Intel president and chief executive Paul Otellini on Thursday predicted that his company and a handful of other vertically integrated semiconductor manufacturers were on the cusp of a "Golden Age" where cutting-edge process technologies would confer even greater market advantages to the firms that develop and implement them first.
"I believe we are developing a set of unique assets that will give us increasingly differentiated competitive solutions going on for years," Otellini said in his opening address at Intel's annual Investor Day, held at the chip giant's Santa Clara, Calif. headquarters.
"For integrated device manufacturers, there's a Golden Age ahead of us," he continued. Otellini predicted that only Intel and "one or two others" would enjoy the advantages of fully integrated chip design, fabrication, and distribution models as cost barriers to innovating new process technologies and building out next-generation semiconductor manufacturing plants would further winnow down such companies to a mere handful.
Touching on developments in the semiconductor industry over the last several years, he said each major process technology innovation of the past decade has given Intel an increasingly bigger leg-up on the competition.
The move to strained silicon several years ago conferred a three-year jump on rival chip makers, he said, while the introduction of High-K metal gate technology gave Intel an even longer lead. The company now believes that its latest process innovation, the Tri-Gate transistors used in Intel's new "Ivy Bridge" chips, will deliver a whopping four-year advantage on the competition.
In addition to having process technology advantages, integrated device companies like Intel can also choose to slough off their yield loss at less costly points in a manufacturing run, Otellini said, whereas "there's a tension between fabless companies and foundries" on yield loss.
For investors, the proof is in the pudding, Otellini said. He pointed to Intel's recent track record of record growth, noting that the company's 2011 revenue of $54 billion was up 24 percent from 2010. The chip giant also delivered $17.5 billion in operating profit last year alongside a 19 percent year-over-year bump in earnings per share.
So who are the "one or two" other companies that Otellini thinks will join Intel in the coming Golden Age for integrated device manufacturers? He didn't name names, but it wasn't hard to guess at likely candidates such as IBM and Samsung, said Patrick Moorhead, principal analyst at Moor Insights & Strategy.
"Otellini presented a case for Intel that left little room for competitive oxygen as he made his case for end-to-end computing domination," Moorhead said. "In markets where Intel has very high market share the story was around market growth and innovation, like what the company is doing in cloud servers. In markets like mobile devices, where Intel lacks significant share, the story was around connected ecosystems, security, and manufacturing dominance."
On Data Centers and the Cloud
Otellini sees the explosive, exponential growth of unstructured data being produced in the world as "a tremendous opportunity for Intel going forward."
"What everyone on Earth is beginning to do is to create data of many different types," he said. "The bulk of the growth is in unstructured data. Storage will have grown 25 times from 2005 to 2015, cloud computing will have grown 100 times, and the number of transistors required for all of this grows 200 times."
This translates to plenty of opportunity in three key areas—high performance computing, volume data centers, and the new microserver segment, he said. Interestingly, despite a lot of buzz around the third category, Otellini was cautious about how much of an impact microservers will have on the overall server market in the coming years.
"It's a very exciting growth segment," he said, talking up microservers built with Intel's low-power Atom chips and its more powerful line of Xeon server processors. But he added that Intel still sees microservers as "a single-digit segment of the server business."
As data center build-out expands to meet the growing needs of cloud computing providers, Otellini promised that Intel would be involved in not just the chip part of that equation, but also in the data center fabric, networking infrastructure, storage, and software used to service an exponentially growing number of connected users, devices, and embedded systems around the world.
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