Low-end PC's and arrogance. I humbly submit that the way that this question (see below) was answered allows Intel to fall into a trap that its microprocessor competitors (e.g., AMD, Cyrix, etc.) and its "new age X terminal" competitors (e.g., Ellison of Oracle, McNealy of Sun, etc.) are setting.
One of the reasons I admire Intel so much is the "paranoia" factor of the company -- a culture based on equal parts of arrogance and fear. I'm a believer in the company because I think this will continue. Surely it's obvious that the strength of a company today can easily become a major weakness tomorrow. The strength of Intel today is that it has successfully combined a very fast release cycle (better, faster) and a superb fabrication capability (lowering costs) with a branding/marketing strategy which has people moving toward the higher-end microprocessors.
However, Mark Brophy's point that PC penetration is only 30% (roughly) in the U.S. is telling. (Note: I'm going to stay with the U.S. market in this discussion -- primarily because you can argue in that market without getting into a lot of standard of living arguments that seemed to be how the initial conversation devolved). If Intel is waiting on the U.S. population to "discover toilet tissue", then Intel is going to get killed. Instead, it seems to me that Intel needs to have a strategy which encompasses and embraces the low-end while taking the margin from the high-end.
To Intel's credit -- that's exactly the cost structure that they have put in place today with their microprocessors. The troubling aspect of Intel (as with almost any company) is what the ***NEW*** strategy will be when this one wears out. While some have questioned MMX, the fact is that it's at least an understandable strategy of providing non-incremental functionality to the end user (again -- if the ISV's buy-off). However, if Talisman hits the street at $300 then you've just seen the upper price limit someone would put on buying a new computer versus simply putting a new board in. Of course, this is why Intel executives are hanging out with software dudes all the time -- they need a "killer application" for not only MMX but for their very high speed graphics bus and all of that stuff -- just to try to keep the high-end momentum going.
It would be stupid of Intel to tactically not exploit what all of their work has gained them -- dominance of the high-margin, high-performance PC. At the same time, I sometimes wonder what "self cannibilization" strategy they are going to use -- not for the next microprocessor, but for whatever computing device will end up reaching 90% of the U.S. market. It will be embedded -- not an Intel strength -- and it will be lower margin than what we see today -- and MY PERSONAL bet is that it won't be anything like an NC. I think Intel has as good a shot at winning at whatever this is as anyone in the world ***IF*** they keep the same paranoid attitude. Bottom line: if I'm Intel, I sure wouldn't let MIPS or anyone else win many more PlayStations.
John -- or anyone else out there who thinks that they know -- what I'd love to understand is Intel's theory on getting 90% or whatever of the U.S. market. Because if you figure this out, I think that getting China is going to be a lot easier.
Reference:
Regarding the thread:
<Mark Brophy> PCs have only penetrated 30% of the U.S. population, due to high cost. The penetration is even lower in Europe, and lower still in Japan and Third World countries.
to which John Hull responds:
<John Hull> I think your 'cost as a limit to penetration' is a bit mis-directed/over-weighted. Remember that the PC is not a mature product, most of the world is still trying to get their hands on their first roll of toilet paper - never mind their first PC. I'm not being flip about this, its quite true - there is a huge untapped market for technology out there but it takes time and effort to develop it. |
