With its share of the microprocessor market hovering around 80 percent, Intel looks like a company on the verge of a monopoly.
Certainly, the company is firing on all cylinders. With new processors, rising market share and an annual advertising budget of around $100 million, not to mention its now-ubiquitous "Intel Inside" logos, the company has utterly dominated the market for personal computer processors this year.
But how close are we to a world dominated by one chipmaker?
Not very, say most industry analysts. In fact, Intel is actually much less of a monopoly threat today than it was previously, thanks largely to the cyclical nature of the x86 processor business -- and the paranoia of computer manufacturers who don't want to see a world where a single chipmaker calls all the shots.
"I don't think we have to worry about having a single source of processors in the world," says Yankee Group analyst Josh Martin. "Intel's been a dominant factor in the market for some time, but that doesn't mean AMD's fate is sealed by any means."
Intel's current technical lead is indisputable. Last month, the chipmaker started shipping new processors that use the company's Hafnium-based high-k metal gate (Hi-k) formula, a technology that throws more coals on the fire of Moore's Law and allows the chipmaker to shrink its transistors down to the 45 nanometer range. Smaller circuits, in general, translate into better performance and greater power reduction.
Meanwhile, Intel's competitors are on the ropes: Its chief rival, AMD, only moved to 65-nanometer process chips in December, 2006 and doesn't expect to offer 45-nanometer processors until the second half of 2008. AMD's share of the microprocessor market shrank from 25.7 percent in the fourth quarter of 2006 to 19 percent in the first quarter of 2007, but has since rebounded to 23 percent in Q3 of 2007. Other former competitors are nonexistent: IBM's PowerPC chips don't even have a presence in the personal computer market any more, thanks to Apple's switch to Intel CPUs in 2006.
What's more, Intel is unlikely to lose its technical dominance any time soon: It spends more on research and development in one year than AMD's total annual revenue and continues to gobble up or build new factories (known as "fabs" in the chip business) around the world.
Still, there's not much chance of Intel becoming a chip monopoly anytime soon, says Martin. That's mainly because the cutthroat microprocessor industry, which continues to grow at warp speed, operates in a cyclical fashion. Company fortunes tend to shift rapidly and are based in large part on hitting the right market segment with the right product at the right time, which is especially difficult to do when those products are made by billion-dollar fabs that take years to build.
Not only does Dean McCarron of Mercury Research agree with Martin, he maintains that Intel is actually much less of a monopoly threat today than it was previously. That's because, in McCarron's estimation, things are actually more competitive in the chip industry now than ever.
"The fact is (AMD is) now competing in all (processor) markets," McCarron says, something that wasn't the case five years ago. That's exerting much greater pricing pressure on both companies, and while AMD has to frequently undercut its own processor prices to stay competitive with Intel, McCarron says that's not necessarily indicative of a company on the ropes.
This fierce competition between the two companies has benefited consumers, as the ongoing pricing wars have yielded some very cheap processors. And almost every major computer manufacturer now offers both Intel- and AMD-equipped computers.
In the end, those PC manufacturers all have a vested interest in keeping AMD around, as none of them would benefit from letting Intel monopolize the CPU market. As McCarron notes, they also tend to enjoy playing one chipmaker off of the other to get favorable pricing.
AMD's $5.4 billion acquisition of graphics card maker ATI in 2006 hasn't helped the smaller company's financial bottom line, although many believe that the merger was necessary for the survival of AMD.
In fact, it's that merger and its long-term implications that may present the greatest challenge to Intel's current dominance of the microprocessor industry. With both companies moving toward fusing GPU and CPU capabilities on one chip, this is one area where AMD undoubtedly has a leg up on its competition.
The other major challenge to Intel has nothing to do with strategy and everything to do with size: Its smaller and nimbler competitor can succeed by concentrating on one area and executing well. For Intel, by contrast, the market is its to lose.
"Because (AMD) is smaller, the company doesn't have as many mouths to feed, (so) winning a particular niche for the company is all it takes for them to be successful," McCarron says. "Because of its size, Intel has to be successful everywhere to be profitable."
Certainly, the company is firing on all cylinders. With new processors, rising market share and an annual advertising budget of around $100 million, not to mention its now-ubiquitous "Intel Inside" logos, the company has utterly dominated the market for personal computer processors this year.
But how close are we to a world dominated by one chipmaker?
Not very, say most industry analysts. In fact, Intel is actually much less of a monopoly threat today than it was previously, thanks largely to the cyclical nature of the x86 processor business -- and the paranoia of computer manufacturers who don't want to see a world where a single chipmaker calls all the shots.
"I don't think we have to worry about having a single source of processors in the world," says Yankee Group analyst Josh Martin. "Intel's been a dominant factor in the market for some time, but that doesn't mean AMD's fate is sealed by any means."
Intel's current technical lead is indisputable. Last month, the chipmaker started shipping new processors that use the company's Hafnium-based high-k metal gate (Hi-k) formula, a technology that throws more coals on the fire of Moore's Law and allows the chipmaker to shrink its transistors down to the 45 nanometer range. Smaller circuits, in general, translate into better performance and greater power reduction.
Meanwhile, Intel's competitors are on the ropes: Its chief rival, AMD, only moved to 65-nanometer process chips in December, 2006 and doesn't expect to offer 45-nanometer processors until the second half of 2008. AMD's share of the microprocessor market shrank from 25.7 percent in the fourth quarter of 2006 to 19 percent in the first quarter of 2007, but has since rebounded to 23 percent in Q3 of 2007. Other former competitors are nonexistent: IBM's PowerPC chips don't even have a presence in the personal computer market any more, thanks to Apple's switch to Intel CPUs in 2006.
What's more, Intel is unlikely to lose its technical dominance any time soon: It spends more on research and development in one year than AMD's total annual revenue and continues to gobble up or build new factories (known as "fabs" in the chip business) around the world.
Still, there's not much chance of Intel becoming a chip monopoly anytime soon, says Martin. That's mainly because the cutthroat microprocessor industry, which continues to grow at warp speed, operates in a cyclical fashion. Company fortunes tend to shift rapidly and are based in large part on hitting the right market segment with the right product at the right time, which is especially difficult to do when those products are made by billion-dollar fabs that take years to build.
Not only does Dean McCarron of Mercury Research agree with Martin, he maintains that Intel is actually much less of a monopoly threat today than it was previously. That's because, in McCarron's estimation, things are actually more competitive in the chip industry now than ever.
"The fact is (AMD is) now competing in all (processor) markets," McCarron says, something that wasn't the case five years ago. That's exerting much greater pricing pressure on both companies, and while AMD has to frequently undercut its own processor prices to stay competitive with Intel, McCarron says that's not necessarily indicative of a company on the ropes.
This fierce competition between the two companies has benefited consumers, as the ongoing pricing wars have yielded some very cheap processors. And almost every major computer manufacturer now offers both Intel- and AMD-equipped computers.
In the end, those PC manufacturers all have a vested interest in keeping AMD around, as none of them would benefit from letting Intel monopolize the CPU market. As McCarron notes, they also tend to enjoy playing one chipmaker off of the other to get favorable pricing.
AMD's $5.4 billion acquisition of graphics card maker ATI in 2006 hasn't helped the smaller company's financial bottom line, although many believe that the merger was necessary for the survival of AMD.
In fact, it's that merger and its long-term implications that may present the greatest challenge to Intel's current dominance of the microprocessor industry. With both companies moving toward fusing GPU and CPU capabilities on one chip, this is one area where AMD undoubtedly has a leg up on its competition.
The other major challenge to Intel has nothing to do with strategy and everything to do with size: Its smaller and nimbler competitor can succeed by concentrating on one area and executing well. For Intel, by contrast, the market is its to lose.
"Because (AMD) is smaller, the company doesn't have as many mouths to feed, (so) winning a particular niche for the company is all it takes for them to be successful," McCarron says. "Because of its size, Intel has to be successful everywhere to be profitable."
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