Final Project Individual Part
New Trend of Microprocessor Industry in Global Cloud Computing Era
1.
Introduction of microprocessor
A microprocessor is a computer
processor that incorporates the functions of a computer's central processing
unit (CPU) on a single integrated circuit (IC). The integration of a whole CPU
onto a single chip or on a few chips greatly reduced the cost of processing
power. [1]
The development process of
microprocessor could not be discussed individually without the fast development
of electronics engineering. In 1971, the first microprocessor which was 4-bit was invented, this was a
significant improvement for electronics industry. One year later, the 8-bit
microprocessor was invented. Here is a very famous law in the electronics
engineering industry which is called “Moore’s Law” which means the number of
transistors in a dense integrated circuit has doubled approximately every two
years. The improvement of microprocessor was really fast according to the
“Moore’s Law” which made the microprocessor upgraded from first 4-bit to 8-bit,
16bit, 32-bit, 64-bit until the early 1990s. Keeping up with Moore's Law is
becoming increasingly challenging as chip-making technologies approach their
physical limits. In response, microprocessor manufacturers look for other ways
to improve performance so they can maintain the momentum of constant upgrades.
2. Industrial profile of microprocessor industry
2.1 Size and Structure of the Industry
The
Microprocessor Industry is a very Competitive Industry. Mainly because the two
main competitors are the only two competitors fighting it out. Each of which
try to outdo the other by launching innovative products, new marketing
strategies and newer branding attempts. In order to have a clear view of the
macro-environment of microprocessor industry, we could use Porter’s five forces
analysis model.
2.1.1 Bargaining power of suppliers& buyers
2.1.1 Bargaining power of suppliers& buyers
Bargaining power of the supplier is a weak force
due to the fact that even if a supplier raises costs, it is easy for a
microprocessor firm to easily change the supplier with a minimal switching
cost.
The Bargaining power of the buyer is a major force
as it depends on the Original Equipment Manufacturers (OEM's) example: Dell,
HP, IBM etc. Intel began a marketing campaign called 'Intel Inside' which means
that Intel can educate the customers about their microprocessors present inside
the PCs without the need of going through OEMs which resulted in the down
streaming of their purchasing power.
2.1.2 Threat
of Substitutes
The Substitution force is weak since there is a
lack of substitutes present and even if they were in the past (for example
Apple and hand held PC's) they now use Intel processors.
2.1.3 Threat
of new entrants
The Threat of new entrants is important mainly
because it affects the profitability of the leading manufacturers in the
industry. Intel's gross margins reached 80%. Other firms including Motorola and
Apple tried to enter the market but eventually failed.
For a new firm to enter the market they had to
firstly invest a large amount on fixed cost to create facilities for production
as well as devote large amount of Research and Development on production of new
chips so that they remain competitive with other manufacturers. Of course, bigger
firms have advantages in R&D since older and bigger companies have been
involved in R&D of chips since a long time and have gained valuable
experience over the years in comparison to new firms.
2.1.4 Rivalry
among existing competitors
Rivalry among existing competitors is the most
important force in this industry since there are only two main competitors:
Intel and AMD.
Because the fixed costs are high and marginal costs
are low it results in tremendous pressure for manufacturers to cut down on
costs below the market average so that they attract customers as well as make
up some of their fixed costs. This ultimately results in a situation where the
two competitors compete on the same dimension for one gains and the other
loses.
Another cause of strong rivalry are Exit barriers
where companies try to expand their products into other PC components but
inherently remain linked to profits based on manufacture of microprocessors.
2.2 R&D Activities
R&D expense is essentially the amount of
money that a company spends to develop new products and services each year. The
investment of R&D to a specific area represents the company’s level of
emphasis to the area. According the data of R&D expenses for the main
groups of microprocessor industry, the potential and trend of the industry
could be seen.
AMD has been attempting to challenge Intel
for market share for a long time, but with 20% market share, its smaller size
puts it at a disadvantage. Because Intel has more money to spend on R&D.
There is a very interesting company ARM, which may have great potential in this
industry.
ARM, which began life as a
fairly-low-capability chip for a British PC, again back in the 1980s. According
to the R&D tends of ARM, we could see the incredible potential although the
amount expenses could not compete with Intel at present.
2.3 Leading Companies
With the continuing going downhill of AMD’s
business in recent years. The macro-environment of microprocessor industry has
become really tough. The data proved that Intel is the absolute winner in
microprocessor industry up till now.
Figure 4: Microprocessor industry
market share in 2012[3]
3. Impact of emerging technology cloud computing
3.1 Current situations of cloud computing
Cloud
computing has been credited with increasing competitiveness through cost
reduction, greater flexibility, elasticity and optimal resource utilization. The Cloud market is still
potential in the future, cloud applications will account for 90% of total
mobile data traffic by 2018, compared to 82% at the end of 2013. Mobile cloud
traffic will grow 12-fold from 2013 to 2018, attaining a compound annual growth
rate of 64%. Hence, to integrate products with cloud computing technology is
absolutely the future trend for the companies.
3.2 Strategic approach of ARM to utilize impact of cloud computing
ARM as a
relatively small size company than Intel, it really has even larger potential than other competitors. Intel
was once a player in ARM but abandoned this business in favor of Atom. This may
be a big mistake for Intel’s microprocessor strategy. Without the large barrier
Intel in mobile device processor industry, ARM dominates the mobile device
market today, and there's no end in sight. ARM Holdings uses a business model
that is the opposite of Intel's, doing design work but then licensing to those
who build all manner of chips, including the Samsung parts that run in the
iPhone and iPad. And the popularity of ARM has led even Microsoft to port
Windows 8 to the ARM architecture.
ARM CPUs and GPUs drive mobile market
However, the
emergence of Cloud Computing technology might be a large impact to the future
direction of microprocessor. As a matter of fact, the PC industry has entered
its final stage and this is going to lead PC microprocessor industry to death. Meanwhile,
more and more requests for convenience from people show that computing should
occur in the cloud, not on someone's desk, and increasingly clients will be
mobile and thus have a strong emphasis on low-power operation. However, a shift
away from running apps on the mobile device to running these in the cloud
really need more request for security and manageability, hence the efficiency
of microprocessor of mobile devices is still critical in the future. When
compared with Intel, ARM’s strategy approach of dominating the mobile
microprocessor market is wiser and more far-sighted, of course, the post-PC era
will still last for a long time, so there is enough time for Intel to
reconsider its strategy approaches to face the impacts of mobile cloud computing.
ARM Intelligence Flexible Cloud
4. Impact of globalization
As a sub-unit industry of
electronics devices especially PC industry, the microprocessor manufactures has
done their globalizing strategies for a long time for example the collaboration
of Intel with PC companies makes the Intel microprocessors run in almost every
PC around the world. Actually, the globalization of cloud computing technology
is going to be a large challenge and opportunity for microprocessor companies.
The largest barrier for cloud
computing’s globalization is not technology but policies and regulations of
different countries. Because of uncertainty of information security, cloud
computing may not be welcomed by many countries. The opening degree for cloud
computing measure the countries’ preparedness to support the growth of cloud
computing. Here is an analysis of cloud environment of 24 countries which together
account for 80 percent of the global ICT market:
Figure 5: Cloud computing policy
environment [2]
5. Conclusion
With the impact of emerging technology cloud computing, the future
structure of microprocessor industry has to meet a large reconstruction.
Fortunately the post-PC era will still last for a long time which gives
companies enough time to do transformation. As we know the final goal of ICT industry is to
realize concept of Internet of Tings(IoT) and cloud computing makes it no more
just a concept. So whether the company could foresee
the future situation and make innovative strategy approaches to catch the
coming opportunity of Big Data era will be critical for the development of
microprocessor industry in the future.
6. Reference
Internet Resources:
[1]http://en.wikipedia.org/wiki/Microprocessor
[2] http://cloudscorecard.bsa.org/2013/countries.html
[3]http://www.itcandor.com/microprocessor-q312/
1. Grueber, M. (2010, May 1). 2011 Global R & D Funding Forecast - Industrial R & D: Electronics and Computers. Retrieved from http://www.rdmag.com/articles/2010/12/2011-global-r-d-funding-forecast-industrial-r-d-electronics-and-computers
2. Cloud computing. (n.d.). Retrieved May 3, 2015, from http://en.wikipedia.org/wiki/Cloud_computing