go easier and more satisfying. It's also more logical for the phone producers.

If you scan the BOM (bill of materials) of a 4GB cellphone with 5MP camera and 2-3 inch screen, one of the most expensive components has got to be…storage.

Remove storage from the equation, offering the consumer with “virtual storage” options and other software-ready features like music/video download, GPS, 3D screen and suddenly you have an economic device you can enjoy for years…yeah right!

Handset manufacturers will be delivering a more feature-rich, more economic and more flexible device to the manufacturer and will place the onus to deliver low-cost, rugged capacity where it belongs…at the flash producers' front door.

At home and away the demand is going to be connected to using your content in new and different ways. Simplifying the process and making it cheaper, more reliable, more flexible is going to place increasing stress on fixed providers…like the cable guy!

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2007—the 3D year

By Kathleen Maher

So, how long have we been doing this? Jon’s been at it since god made the pixel. The rest of us have come along somewhat later. And for all this time, we have continued to talk about the holy grail of 3D. Microsoft got our hopes up with talk about a 3D interface. They even named the thing—Chrome. And then they shut it down and reassigned everyone who got anywhere near the project. We got really excited a few years ago about 3D on the web. Didn’t happen. And then there was Vista with 3D capabilities and Leopard too. We waited and waited. And then when it finally got here, it all seemed so anticlimactic.

And still I say, 2007 is the year of 3D. A little late, not so flashy, but hey, that’s the way the real world is, kid.

The strange course 3D has taken to the mainstream has caused more than a few clocks to be reset, but the people who labor long and hard to create the fastest GPU, the best game, and the coolest special effects are in this business because they love 3D. They don’t give up. They’re not novelists or painters, but they have the same creative drive and they want to see dreams take shape using lighted pixels.

If you look at it this way, there is a part of 3D technology that will always remain slightly out of reach because there are people reaching for the stars, or digging for gold. The oil and gas industry is using graphic visualization to search for oil, pharmacologists are using it to search for money, and new cures. And of course, creating life from pixels is part of day-to-day business for the movie industry.

In 2007 though, 3D is breaking out of its niches.

Obviously, gaming has been the first wave of mainstream 3D but it’s still a niche. It’s the dark side of 3D. Immersive environments are common in 3D and they just get better with every game release. But as we all know, games are for kids. Kids who like to see things blow up and who like to indulge their guilty pleasure. The cult of the gamer has actually stymied graphics development as companies target the one dimensional gamer and fail to use their imagination for other applications for 3D. As Alex Herrera notes in this issue workstations have come to be seen as the boring over-achieving cousins of the game rig. In reality, workstations are the tools used to actually create the magic —even the magic of 3D games as well as the magic of creating dreams out of pixels, and money out of chemicals and shale.

In 2007, amazing things have been happening in 3D. The CAD companies are reporting growth rates in the range of 30% and more and they see the trend continuing. CAD companies are growing revenues by selling 3D products instead of incremental sales of mature 2D products. It’s taken almost 20 years for the shift to come but now that it has, it’s going to cause an avalanche.

There’s more. Adobe has added 3D functionality to its flagship products Photoshop, Premiere, After Effects, and, before that, the company added 3D to its PDF format. Google has made 3D modeling free with its SketchUp tool for Google Earth. The CAD companies are building plug-ins for Ketchup so that anyone can start with a simple Ketchup model and bring it into a CAD program for further refinement. Or take your CAD model into Ketchup and let it find its place in the world through Google Earth. Autodesk now supports Google and Microsoft Live searches with its DWF exchange format so that, if there’s a model available of something you can find it. Try typing car filetype:dwf in your Google search bar and see what you get. If you have the free Autodesk viewer tool (or a product that reads DWF) you can see, annotate, and move the model. It’s a good start on the way to making 3D the lingua franca of the web.

To get back to the game industry, while there will always be a segment of the game market that gravitates towards the first person shooter, there are signs the game market is growing up. Or growing out with games that are more inclusive and online worlds that are might be games or they might be habitats. There are societies in online worlds where deals are made and people even have jobs—building models for Second Life and other worlds.

Virtual reality is getting more real all the time.

Getting perspective

A few years ago, probably around 2000 or so I predicted that the real future was in 2D. Video and TV were the real future of the PC. As for 3D, it belonged to a small tribe of maladjusted shooters and almost equally maladjusted scientists and engineers. At the time, I was right—even more right than I realized. Video has increased the usefulness and the entertainment value of the computer—to the point that computer entertainment is threatening the very basis of our civilization—TV.

Most of the web is still 2D and the most popular sites today are actually pretty plain—they’re My Space and Face Book and LinkedIn pages but they open up and enrich the lines of communication between people.

Now, the infrastructure is in place and the lines of communication are open wide and humming. The scene is perfectly set for 3D, which truly will add a new dimension to communication. It’s not “either or.” 3D worlds will combine pages, and video, and models and people will get used to moving through different contexts.

In 2007, 3D models moved out of the confines of specialized occupations and into the hands of more people. That trend is going to continue and through the rest of the decade, we’ll see more 3D environments and 3D on the web.

It’s going to be just like we always said it would, only different.


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