This month has started out with a lot of excitement. first Intel announced their amazing Tri-gate processor which is designed to get Intel into the Smartphone and Tablet Market. NVIDIA, who is already on many of the next generation products, bought Icera to complete their mobile suite and better compete with Qualcomm. However, at the same time Apple, who had been the company of the last decade, passed Google with the most powerful brand and likely represents the biggest threat to both the ARM vendors and Intel. Let me explain.
Back the Future
The PC market was unique in that a series of vendors grouped around a common pool of technology to create very similar products. They, over time, agreed on the processor and bought it largely from Intel, they agreed on the operating system and bought it largely from Microsoft, and they agreed on virtually all of the ports except the power port in laptops. Granted AMD and VIA provided processor alternatives to Intel’s and NVIDIA, AMD, and VIA provided graphics alternatives and Apple provided a small alternative to Windows but, for the most part, Intel and Microsoft controlled the PC market. And in that world Apple was trivialized.
However the big power behind the PC was initially IBM, who was massively dominant when the PC was created. IBM captured virtually the entire business market-- which was where the money was-- and it was corporate buyers who made the difference as they didn’t care for Commodore, Atari, or even Apple (with some small exceptions) all that much even though those brands, collectively, were much more powerful.
However, we are calling the current trend the “Consumerization of IT” and businesses aren’t driving it. Apple is by far the most influential vendor in the consumer segment. In addition, the closest thing in the tech industry to having the client power IBM had is arguably Apple thanks to the iPhone and the iPad. Their recent brand power suggests they are the company with the most influence.
Apple Vertical Integration
Last week the rumor surrounding Apple was that they were going to move off of Intel’s technology and towards ARM. However this doesn’t help NVIDIA because Apple has their own processor group and they have a tendency to want to go it alone. Granted, they don’t have a baseband processor yet and have been buying that from companies like Qualcomm but, given how Apple likes to own their solution, it is likely they eventually will want to use their own technology here as well rending both Qualcomm and NVIDIA redundant on Apple’s products.
Apple’s success has made them the most emulated and where Apple goes, others are likely to follow. HP with WebOS is already looking at going down a similar path and even Motorola is starting to look at doing their own OS. At the very least and this trend would obsolete, if successful, firms like Microsoft and Google with regard to operating systems.
In effect, Apple is not just driving the concept of a Post-PC era, they seem to be on the cusp of declaring the entire model obsolete and, should they be successful, vendors who live on this model, regardless of whether they are currently on the tablet/smartphone side or the PC side might find a declining base of customers and be forced increasingly into the role of IP litigator to preserve revenues and profits. Apple has a pretty good defense for this but most other hardware vendors and Google currently do not.
Intel Might have been Better without Apple
One of the sayings here in Silicon Valley is that “Nobody partners with Apple twice.” This is generally because high profile Apple partners ranging from HP to Portal Player have found that the initial benefits from an Apple partnership pales against the damage when Apple breaks the partnership. Even IBM, with the PowerPC processor, can attest to this as being a rule that should be remembered.
Had Apple stayed with PowerPC on PCs they would likely have been less successful and their anticipated move to ARM would have had far less impact on Intel. Now that move, coming on top of Microsoft’s announcement for ARM support, would be crippling and represent what is likely the biggest problem Intel has faced this decade.
Wrapping Up: Apple Uber Alles
What I think is fascinating to watch is that ARM represents the biggest visible threat to the x86 vendors but these vendors are still mostly fighting each other. Intel likely represents the biggest visible threat to the ARM vendors but they are too busy fighting with each other to coordinate against Intel. However the biggest threat to both is likely Apple’s model which obsoletes the independent model all of these vendors are based upon. If Apple is successful in driving the technology market to vertically integrate, which is how tech was initially under IBM and Apple, then it is game over and none of these warring vendors are likely to see it coming. In Apple’s future world there can be only one.
President and Principal Analyst, Enderle Group
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