5 predictions about the future, hidden in Intel reporting

Intel's financial statements have traces of predictions about the future of the industry, skillfully hidden among extensive conversations about comparing non-GAAP and amortization of intangible assets.

Usually, the pleasure gained from reading and analyzing the income statement of an average company is only comparable with the pleasure obtained from observing a slowly drying paint multiplied by observing the growth of grass. That is another occupation, in general. But everything changes if these numbers come from Intel . Don't misunderstand me: Intel’s earnings report this afternoon this Thursday is still dull. But, since Intel is one of the cornerstones of the good old uniformity of the Wintel platform, their annual reporting is considered to be the unofficial barometer of the PC industry as a whole. If Intel is doing well, then it is doing well with the entire desktop ecosystem; and the five financial statements hidden in the document actually turn out to be predictions of the future for the PC - for 2013 and a little further.

1. PC is not dead

Everything is simple: when a regular expert tells you that the PC will soon die out like a dodo bird, you can send it where you want. Yes, of course, PC sales fell slightly in 2012 - by 3 percent in the case of Intel PC users, the total amount of decline in the industry was between 3 and 5 percent; but, nevertheless, desktops and laptops were and remain a huge platform for business.
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“If you are talking about 350 million PCs that were put on the market in 2012, then somehow it’s not the language to call such a market dead,” said Patrick Moorhead, founder and principal analyst of Moor Insights and Strategy. "Yes, perhaps the PC development industry is dumping at a pace, but it is definitely not dead."

In general, Intel received $ 53 billion in revenue in 2012 - yes, we are talking about billions, not millions. This is more than 1 billion per week. By the way, despite the fact that revenues from sales of Intel PCs decreased by 3 percent in 2012, real sales of units of equipment as a whole fell by only 1 percent. After that, someone will believe that the PC is dead? Ha!

2. ... but the focus is still shifting

Yes, even if consumer PCs didn’t give up, the days of impressive growth were definitely left behind. All that Intel expects on this front is only a slight increase in revenue in 2013 compared to a decline in the past.



Intel also sees the “writing on the wall” and is working to diversify its lineup in order to comply with industry standards - starting, of course, with all these annoying tablets. During his introduction to Intel's earnings report , Chief Financial Officer Stacey Smith spent as much wax-writing about the company's plans in 2013 for mobile initiatives for as much time as he talked about ultrabooks and dextup processors. However, this was to be expected, because in this new line of business: at CES , the Bay Trail and Lexington tablet processors for smartphones were shown, and again, no less attention was devoted to the future Haswell. The company makes a big bet on business users, and, of course, on the ubiquitous clouds today. The Data Center Group, which is involved in servers, was the only one who was able to increase its profits last year, and Intel expects further growth this year - up to double digits. The new course of the company, taken on server and mobile technologies, gives it a unique chance to break the double jackpot on the market.

“Data centers and clouds are now also Intel,” Moore notes. “Their huge growth is not at all accidental. Every phone and tablet sold is connected to the cloud, and Intel provides these clouds. Now people are gradually forgetting that their "iron" is controlled by the cloud "

The 800-pound gorilla of the mobile world named ARM also turns its attention to the clouds. We will see the result already in 64-bit ARM processors, which should appear in server racks in 2014. It is noticeable that the entire PC industry has shifted its focus towards the business sector - which is clearly underlined by the attempts of Dell and HP to impress the production-oriented enterprises.

3. Blurring lines and mixing uses

The future, as Intel's CEO, Paul Otellini, told investors, for hybrids. (This statement is unlikely to be a surprise to you if you closely follow the events occurring in the industry)

The first round, in which hybrids took part on Windows 8, did not become a storm that swept the whole world - but Otellini expects the mobile technology to split into two camps of devices that continue to evolve: tablets and phones from 5 to 7 inches in size, and devices with a screen size of 10+ inches. Otellini expects that these large hybrids will offer PC-equivalent performance in a flat-panel tablet form factor, all thanks to Haswell and Broadwell processors that will appear in the next two years. Patrick Moorhead agrees with him on this issue.

“All points converge on 2014,” Moorhead says. "In 2014, you can get very high performance in one device, a thickness of 9 mm, no cooler and low cost - this is what the tablets will look like on Haswell technology." If the device has 10 or more inches, you can easily attach it to the dock with the keyboard. Why then would someone need to buy a separate tablet? You don’t have to compromise between tablets and a laptop; there’s simply no market for 10-inch tablets. ” This, we note, is not too favorable forecast for Windows RT - and for laptops, too.

Intel has already laid the foundation for future tilting, sliding and other "mobile" laptops. And at CES, the company announced that any laptops inside which will have Haswell processors installed would also have to use a touchscreen display to get the proud title of “ultrabook”.

4. Race to the top

However, hybrids have drawbacks: they cost much more than their less “flexible” rivals. Despite the recent cries here and there, that cheap touch-screen laptops increase sales of Windows 8 , we’ll rather see manufacturers who compete for high end processors than for superiority among low-cost processors.

Sales of touchscreen models and Windows 8 on board in the fourth quarter convinced Otellini that “people are willing to spend a little more in order to get a product with great potential. This trick definitely works in the case of the Apple business model for many, many years, and it seems to me that this model aims to ensure that buyers pay for innovation in this way. ” So you can get your checkbooks now, guys.

The NPD sales data for the festive season tell us that the average price of an Apple laptop, which the user is willing to give, is $ 1,419 - that is, exactly $ 999 more than $ 420, that is, the average price of a laptop on Windows. laptops on Windows with a price of less than $ 500 fell by 16%, while sales of laptops with a price of $ 500 + increased by 4 percent. OEMs are not idiots. They want to be closer to this trough, and this is why we can already see how many manufacturers like Dell or Acer are refusing to buy products from the cheap sector in favor of producing ultrabooks and other expensive models, despite the fact that such a change of course could not pay off in 2012 .

But budget PC fans have nothing to fear: inexpensive laptops are not ready to retire. “Intel does not say that it will refuse to participate in an inexpensive market sector. In fact, with processors like the Atom or Pentium, they may not even think about it, ”Moorhead says. “What they are really trying to say is that they are going to focus on new models that will require more performance and usability.”



These innovations in use, Moorehead says, will be completed on Intel’s initiative, Perceptual computing , which blends computer management with human perception. Moving on to talking about innovation ...

5. Race to the top, part two: Moore's law is still in force

Despite the fact that sales of custom PCs are slowing, Intel does not lose grip on what it can do best, and continues to focus on creating smaller, better and more efficient processors. The company continues to build a bright future for all PCs, spending a rather large amount - as much as 18.2 billion - on R & D and acquisitions last year. This number in 2013 should grow and turn into $ 18.9 billion.

But Intel is not just investing all its money in financing other companies. The company plans to begin production on the 14-nm process technology this year. “This puts us well ahead of the competition,” noted CFO Smith during an earnings conference. The current Ivy Bridge processors are built on the 22-nm process technology, while AMD still uses the 28-nm process technology .

But from the company one should expect not only Haswell 14nm chips, which will appear in 2014. In 2013, the company plans to begin work on the 10-nm process technology, which in 2016 will be released new architecture without heat shrinkage - already as part of the cycle of the company "tick", followed by the architecture of "so» Skylake, expected in 2015. (As you know, Intel is working on the tick-tock development process. The tick has an improvement in the process technology, and the so-called new architecture) - approx. translation .)

But, while Intel's processors are getting smaller and smaller, the company is working on increasing the silicon wafers from which the processors are made. The current size of the plate is 300 mm, and Intel wants to increase this number to 450 mm. A higher value means lower production cost, which will mean - this is just an assumption - a lower cost on the CPU in the future. Despite the fact that the transition to large plates should not be expected earlier than in the second half of the decade, Intel is already engaged in this transition process. Yes, Chipzilla thinks globally.

The key investment of 2012 can bring tangible benefits in both directions. In July, Intel gave ASML Holdings $ 3.3 billion to motivate the creation of 450 mm wafers and ultraviolet extreme technology, the next generation technology that should help Intel make the process even thinner. Intel expects that the immersion lithography currently used will be ineffective for processors with a process less than 10 nm.

Intel itself said earlier that they did not expect the emergence of EUVL technology or 450 mm plates before 2016 and the release of 10 nm Skymont processors, but Otellini refused to provide any news about the possible use of EUVL in 10 nm processors when asked about this at the conference.

Go to infinity and beyond!

So, let Intel's operating income drop slightly in 2012, but taken as a whole, the company's revenues say that the PC still has a bright, advanced future, and with it hundreds of millions of PCs sold. And let the future, as always, turn out to be not as we imagine it now - but the future of the PC has never been so bright and ready for development.