Intel, Nvidia, and AMD: the End of the Semiconductor World as We Know It

Last Updated Jan 11, 2011 4:53 PM EST

Monday was quite the day for surprising semiconductor news. First, Advanced Micro Devices (AMD) CEO Dirk Meyer got the boot. Then Intel (INTC) and Nvidia (NVDA) announced the $1.5 billion resolution of a series of lawsuits over technology licensing.

But no one should be surprised. Outbreaks of the unexpected are likely to be the new norm in this industry as rapid technological change and wild shifts in consumer and business preferences kick away the ground underneath.

At AMD, Meyer was almost certainly booted. His strategy was seen by many as short-sighted. Last October, he said that tablets weren't a rush priority for the company. To be fair, his statement wasn't completely mindless. AMD isn't big in notebooks, so it would be foolish to assume that the company could necessarily compete in an even more technically demanding market.

Yet Meyer was playing a traditional semiconductor industry strategy: Identify the markets that already exist so you can put the necessary heavy capital investment where it can do the most good. Unfortunately, that's not good enough anymore. There's no time to wait and see which form factors are the winners. Intel had played that game too long and now is far behind in mobile. AMD is even farther back, even as traditional PC markets wither.

Mobile devices will displace much of the need for PCs, and companies won't keep spending on traditional desktops for all employees if they don't need them. Virtualization and cloud computing reduce the number of servers that companies need for a given workload. By the time a company like AMD can see the shape of things to come, it's already too late to develop semiconductor products for the changed market. Other tech heavyweights have already taken moves that further upset the old order:

  • Apple (AAPL) contracts out manufacturing of the chips for the iPhone and iPad.
  • Microsoft (MSFT) will port Windows to ARM-based chips, an architecture completely different from Intel's x86.
  • Nvidia, Qualcomm (QCOM), and Texas Instruments (TI) are all in the hunt to grab the mobile market.
  • Nvidia will also bring ARM architecture to desktops and servers.
Those who have been in the semiconductor industry for years have seen their entire world turn upside down. And as consumers accelerate the move to mobile computing and corporations seek to cap IT spending on servers and data centers, it will only get worse.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.