“Disruptive innovation” is a phrase that’s overused to the point of being a joke, writes Timothy B. Lee in Vox. But he adds that the phrase is an apt description for what’s happening to Intel, which is moving away from the struggling PC market to seek a silver lining in the cloud and Internet of Things.
Lee notes that business guru Clay Christensen, who coined the phrase, gave it a precise definition “…that fits Intel’s situation perfectly: a cheap, simple, and less profitable technology that gradually erodes the market for a more established technology.”
Lee outlines the path that brought Intel to the point where it last week announced a restructuring initiative and plans to eliminate up to 12,000 positions globally, or 11% of its workforce.
First, in 2005, after Steve Jobs announced that Apple would use Intel chips in its Macintosh computers, Intel turned down the opportunity to provide a processor for the iPhone. Consequently, Apple and other smartphone makers adopted the ARM architecture, available from many suppliers.
Next, Intel cut the only tie to ARM that it had when it sold its XScale processor operation in 2006 to focus on developing low-power Atom versions of its x86 processors. But the ARM chipmakers had a big head start, and Atom failed to gain much traction.
Writes Lee, “Intel’s basic problem was that the mobile chip market didn’t seem profitable enough to be worth the trouble.” An Intel PC CPU could cost more than a complete smartphone. Further, Lee adds, Intel feared that if it succeeded in developing low-cost, low-power chips, they might displace more costly, higher performance chips in laptops.
Lee sums it up this way: the ARM chipmakers “…are doing to Intel what Intel once did to Digital Equipment Corp.”
Lee doesn’t prognosticate about how Intel’s new initiative will play out, and Intel, in its announcement last week, had few specifics about its plans. Its mention of cloud and data-center aspects of the IoT suggests it won’t be focusing on low-margin edge or fog-computing devices. Indeed, Risto Puhakka, president of VLSIresearch, speaking at the BiTS Workshop in March, said the most lucrative opportunities for chipmakers in the IoT space will reside in the data centers.
In related news, “Ovum sees over $31 billion invested in IoT-related startups from 2011 to 2015” and “Rising industrial PC market to stabilize in 2018, IHS says.”
