On this episode of The Six Five Webcast hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The six handpicked topics for this week are:
- AMD’s Datacenter Announcement and Meta and SAP?
- The NVIDIA GTC 2021 Event
- NVIDIA DRIVE platform Hyperion 8 Announced
- The Mitel and RingCentral Partnership
- Windows 11 SE and the New Surface Laptop SE
- Intel Calls Qualcomm A Top Strategic Account
For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.
Daniel Newman: Welcome back to another edition of the Six Five podcast, weekly edition episode number 102. Pat, we’re past the 100 mark. I don’t know if we need to call this out anymore. Let’s just say we are super committed and we have hit the benchmark. Now it’s all about 100 to a million. I don’t know buddy. But it’s Friday. It’s Friday morning. We’re on schedule this week. Can’t promise it’ll be that way for the rest of this year because we are heading into the holidays. We are heading into some travel but we love these Friday mornings and we love weeks when there’s lots of big news in the tech space. And this week there was plenty, Pat. Probably highlight events and video GTC, AMD had some big news and we’re going to talk about a whole bunch of other news that broke this week. But first of all, Pat Moorhead, good morning. How are you, my friend? Excited to be back.
Patrick Moorhead: Daniel, it’s is my favorite part of the week, which is Friday. Do most to our podding and it’s kind of free flow podding. We’re not having a guest, which I do love our guests, don’t get me wrong but I do like to pod with my bestie. I’m mixing it up this week with a new background, new room in the condo down here. This might possibly be my son’s room. Possibly. I don’t know. You can see the Alienware going on, just possibly his gaming chair.
Daniel Newman: I like his room. I like his collection of cool shoes. Jordan’s and he’s got the ultimate gamer set up. Everybody needs to know Mr. Pico Moorhead. He also has an affinity for fast cars like someone else I know, which is super fun. By the way, it is November 12th and I would like to take a moment to do a little shout out. It is Olla Moorhead’s birthday, am I correct? The wife’s birthday.
Patrick Moorhead: Yeah, so nice.
Daniel Newman: And she’s what? 33, I believe. And then my beautiful middle daughter, Avery is turning 16 today. And no, don’t ask, I’m not buying her a car. She’s one of those Z kids. She doesn’t even really want to drive, which is super weird to me but we’re having that conversation because it’s getting to a point where it’s actually more inconvenient to me than to her that she doesn’t want to do that because I’m not quite comfortable having her running around at Ubers yet.
But Pat, big week. Excited. Quick, let’s just quickly knock out the disclaimers. Our show is for information and entertainment purposes only. And while we will be talking about publicly traded companies on this show, please do not take anything we say as investment advice. And of course, as a reminder for everybody out there, the Six Five, it was really all about six topics, five minutes each. We’ve sort of blown that but you will get six topics. They are hand picked and our whole concept here is less news, more analysis, getting in between the lines, what you really need to know about the week’s most interesting stories across tech. And this week we’ll have AMD, NVIDIA, Luminar, Mitel, RingCentral, Microsoft, Intel and Qualcomm as our key topics but who knows where we may end up between now and the end of this show. But Pat, rock and roll. You ready to, what do you always like to say? You ready to light this candle, Daniel?
Patrick Moorhead: Something like that. Something cheesy and gen X-y.
Daniel Newman: All right, well light this candle. First topic is AMD. Wow. What a week. What a week, Pat. And I just want to say, on Friday, you know this, because over the weekend I was pitching back and forth with you. A market watch piece I was working on and I said, “Who are going to be the next three mega cap companies?” Which are companies with valuations over 200 billion. On Friday AMD closed at somewhere around 150. On Monday the announcement that you’re about to talk about came out and their market cap jumped to 180 and I felt like I had absolutely nailed the premonition. The only problem was, is the piece came out after the news despite the fact that I wrote it first but I’m telling you here, Pat, as my witness, you knew I was writing that piece before that news broke.
Patrick Moorhead: I did. I vouch for you. You may have asked me question about it. That’s how I know. Well, no you were spot on. You were spot on. What on earth drove the stock up to a closing of 154.45? Or actually it opened. It was interesting. I’m going to jump right to the Meta announcement, which Meta slash Facebook set of was using Epic, which by the way, my comment was, well, that’s great, but it’s really not as big a news as you might have thought and maybe that’s why the stock went from 154 down to a 140. But the news that came out was that AMD brought out a new Epic third generation AMD Epic with AMD 3D V-Cache. Wow. That’s just some awesome acronyms there.
First off, HPC is an important market. It’s not just for universities or national projects, although AMD did win some big ones with this chip but also their accelerator, the MI2, the Instinct. And it’s also for things like banks, it’s for drug discovery, it’s for high frequency trading. High performance computing has actually turned into high performance computing not just the national lab. This new chip, so what the head is a 3D V-Cache. Well, what AMD did is, AMD’s calling it a 3D package, which I’m going to give them credit for. I thought it was more of a two and a half D but if they’re going to call it 3D, I guess it’s 3D, but essentially they’ve put a giant piece of cache to accelerate it.
And their claims are that it increases performance on certain HPC workloads up to 40 to 50%, which is pretty incredible and I see now why they’re winning many of these national labs. They’ve tripled the amount of L3-cache, there’s 800 megabits of cache, upper socket, which is completely bonkers. Whether it’s element analysis, structural analysis, computational fluid dynamics, EDA, this thing is absolutely rocking. AMD also brought out some partners, Altair, Ansys, Cadence, Siemens and Synopsys.
The MI200, it’s interesting with AMD, they keep making these huge announcements on the GPU side. They’re getting a little bit of traction but not a lot. NVIDIA is winning most of that but they brought out a new MI200, Instinct MI200, which by the way, on paper, on a floating point basis does blow away the NVIDIA A100. Now GPU hardware has never been AMD’s challenge. It’s really been the software. With CUDA as locked in as it is, it’s harder for AMD to drive business, let’s say than an NVIDIA but I’m optimistic here and what they can mean. The market does want more competition. AMD did win multiple lab wins over NVIDIA with its GPU. I think it’s definitely looking up for the data center side of the GPU house.
Daniel Newman: Yeah, Pat. And it was a big week overall. I sort of alluded to the Facebook news. It’s interesting with Facebook is because the company is almost an untouchable in terms of everybody’s disdain for some of Zuckerberg’s antics and the company’s treatment of its users. But at the same time, its users are staying steady and in fact, growing. The stock price is up more than Amazon for the year. And the Metaverse, they’ve seemed to somehow, at least in early days taken ownership because even Microsoft is going to partner with Meta. I can’t call it Meta though. I’m just going to call Facebook because I’m not going to actually universally accept Metaverse as our future term and we’ll come back to that. That was a really big win, a big announcement for the company.
The other one that I just wanted to touch on around AMD was the announcements RISE with SAP and AMD becoming a deeper, more integrated partner. And this really is a shout to Lisa Su and her team’s successful capturing of more substantial market share for data center compute with Epic. As the company has usurped it’s longer term goal of 10% and I also point out that Intel still has a huge amount of market share so everybody that’s calling their demise early, they’re still very, very, very important in this space. But having said that, SAP has come to recognize is that it needs to make it easy for SAP users that are migrating and upgrading to S/4 and to new technologies on SAP, to be able to do it with AMD in the most seamless way possible.
For the longest time, there’s been an extraordinarily deep partnership with Intel and SAP and it was seemingly untouchable but this move and the fact that SAP not only is offering it but RISE with SAP, which is their program that’s all about simplifying and bundling the delivery of SAP in the cloud is going to standardize more capabilities around AMD. It was a really good reflection. It shows a really positive momentum.
All right, we were on that one a little bit longer than we intended but kudos AMD. Pat, this week’s big event was all about NVIDIA. GTC, even Twitter gets a little hashtag with a custom leather jacket. When we do a Six Five Summit, I want a little one of our little heads or something to be next to our names. Then we know we’re doing it right. But listen, there was 20 plus announcements. It was huge. The way I think we could break this down, Pat is maybe I talk about one thing, you talk about one thing that kind of stood out to you and then we have another topic later that’ll indirectly talk a little bit more about what’s going on. My focus kind of bounces off the last topic of Meta and Facebook and Metaverse and that in case you weren’t aware for some time now NVIDIA’s had a technology called Omniverse and Omniverse has been all about creating more integration between our digital and physical universes through things like gaming, collaboration, simulation and this particular GTC, the company further inundated its role and its commitment to playing in the verse.
And the reason I’m going to take the word out in front of it is because clearly Jensen and NVIDIA is in dispute that Meta or Metaverse is going to be the term of the future. The company believes it will be Omniverse. That feels a little bit Pat, like DPU versus IPU versus XPU, which I’ll just say P-U. Listen, we’re going to get there. But what NVIDIA is doing and what I really came out and said, is first of all, they had two really big announcements. One was around synthetic data with its Omniverse replicator synthetic data generation engine for training AIs. Ooh, take a breath there.
But what’s going on there is that effectively when you’re in this Omniverse, Metaverse when you’re in simulation, digital twin, you’re creating all this data and you need to be able to build models that can take that data, which is called synthetic data that’s being created in a digital twin or a parallel universe as I like to call it and concurrently mesh it with the data of our physical universe and be able to use it for things like simulating test drives of vehicles. When you’re going into the future of fully autonomous vehicles, you can create millions of simulations that create useful data that would be practical in the real world but you need to have a way to be able to utilize that data, optimize.
Patrick Moorhead: Daniel, did you say digital twin?
Daniel Newman: Digital twin.
Patrick Moorhead: Oh okay. I got you.
Daniel Newman: Ah, there’s a digital twin. That’s the cover of my Forbes piece about it, in fact. And so the best two examples of how that’s going to end up working is going to be really around autonomous vehicle and robots. I think those are the two early utilizations of it but really this is all about the evolution of AI. It’s having physical and virtual environments and all that data used concurrently to create the most valuable models, frameworks to develop future environments, which could and possibly will include something like Metaverse from Facebook or Meta or Microsoft’s Teams on workplace spaces, whatever.
Patrick Moorhead: I know what you’re saying.
Daniel Newman: The second is your avatar is waiting, is what I called that little section, but NVIDIA Omniverse avatar. And the company’s basically built a platform for generating interactive AI avatars. And this is what we saw Jensen show off. But in order for us to have the Omniverse or Metaverse or whatever the heck we end up wanting to call it, we’re going to need to be able to create intelligent versions of ourselves and others. Jensen showed himself but the company like it did with inference and Jarvis and Merlin and these frameworks, it did something similar here with its real world use cases, which this is what NVIDIA’s so good at by the way is creating real world use cases where they’re less about being a hardware company and more about being a solutions or software company.
And they came up Project Tokkio and Project Maxine. Tokkio was all about showing examples of how customer support could be used. How an avatar could basically be generated and created to in this Meta Omni world to create interactive customer service. They showed an example in a restaurant, they showed an example with conversation with a professor or someone about climate change. You could actually have an interactive conversation with it.
The other one was Maxine, Pat. And this is a really interesting and actual practical version in this hybrid future of work is they put two people working in noisy environments across the world, speaking different languages and how using the avatar technology and Omniverse, they could instantly streamline the language, take all the background noise out so it’s like you’re having a quiet, private conversation with seamless language translation in this Omniverse. To me, that’s a really useful practical example of bringing the world closer together, which is why I’ve sort of said, I think NVIDIA may end up blurring. NVIDIA may end up being more important to the future of whatever these digital and physical world creations are than Facebook Meta but not necessarily will they get the credit for it but that’s why Pat, we are here.
There’s one other thing I know you and I, I’m going to kick this one to you but our friends at Cloudera and NVIDIA announced a really interesting partnership as well.
Patrick Moorhead: Yeah, you want to talk about that?
Daniel Newman: I did. I could punt it to you or you want me to do it?
Patrick Moorhead: Oh, well you wrote the article on Cloudera, why don’t you do it?
Daniel Newman: Absolutely. The Cloudera machine learning and basically NVIDIA offered what’s called RAPIDS edition machine learning runtime, another mouthful but it’s really all about rapid docker images. It’s about helping data scientists get up and running on GPUs with a single click of a button. And to me, this is one of those big moments where a company like Cloudera partnering with a company like NVIDIA to be able to streamline and add capabilities for democratizing data science.
And by the way, Pat, this is a really important topic because we have better and better compute technology with GPUs but the ability for enterprises to utilize it comes down to software, comes down to data management and data science. And so what I’ve really been impressed with is the Cloudera data platform, the company and the way it’s been basically partnering successfully around the internet and basically removing barriers that basically enable data scientists to adopt GPUs for workloads that are more just deep learning. Overall Pat, it was an announcement within an announcement within a number of announcements, but you and I we track Cloudera very closely. And as far as I see it, it’s a great alignment for the company.
Patrick Moorhead: Yeah, totally. Totally. One thing I’m going to hit, I’m going to hit on in NVIDIA’s auto announcement. Little bit of background, NVIDIA has about a $600 million annual business in automotive. Hasn’t moved up extraordinarily over the past couple years but I believe once we start seeing more L2 Plus, L3 and even L4, it’ll explode. I’d love to get a backlog number from them like we get from Qualcomm but I have not been successful in that. But they have a tremendous amount of logos and you can catch those logos in my Forbes article. But one thing I want to hit on is what they actually did announce at the show.
First off, is they brought out a new stack called Drive Concierge and they also brought out Drive Chauffeur. And you can imagine what those are. Should be pretty easy to figure out. With Concierge, NVIDIA creates an Omniverse avatar for you to communicate with and interact with driving. You have an emoji, a 3D emoji like figure. It sees, it speaks, you have conversations back and forth. Unfortunately it doesn’t look like it’s the Jensen emoji. It’s more kind of a robotic but it can essentially help you do all these on demand things like getting a reservation, easy stuff like show me where I can go, turn off the radio or do something like that. And then the next thing they brought in was Chauffer and Chauffer is exactly what you think it might be. It’s AI assisted driving platform and it’s built for highway and urban traffic environments. Everything you would expect from NVIDIA. Does NVIDIA have too many names, too many brand names? Probably, but Chauffeur and Concierge are pretty easy for people to understand.
Now this software sits right on top of a platform called Hyperion 8 and Hyperion 8 is a platform for L3 and up to L4. You can have one or two Orins, which is the name of their SOC. You can have DriveWorks, comes along with that, DRIVE AV software and a bunch of tools that allow OEMs to optimize for it. Hyperion 8 went GA and part of Hyperion 8 was a full set of sensors. And what we learned at the show was that the LIDAR sensor of choice, the only LIDAR that showed up on the slide was from a company called Luminar and their stock price just absolutely took off. I think it went up 20% based on that announcement. Thought it was a good way for Luminar to show off their wares in that they’re part of, I guess, arguably one of the most sophisticated driving platforms out there.
The other thing is I think it put the you don’t need LIDAR to bed. There’s a lot of theories out there and even Elon Musk thinks he doesn’t need LIDAR but he’s three years late in getting out his fully autonomous software stack. Luminar also had earnings that they announced yesterday and I think the highlight there, in addition to its further productization of all its stacks out there was an 89% increase in revenue. And for a growing startup like this, a public startup, think it was a pretty awesome feat.
Daniel Newman: Yeah. We’ve kind of just pivoted from topic two to three, which was Luminar and Pat, you pointed out the growth. You and I had the chance during F1 to actually meet with Austin Russell. And I’ve had a chance at IA over in Germany. And I continue to be impressed by this company. It’s revenue wise, it’s still very early days but the company has increasingly been selected to really take the LIDAR and long range LIDAR into the next generation. As we move from L2 Plus, which is a lot of what we still end up talking about to L4, long range LIDAR is going to be a critical element and component. Traditional sensors and vision cannot accomplish the same thing and I had the chance when I was at IA in Germany to actually witness this hands on. Seeing a child running out from a truck and that the LIDAR was able to identify and stop a vehicle where a traditional L2 Plus driver assisted technology is not capable of doing so.
This particular win here, look, on time, not on time, that’s a discussion we can have with whether or not NVIDIA is getting there. But everybody’s goal is to get to L4, is to get to fully autonomous, safe, fully autonomous driver in and out of the loop to be able to enable next generation of smart cities, connected environments. And so NVIDIA is putting a real timestamp on it though. To their credit, they’re saying in 2024, they’re going to be able to provide the technology to OEMs that is going to enable fully autonomous vehicles to be commercially sold on the road.
Speaking of on the road, Pat, that’s the name of our, when we take our podcast to our client events. It case anybody is looking for that.
Anyway, but for Luminar, it’s a great validation. You’re talking about a company like NVIDIA that’s been paramount to the development of Tesla software and that has worked very closely with Tesla over the years. You’re looking at a company that has design wins for vast majority of major OEMs and a company that’s expected to be playing a very significant role. Luminar’s won companies like Volvo. They’ve won companies like Polaris, which has an upcoming de-SPACing for their vehicle business, which is super interesting. And, Austin Russell is a really compelling, really passionate guy. I’m interested in seeing how this comes out to the next level but it’s never a bad thing as you’re a rising company to be endorsed and put in as the primary design win or in a new product like Luminar was by NVIDIA.
Pat, let’s rock on. You okay with that?
Patrick Moorhead: Yeah, I think I’m okay with that.
Daniel Newman: Did we get that one? Did I get it? Did I cover it?
Patrick Moorhead: You nailed it.
Daniel Newman: All right. In other interesting news, Pat, and you and I both were tracking this but this week, RingCentral and Mitel worked together to basically create a new exclusive UCaaS partnership called MVP and MVP will integrate with Mitel’s cloud link technology and provide Mitel’s customer base of almost 35 million with a more simple path to migrate to the cloud or cloud phone system. This was a big move for both RingCentral because of course the company wants to capture a bigger part of market share for UCaaS and UCaaS is still heavily on prem and concurrently Mitel, which at this point still is limited to prem based private cloud tech deployments, is looking to take advantage of the market and the desire for people to put phone systems in the public cloud.
The way this partnership works is that RingCentral is going to pay $650 million to Mitel and they’re going to acquire some intellectual property and patents and rights to cover network and call management security and infrastructure. From the Mitel side, the company’s going to basically spin around and invest 200 in equity back into RingCentral. And so, this is basically going to come out in the first half of 22 but I think this is going to be a big impact and was a very necessary move at this current juncture for Mitel as well as a good move for RingCentral.
Because like I said, you have this shifting demand a lot like other cloud workloads, Pat, you and I have talked where the world thinks everything is in the public cloud but it’s not. RingCentral has grown exponentially. Had some very, very big success around being simple to deploy, cloud based IP phone systems but you’ve got so many customers that still want to do this on prem and they have not had an answer for this and now they’re going to have an answer for this.
Credit to now chairman of the board, Mary McDowell, she’s been elevated to chairman in the company, now has a new CEO, Tarun Loomba, and this was a timely move. It’s going to be important long term. I think it’s good for both companies. And I think it solidifies both of their growth paths going forward. I’ve long said, I think Mitel needs to get to the cloud, needs to address that particular part of the market. And now they have.
Patrick Moorhead: Yeah. Daniel, great analysis. I’m going to go to the one slide that’s kind of the before and the after. Here’s where we are today and then I’m going to flip over here and you can see on the far right, what happens to UCaaS. It goes from Mitel hosted to RingCentral hosted. And I think this was the slide that kind of told everything for me. And quite frankly, this reminds me very much of what we have with HPE, we have with Dell and we have with Lenovo that do not have their own public clouds. The current on prem business is a lot bigger than the cloud business and that’s true for UCaaS and that’s also true for CCaaS but it’s clearly going to the cloud. Now you’ve got cloud only like an 8×8 and gosh, a Zoom, as an example.
Interestingly enough, you have Zoom who I know is eyeballing on prem solutions because there are certain types of customers that require on prem solutions. But when I think of Lenovo, when I think of Dell and HPE, Mitel is going to have to find a way to monetize the public cloud. And I think one argument for at least UCaaS might be okay, well they just did. They just did a deal with RingCentral. RingCentral is a public company, Mitel is a private company. I’m going to be interested to see some of the longer term financial deal that happened with that. Because is Mitel going to get X amount of dollars when it brings in a new customer and brings it over to RingCentral? I know there’s going to be an exchange of money on this deal that you talked about. But my goal is to better understand the go forward model of Mitel but it’s going to look a lot like what we have with HPE, Dell and Lenovo. Not like IBM and Oracle who have private and public clouds but those three companies.
Daniel Newman: Absolutely. Pat, let’s keep moving. We’re doing okay today. Normally it’s the Six 20, it’s the three hour or long pod but we’re hitting the topics. We’re keeping things moving and I like that. But some announcements this week, Pat, from Windows, Microsoft 11 SE and a new Surface Laptop SE, you’ve been all over this one.
Patrick Moorhead: A little background, Chrome OS and Chromebooks are hot, at least in North America in I would say K through 12, probably more like K through eight, even though my kids didn’t have Chromebooks, they had Windows machines. A lot of them have Chromebooks. And I think we also saw that with COVID, some kids unfortunately didn’t have any compute devices and Chromebooks basically flew off the shelves. Chrome OS has 10% market share. Windows has 82% market share. And Microsoft has been trying to stem the flow for a few years. And in my opinion, Microsoft missed two things.
First of all, having the right platform, Windows is arguably a more robust platform than Chrome. Although, there’s a lot of people who will debate that. You can run Android apps if you want on Chrome OS but Chrome OS is really about the browser and everything you do in the browser. And if you’re doing everything in the browser, typically you can hit a low cost point because you don’t nearly need the horsepower to be able to hit that. But ironically, it was the degree of simplicity or the lack of simplicity very few people talk about that I believe is hurting Microsoft in this space. We’ve had low end Windows notebooks but it didn’t seem to stem the flow.
Not only did the Surface team bring out a new device called the Surface Laptop SE at $249 for K through eight, they also brought out a more simplified Intune and a more simplified Teams for education. I haven’t had a chance to play with the device, Daniel. I haven’t had a chance to play with the software yet. I like the aspiration but if this isn’t simpler, it just isn’t going to make a difference. I am hopeful because typically with Microsoft, they’ll chip, chip, chip away at it. My gosh, Microsoft had the first Windows tablet back in 1991. I worked for the company that brought that out. We had failure after failure in tablets, Apple came along and then the Surface Pro just kicked everybody’s butt out there. I’m hopeful. I need to use the device and I need to use the software.
Daniel Newman: Yeah. I think it’s all about hitting a market. This is an area where Chrome and Google have done just extraordinarily well but addressing that market, we all know what happened with remote learning. We all know also what happens with affinity. You get the right devices in hands when they’re younger and you build an affinity. If it’s good for those devices, as they get older, all of our kids that have grown up and at least here in the United States, Apple has the dominant majority of the smartphones and these kids are absolutely Apple crazy. Hard to even convince them to consider anything else. They’re mostly using Chromebooks, lower end Chromebooks and I’ll tell you what, there is very little affinity for these devices. And in fact, the kids will tell you that’s a combination of the software and the hardware. Most of them are very locked down.
They’re kind of comparatively to the nicer Surface or the nicer HP devices, they’re pretty cheap. They’re plasticky, their batteries aren’t particularly impressive but it was all about getting them down to a certain price point. That’s not the manufacturing, that’s the spec. But Surface is creating what’s looking like a more premium product, a little nicer on the eye. But to your point, it’s going to have to be very easy to use, which is what has been managed with Chrome and Chromebooks so far. Lightweight, easy to use, very little you can do with the software, pretty hard to break but these devices look good, Pat. And I’ve said this for a long time. The surface line, they make very, very nice machines. I’m an everyday user of their products. And I think this is one, I think you hit it very well. Time will tell us if this was a winner but the $249 starting price point is at least in some communities of a little bit greater resources should be an achievable price point. Certainly something you can’t meet with Apple.
Patrick Moorhead: What an in time to bring a low end device in as well.
Daniel Newman: Yeah. Because there’s so many chips around to make them.
Patrick Moorhead: No, no. I know, a supply chain crisis. This thing has, I was going to use the same, well, not the same exact USB controller but those USB controllers and pineks that everybody is fighting for at a $249 price point with a Microsoft tag on it. One thing I forgot to add on the simplicity part is where Microsoft did change the way that it operated is, is that essentially these education editions were stripped down to the core of the operating system. Either you could only run applications out of the App Store, out of a special app store or there was just something fundamentally wrong with it. The only limitation I can find that I’ve looked into this could actually simplify it, which is you can only window on the left and on the right. And some people are like, “Oh my gosh, it’s so limiting.” And I’m thinking, wow, that kind of seems simple for my first grader. Well, my first grader that I had 27 years ago.
But it seems like a, a really good thing. But I did want to add that I’ve got to try this out. I’m going to try the Intune. I manage my own IT at my small little 30 resource company and I picked Google. I picked Google 10 years ago because it was simple. I compared the two I’m like, I don’t even understand what Microsoft is talking about on this console. And I sat on my kid’s school board on the tech council and they were just like, “We have a hard time figuring this out but we only want one platform K through 12 so we’re picking Windows.” But they had to hire an IT person. Wanted to add that on. My apologies. I did a boomerang.
Daniel Newman: Absolutely. You boomeranged away and that’s all good, especially because we aren’t crazy over on time right now, but we are at the end here, Pat. And so, an interesting piece of news broke this week and I had the chance to talk to Mr. Dylan Martin, who does a nice job over at CRM diving into the semiconductor space. And he reached out to me about a recent memo that Intel basically put out reorganizing their strategic accounts underneath Michelle Johnston Holthaus. And she came out with a memo effectively saying, “These are going to be the companies that are going to be led and focused on by our strategic accounts team.” And it was basically business as usual. It was Dell, it was HP, Lenovo, Microsoft, Google, Amazon. And then the last one though was Qualcomm. And so I was pinged about this because really right now, those two companies have had contentious moments in the mobile handset space, which Qualcomm over time eventually and expectedly emerged based on its history as Apple moved to acquire Intel’s 5G mobile handset technology IP and is working towards building its own thing.
But now after new announcements that came out not so long ago by Pat Gelsinger all about the Foundry service and about a strategic partnerships. Now what used to be maybe competitors or battle in the ring companies fighting for positions in emerging, in current markets, Qualcomm and Intel look more likely to be working together. And this announcement sort of in my mind reiterated just how much Intel sees Qualcomm as strategic. And so I was trying to dig into what is it that they’re seeing as strategic and Pat, and I think you could have a little fun with this but a couple things came to mind cause it’s not so much that you wouldn’t expect Intel to work with Qualcomm, it’s just at this level of naming them as seven key accounts when you know why the other six are and Qualcomm’s clearly not large today.
Now you saw Qualcomm’s 70 plus percent EPS growth and humongous revenue growth in the last quarter, on a tear 5G’s on a tear but you also know Qualcomm and bought a company called NUVIA not that long ago, Pat. You were an advisor. And that particular acquisition and the fact that Qualcomm has been closely working with ARM developing always connected PCs that are now being deployed by the likes of Lenovo, Samsung and others, Microsoft, using Qualcomm’s Windows on ARM. You’d say that could be one angle, providing chips but the other angle of course is Foundry service. And there was an announcement that came out from Pat Gelsinger and later another announcement that came out from Qualcomm. Now they weren’t exactly aligned in terms of the way they were announced but effectively, both companies said, “We’re going to work together.” And so strategically speaking this to me is an indicator of just how big the on shoring opportunity for chip manufacturing is going to be.
We all know TSMC is a huge winner. They’re building more fabs here but as the semiconductor industry and our federal government infrastructure spending looks to put 50 plus billion dollars to use, Intel has these shovel ready projects to build new fabs here stateside. We’re hearing more and more about further fab development here in the US. They’re not going to back the building of these fabs and not make sure these fabs are pumping out volume.
And so as I see it, the strategic relationship is going to be even tightened and more relevant based upon the fact that when those fabs here in the United States are done, the expectation given the tax breaks that I expect to be given will be that those are pumping out leading edge nodes and that companies like Qualcomm and NVIDIA and AMD but especially in this case because of the lack of overlap, that Qualcomm will likely be one of those first companies that Intel will be producing some serious volume for assuming they can meet pricing, demand, technology and process requirements, Pat. But that’s what I think’s happening here. I think it’s a little bit early but in the next few years Qualcomm’s going to become really big for Intel.
Patrick Moorhead: Oh, how times changed so quickly. What was it? Five years ago you had Intel, Apple and Samsung complaining to the regulatory commit five different regulatory commissions about Qualcomm’s so-called anti-competitive behavior on 4G, to lock in stuff for 5G. And here we are, we’ve got the whole vulcanization or China plus friends and Western countries and friends and we find ourselves in a freaking, call it semiconductor pandemic here. We can can’t get enough semiconductors. And I would posit the most sophisticated silicon primarily being made in South Korea, cannon shot of North Korea and Taiwan who’s threatening to invade Taiwan. And when Obama was president, he kind of forgot about the whole global foundries. Global foundries needed two to $3 billion to get seven nanometer up and running on EUV and nobody would give it to them so they just got out of that bleeding edge to technology.
Here we are and now Intel sold its modem capabilities to Apple and here we are. You have Intel IFS that I guarantee you, as soon as IFS is up, you will see Qualcomm making some of its modems here in the United States. That could be at IFS, that could be at Samsung’s looking at a new facility and TSMC is building a new facility in Arizona. My odds are, I think it’s going to be Intel. Qualcomm was talked about as a partner at Intel and that very quickly got, I don’t know, got pulled off the slide but they were on the slide and I believe that Qualcomm will be fabbing modems at Intel IFS or it could be a packaging deal, a 3D packaging deal, similar to what Amazon announced with them.
But times have changed. Five years going from court systems and suing and wanting to kill each other to likely potential partners. Now they’re going to compete like hell on two fronts I believe, when the NUVIA team kicks in next year, we’ll see samples soon. My guess is we’ll see the products in 2023, actually on shelf. They’re going to be fierce, fierce competitors. And I think potentially the second accelerator that they have for machine learning inference, they’re also going to be competitors on that. And the farther that Qualcomm gets into carrier infrastructure as well, that’s exactly where Intel wants to go. Anyways, great speculation on a story that you participated. That was fun.
Daniel Newman: Yeah. That is a lot of fun, Pat. And not to really do much of a circle back here but I’ll stick to my guns that you have a growing TAM. Intel has recognition that they are patching a lot of gaps. However, there is competitive in roads that have been made, whether that’s AMD or ARM and that the market share will likely always be challenging to keep at the levels. And to some extent, Intel needs to diversify and much like how it AWS in these hyperscale cloud, like Microsoft is everybody’s friend and everyone’s competitor and they’ve done it extremely well. And why can’t Intel use its capabilities to have a similar type of relationship in certain parts of the market? I look at this as a strategic move, as a smart move. I think it will take a little time, like you said, for it to all pan out.
All right everybody, that’s it. That is it. I just went hard on a left turn there. I jerked the wheel and it sounded like I was going to keep talking. Nope, that’s it. That the show. We’re at the top of the hour. Mr. Moorhead, another great week, episode 102. We covered NVIDIA, Luminar, AMD, Cloudera, Mitel, RingCentral, Windows, Intel, more Qualcomm. Great show, Pat. Everyone out there hit that subscribe button, join us, send all that good feedback my way, that negative feedback if you don’t like what you heard at Patrick Moorhead, it’s easy. Find him on Forbes. Find him on LinkedIn. Find them on Twitter but let him know if you don’t like something. The good stuff always comes to me. For the show though, that’s it. We’re going to see again in a week or so. Got to say goodbye.
Patrick Moorhead: Have a good one. Anyways, complaints, like Daniel said, complaints his way, accolades my way. Have a great weekend. We love you guys.