Year-end prognosticators have their work cut out for them. Most predictions made a year ago were undone by events few actually foresaw. Now things are as uncertain as ever. 2009 could bring a healthy recovery, or another financial crisis could set us back even further.
So rather than specific predictions, it seems more sensible to look at current trends that could shape the tech industry next year. Here are five that, barring further upheavals, could separate the strong companies from the weak.
Big names get bigger. Bad news for startups: Capital and customers alike are seeking the safety of well-known, well-funded names. Take a minute and think of the most respected names in tech. Google? Apple? Amazon? Whether they finish the year higher or lower, the more stable they look, the more they will outperform the broader market. They will have a larger share of attention, and possibly sales.
That won’t be the case for all big companies, especially those slow to update their business models. Microsoft may be aggressive about moving into newer markets, but its core operating-software business may be a drag on growth. Nokia and Motorola have lagged in innovation for years, and must catch up this year or risk falling into oblivion.
The netbook lifestyle. Netbooks are looking to be a big trend in 2009, but it’s unclear whether they’ll be as popular as handhelds and PCs, or a thin niche sandwiched between them. Their fate depends in large part on applications that make them as useful as their bigger and smaller siblings.
Acer is emerging as an early leader in netbooks, but HP, Lenovo, Dell and possibly Apple are competing as well. Who will lead in netbook apps? It’s up for grabs. Google and Apple could take it, as could longer shots like Yahoo and Microsoft — or even a small company not yet on the radar.
Companies get virtual. CIOs plan to spend 2 percent less on IT projects next year, a survey by UBS suggests. Spending on virtualization software will rise 6 percent (down from 10-percent growth in 2008), although UBS cautions it still isn’t a priority in many IT departments.
That could change as CIOs wake up to the efficiency — and potential savings — that virtualization can bring. VMware rules this niche, with Citrix also a player. IBM, Oracle and Microsoft will try to grab market share, but it may require them to alter their licensing terms and cut into profit margins.
Cloud over privacy. It’s not much of a prediction to say cloud computing will advance in 2009. But that could make this a make-or-break year for privacy issues. Yahoo and Google have taken baby steps toward protecting privacy, and how they and others act will turn the the cloud into either a safe place for personal data or a hostile one. And how secure we feel in the cloud will in turn affect the companies building it.
On a separate but related note, 2009 also looks to be a crucial year for net neutrality, so the fate of the individual on the Internet may be cast in stone by year’s end.
Business models sink or swim. Several new business models have emerged this decade, among them VoIP, social networks and online video. But with a few exceptions, they haven’t been profitable. 2009 could be something of a crucible for them. Companies offering products or services for free will be tested as ad dollars remain scarce.
The pressure will force companies to be creative about monetizing technologies that have proved popular. Those that simply won’t bring profits will survive, there just won’t be any publicly traded companies behind them.
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Cisco today announced a new edge router capable of moving 6.4 terabytes of data — the equivalent of 200 full length movies — per second. Om anticipated the product last week, pointing out that the influx of data traveling over the Web requires better and faster equipment to manage such complexity and traffic growth. What we also need is a different type of chip.
Routers have to process a lot of data really quickly. They are the air traffic controllers of the Internet: Each time someone types in a URL, the router has to figure out how to get the request to the correct end point. Since the number of possible routes grows every year, as does the number of times a router is consulted, old processors just can’t cut it anymore, especially at the edge where this Cisco router will sit. Instead of making chips for such devices more powerful (and more power-hungry), engineers are following in the footsteps of the server world and adding more cores.
Multicore chips are gaining in use in the embedded world for networking gear, set-top boxes and other applications. In recent routers Cisco had turned to Tensilica, a maker of specialized embedded multicore chips that can take tasks such as routing and video encoding and speed them up without requiring a lot of power. Tensilica calls its products data plane processors or DPUs. Cisco used those DPUs on its QuantumFlow processor.
Cisco is still using the QuantumFlow processor, but has its own custom-designed cores replacing the Tensilica core, inside this latest router, according to sources. However, Intel uses Tensilica cores for audio processing in its new line of systems on a chip built for video players). Other chipmakers, such as Freescale, which in June announced a new family of processors called QorIQ (say “Core IQ”), are tackling the problem of dealing with real-time data in low-power environments with more flexible, multicore embedded processors.
As real-time data processing becomes more important in areas such as reading routing tables and video and audio processing, Tensilica’s DPU cores and Freescale’s chips offer a way to process that information using less power than a general purpose CPU or even a graphics processor that might also be used for the task. Scientists at the Lawrence Berkeley National Lab are even using the Tensilica cores to try to build an energy-efficient supercomputer. In a connected world where devices have to do more but consume less, this type of design may be the way to go.
As we consume more media online, and the web becomes more central to our lives, it’s only natural to want to bring that content into our living rooms. But while I and a few others will watch movies and shows on a laptop, most people want to watch their media on their TV. And if they can surf the web at the same time, more power to them. For some people, this trifecta of the couch, web surfing and movie-watching on a big screen is their version of heaven. If they have an AMD-powered computer running Windows, then they’re in luck.
I met on Friday with Brent Barry, a PC gaming strategist over at AMD, to get a demo of the AMD Live Explorer software running on a Windows PC and a Sony television. The demo was hardwired, but a consumer could also use a Wii or an Xbox console (both contain AMD chips from the ATI graphics division) to wirelessly send the information from the PC to the console hooked into the television. Since this only works on AMD-powered PCs, most of the market (notably Mac users) are out of luck, but anyone else can download the software for free. It seems similar to the functionality of the ZvBox, but doesn’t require the extra hardware. For a quick tour of the software and why visual computing is becoming so important, check out the video.
Asus Eee PC
A new report from ABI Research on ultra mobile devices will warm Intel’s heart. The report estimates that the sale of all ultra mobile devices including mobile Internet devices, ultraportable PCs, netbooks and basically anything larger than a phone and smaller than laptop will move from $3.5 billion in 2008 to nearly $27 billion in 2013. The firm issued a report a few weeks ago saying 200 million of these devices will be sold in 2013 — something I doubt. But this report is encouraging for Intel, which is pushing its low-power, x86 Atom chip into that market. From the report:
In 2013 more than half of all UMDs will have x86 processors at their heart (largely Intel’s Atom), with the balance based on ARM processors. When it comes to operating systems, in 2013 Linux will outnumber Windows devices by two to one across all UMDs, despite the higher return rate for Linux products (compared to Windows products) experienced by netbook vendors today.
I’m not sure how Linux will overcome those higher return rates, but the idea that Intel chips will power more than half of these devices might give pause to companies such as Qualcomm, Texas Instruments, Nvidia and others seeking to use ARM-based processors to get a piece of this market. If Intel has more than half (even of a smaller market), the rest will have to be split between myriad other vendors. In this case, the real winners will be Intel, with ARM coming in a distant second.
Many of us who live in Silicon Valley pay no heed to decidedly unsexy materials such as aluminum. Of course, they’ve long been integral to our economy — just look at the world’s largest aluminum company, Alcoa. It turned 120 years old on Oct. 1.
A week later, however, the Pittsburgh-based company slashed its growth forecast and suspended its stock repurchasing program, battening down the hatches as the global credit crunch continues to hurt demand. As CEO Klaus Kleinfeld said:
Given the sharp decline in metal prices and increasingly soft demand in our key markets, we are stopping all non-critical capital projects, making targeted reductions to match market conditions, and are adjusting our manufacturing capacity to meet demand in rapidly changing upstream and downstream markets. We are halting production at our smelter in Rockdale, Texas, adjusting alumina capacity accordingly, and are continually reviewing under-performing assets throughout our portfolio. And, we are suspending our share buy-back program.
Why does this matter to Silicon Valley? After all, aluminum is used to make things like airplanes and cars. True, but that’s not all. As a quick visit to Alcoa’s web site will reveal, aluminum is also used to make displays, mobile phones, notebook computers and whole slew of tech-related things. Alcoa even sets up a booth at the annual Consumer Electronics Show.
And now the company says demand in North America is going to decline 10 percent this year. Meanwhile, it expects growth in China to only rise 15 percent compared with an earlier forecast for a 22-percent rise.
And guess where major electronics items are made? China, after which they are sold in North America. My feeling is that aluminum is the canary in the coal mine and is foretelling tough times ahead for both the consumer electronics and computer hardware sectors. We’re already seeing a slowdown in the sales of LCDs TVs — the makers of which are big buyers of aluminum.
There is a good chance the tech malaise is going to spread to the likes of Apple, which uses a ton of aluminum to make their products. Aluminum is also a key ingredient in mobile phones, another area where demand for devices is going to slump, especially for the more profitable, high-end devices. Keep an eye on Nokia and listen for its forecasts.
The automobile industry – a major consumer of aluminum – is already in a deep abyss, with monthly sales plummeting. Automakers are big consumers of technology and have put a whole lot of chips — $113 billion in 2008 — from companies such as Freescale, Infineon and STMicroelectronics into cars to power everything from the GPS to the powertrain.
Any slowdown there is going to eventually move up the food chain and hurt these chipmakers. Strategy Analytics recently forecast a $1.1 billion decline in sales of automotive chips for engines in the U.S. alone.
Whichever way you look at it, the credit crunch is going to crimp consumer demand, which will in turn lead to a clampdown on ad spending, including on the web.
And you thought aluminum was boring!
A lot of talk has been devoted to mobile operating systems lately, with Windows Mobile, Symbian, LiMo and Android getting the lion’s share of the attention. But if you consider that the mobile phone will soon be a place to make calls and access the web through cloud services, then the operating system is less significant and the browser becomes the king.
Or so says Bob Morris, head of mobile marketing for ARM Holdings, which designs the cores for many of the mobile chips that act as the brains of mobile phones. He says that browsers are the new application framework, which is why ARM is paying close attention to how their cores work with specific browsers rather than only the OS. To that end, ARM has inked a partnership with Mozilla and other vendors to build a Linux-based mobile computing device designed for web surfing on the go. Mozilla is planning a yet-to-be launched mobile browser.
So while the former CEO of Vodafone, Arun Sarin, was pushing for fewer mobile operating systems at the GSM World Congress and CTIA trade shows earlier this year, Morris believes the increasing number of services accessed through a web site such as Facebook or Gmail are what chip vendors and device makers needs to pay attention to. Browsers, plus the right downloads such as Flash or Silverlight, will drive the consumer experience more than the OS.
This trend of mobile web adoption has enhanced the profile and importance of ARM, which designs the cores of most mobile processors that serve as the brains of cell phones. ARM cores are also the basis for Qualcomm’s Snapdragon chips, Texas Instrument’s OMAP3 chips and Nvidia’s Tegra chipset, all of which are designed for faster computing at lower power for mobile phones.
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Intel’s Mash Maker application, which launches today, isn’t exactly a new idea; Yahoo Pipes and Microsoft’s Popfly are similar. But Mash Maker marks the first time Intel has launched a software effort with no hardware attached. Presumably you can run Mash Maker on a computer with an AMD inside without melting your motherboard.
I was super skeptical at first and frankly, still am. According to Robert Ennals, senior researcher at Intel Research Berkeley and the architect for Mash Maker, the goal of Intel Research is to make the computing experience better. He said Intel Research and Intel Capital are the only divisions at Intel who have the freedom to think outside the PC box, as it were. Fine, Intel launched Mash Maker to make the Internet a better place. Does it?
Jeff Klaus, marketing director for Intel Mash Maker, said it is more useful than Pipes or Popfly because it not only allows users to make mashups, but also allows those who have downloaded the Mash Maker client to see which previous Mash Maker mashups might improve their web surfing experience. This way users of Mash Maker can benefit even if they don’t know how to create mashups. As one of the biggest complaints I have about Pipes is the difficulty I have using it (yes, it’s a me-centric complaint), I have to think there are others who could benefit from this.
In the meantime, I’ll watch with interest as Intel moves outside of its chip-centric world. A few years ago it made the decision with its Intel Capital venture investing arm to look not just for companies that could eventually sell more Intel chips, but also those that might make for a good return. In 2007 it started investing in seed deals, especially consumer-facing startups, as part of that expanding mission.
As for selling more chips, programs such as Mash Maker may not directly influence buying decisions, but by making the computer easier to use, Intel makes them more important and thus, more necessary. And by associating its brand with a fun application, Intel is achieving brand recognition in a much more sophisticated way than its dancing bunny-suited guys back in the 90s.
Between the laptop and the mobile phone lies…something. Intel and Qualcomm may differ on what that something is, but both firms have determined to tap into growth — real or imagined — in the ultramobile PC space, following on the heels of device makers ranging from established players such as HP and BenQ to smaller ones like LimePC and ASUS Taiwan.
Along the way, the Intel Atom and Qualcomm Snapdragon chipsets will compete against processors from VIA Technologies and Freescale Semiconductor, both of whom make chips for ultramobile PCs already. So far, the winner looks like it will be anyone who wants a computer with a screen width ranging between four and nine inches, as new devices will flood the market. But beyond education, how large will that market be?
VIA Technologies is one of the older players making chips for these pocket PCs. The number of ultramobile PCs based on VIA processors is currently approaching 40, more than 30 of them are shipping today. Freescale has a smaller foothold; one device containing its processors is currently being shipped, and it has a partnership with Intel to provide power management chips for Atom-based devices. Intel has an older line of chips that power the ASUS-produced EEE, but its newly launched Atom processor represents its true effort to get into this market.
At a developer conference last week in Shanghai, Intel said it plans to ship Atom chips in June; it also has 25 mobile Internet devices planned around the processors from manufacturers including Lenovo, Clarion and LG. Also last week, I spoke with Qualcomm’s COO Dr. Sanjay Jha, who outlined Qualcomm’s interest in this space.
Jha said 15 device makers will use Qualcomm’s Snapdragon chipset for powering ultramobile PCs that range from 4 inches to 5 inches in screen width. The devices should be available at the end of this year. While he didn’t disclose the names of the manufacturers, industry chatter favors Samsung and HTC. Which makes sense since Qualcomm is targeting the smaller, 4-inch to 5-inch form factor with which these cell phone makers are experienced.
Chipmakers are placing bets on this space because smartphones and ubiquitous broadband are making it possible for consumers to rely more closely on the web for life on the go. Personally, I think improvements to smartphone user interfaces would be a better bet. In the developing world and in education, such portable PCs could find a home, but for the rest of the world, a smartphone that’s easy to use is the likely winner. That or a MacBook Air.
- The Register: Qualcomm buys Phorm-alike Firm
- BroadbandReports: Time Warner Cable Will be Spun Off
- ArsTechnica: Congress Prepares Probe of FCC Chairman
- ArsTechnica: How NBC Wants to Both Filter and Use P2P
- Light Reading: AT&T Prepping for GPON
- Reuters: Google to Unveil New Ad Service for Publishers: Report
