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Talking AMD Buying Pensando, Qualcomm Closes Arriver, LeadershIP Event, Six Five Summit 2022 – The Six Five Webcast
by Daniel Newman | April 13, 2022

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:

  1. AMD Acquires Pensando
  2. Qualcomm Closes Arriver Acquisition
  3. IBM Announces z16
  4. The 2022 LeaderShIP Event
  5. Azure Goes Arm with Ampere
  6. The Six Five Summit 2022

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.

Transcript:

Daniel Newman: Hey, everybody. Welcome back to another episode of The Six Five Podcast. It’s Friday morning, and we are excited to be bringing you another week of all the analysis on this week’s big tech news. Because that’s what we do here. Mr. Patrick Moorhead, my co-host in crime, no real crimes being committed, but my co-host with the most, somewhere on the west coast. Ooh, I like that. My co-host with the most, somewhere on the west coast. I’ve been practicing that. That was an accident. How you doing this morning?

Patrick Moorhead: Man, I’m doing great. Been on the road all week. A little early at 6:15 AM here in Phoenix. And, it’s been that all week on my third city. And, going to be back hopefully by dinner time, back in Austin. But, there is no way I’m going to let my audience down and claim sleepy or tired.

Daniel Newman: Well, we sometimes trade off these favors of getting up early and doing this for one another. I remember when I was in San Francisco with the Intel Investor Day, I think I got up at 5:00 AM to do that one. And, in the end though, it’s always worth it. We do love our community and we do really try to be consistently knocking out these conversations on the weekly, because there is so much going on in tech and we want to be that reliable source of information. I too was on the road this week on the east coast. I had a very, very dramatic and tiring, exhausting experience. I had to go to the Masters yesterday. I got to follow Tiger Woods around for a couple of holes. Spent about half a day on the course, had to give up my phone, which, if anybody knows me…

Patrick Moorhead: I don’t know how you survived, buddy.

Daniel Newman: … I nearly died. It only felt that way. It’s not actually the truth. But, Augusta, beautiful golf course, beautiful club. One of the most exciting prestigious tournaments on the planet. Amazingly, not one person that lives in Augusta is a member of Augusta National, something I learned yesterday. It is quite exclusive. And, I have not yet been invited. So, I’m not as big of a fan as I would be if I was. Having said that, if everybody out there just remember Six Five is six topics about five minutes each, sometimes a little bit more, deep analysis, a little bit of news. Today’s show, we’re going to be talking AMD, Qualcomm, IBM, a big policy event that took place in Washington, DC. Azure’s homegrown chip strategy, and we’re going to do a little dive into our Six Five Summit. Quick housekeeping, this show is for information and entertainment purposes only. And while we will be talking about publicly traded companies, please do not take anything that I say or Mr. Moorhead says as investment advice.

All right, knocking that out of the way, all the BS. We can talk today about what’s going on in tech. Pat for us, it’s no work, it’s all play. And I’m feeling very rhythmic this morning. So let’s dig right in. Are you ready?

Patrick Moorhead: I’m ready. Let’s light this rocket up buddy.

Daniel Newman: Light this rocket up. I feel like…

Patrick Moorhead: I don’t know what that means, but that was a combination of let’s light this rocket and let’s watch this rocket go up, but…

Daniel Newman: … Yeah, let’s light this candle. I don’t know. It sounds prophetic in some way, shape, or form. So Pat, Lisa Sue is on the prowl again, acquiring intelligent smart technologies that’s going to take AMD to the next level, or is it? What’s your take AMD acquires Pensando.

Patrick Moorhead: … Yeah. So, company’s been on a role with organic innovation with their PC and data center processors, doing okay with GPUs, huge acquisition with Xilinx, better known for FPGA tech. But, AMD I believe really bought them for their advanced high performance SOCs that combine ARM cores, FPGAs, discrete accelerators with high speed HBM interconnects. This acquisition, it was interesting. I had to really think through this one, but I think I had to think long and hard, just because I think the message was a little bit muddy, but let me just net this out. This is AWS Nitro for everybody else. And for those of you who might not be aware of what Nitro is, essentially, it’s a complete disaggregation layer where you can disaggregate different processors. You can disaggregate networking and you can disaggregate storage. And, if you want, you can even disaggregate security functions. If that’s what you have on your chips or your offload cars.

This clearly gets AMD into what we call the IPU or NPU market, squaring up with Marvell, Intel, and NVIDIA. I was struck by how many big name customers Pensando had. They had Azure, IBM Cloud, Oracle Cloud, partnered with Equinix, HPE Aruba, Dell Tech, NetApp, and customers were Goldman Sachs and Wells Fargo. AMD tried to make this about a big software announcement, which by the way, there is software, but there’s also very much Asics and cards involved as well. I can’t really comment on the 1.9 billion, don’t know the revenue stream, don’t know where they’re coming. But quite frankly, with an opportunity like this and everybody going offload, I don’t even know how much that matters, other than this gets AMD clearly in the networking IPU, NPU offload game. So, I like this one.

Daniel Newman: Yeah, it’s a solid move for AMD. I mean, it’s a different level of criticality than these eye leagues steel just based upon the established customer base and how that diversified its portfolio. And obviously, FPGAs do have a certain amount of momentum right now. But, let’s look at some numbers here. I mean, the company had raised about $300 million from Lightspeed, from HPE, from Qualcomm Ventures. It says it has deployed more than 100,000 of its platforms in the production for customers. So to your point, it has some very good customers and a heavy dose of utilization in the marketplace. So, this is a fast moving acquisition, it’s going to get done within probably the next quarter.

And Pat, I think what you said that’s most critical for the market to understand is you’re seeing what is happening with this disaggregation approach furthering to the core, right? You’re seeing it done at the infrastructure layer with the cloud players. You mentioned Nitro, a great example, with AWS, but this is happening everywhere. Disaggregation, moving around workloads to take certain amounts of requirements off of the core CPUs. And, so Pensando’s going to give AMD a bigger story here. And as AMD looks to expand and win deals, especially in enterprise, this is going to help diversify the company’s capabilities.

So, I’m not necessarily sure it’s just going to unseat. I mean, Marvell’s done a terrific job in this space, NVIDIA is always an extremely difficult company to compete with. And of course, you can’t rule out AWS, in terms of how they win through their basically all things IT approach, including homegrown chip making, which has become something that, Pat by the way, side note, 22% I believe of servers by 2030, I think is what I read, could be ARM, based upon mostly AWS’s prowess in homegrown chip making. I read that about a week ago, really interesting data points, so.

Patrick Moorhead: It’s a big number.

Daniel Newman: It is a big number and the team over there is doing some really impressive work under Dave Brown. So, Pat let’s move on to the second item. By the way, that was really good. We kept it in time. It was a big piece of news and we didn’t mess it up. So, this is a full circle story right here, Pat. The Qualcomm, Arriver deal, you and I covered it pretty extensively. I had a chance last week to sit down their GM, head of automotive, Nakul Duggal, got him back on the record, “What’s going on in your automotive business?” This Arriver deal is really a critical part of what Cristiano Amon is out telling, when he’s talking about the digital chassis story.

So, speaking of data points, right? 20% of the automobile bomb by the year… That’s a bill of material, in case you’re novice to these acronyms, by the year 2030 is expected to be semiconductors. So, if you’re noticing the race between companies like Intel, Luminar, Qualcomm, NVIDIA, all jumping in heavy to the automotive space, that’s because the opportunity is really significant. Qualcomm, with its snap drag and ride platform, with its portfolio has been doing a tremendous job. I believe, their pipeline has exceeded $13 billion now in the automotive space. And, they’ve been winning some really impressive customers. We saw Mary Barra show up from GM at the company Snapdragon Summit. We’ve seen announcements come out with BMW, with Renault. And Pat, I mentioned this when I talked to Nicole, they also just sponsored F1, which you and I love. And now that they sponsor F1, they sponsored probably the most exciting team this year, which is the Ferrari team.

So, Qualcomm’s really going all in on automotive. What the company lacked going into last fall when they did the deal with Veoneer to acquire Arriver, was they didn’t really have an L2+ or a pathway to 8S which is going to be the last piece. You’ve got the telematics, you’ve got infotainment, but the story seems to be heavily laid and in, can you get to this fully autonomous driving system? And I mean, the first step is getting to a semi-autonomous nature, where the car can do a lot of the safety, lane change identification, it’s got machine vision, computer vision, it’s got radar, it’s got sensors. And that’s what Arriver had. And Arriver sat inside of the Veoneer business. And Veoneer essentially was a tier one supplier in the automotive space.

So, Pat, and if you didn’t know the story, Qualcomm didn’t really want everything Veoneer. They just wanted Arriver. So, they set up a very interesting and complicated deal that allowed them to quickly close here. And then basically, using a private equity partner, I believe it’s called SSW. It’s not in front of me, but they basically used them to then take the Arriver part, put it into Qualcomm’s business, help them complete the digital chassis story, and then basically sell just the parts of Veoneer out through SSW, which is happening separately.

So, it was a big move for the company it’s going to accelerate their digital chassis going forward, Pat. And I think, as a whole, this is what completes their modular approach, their building block approach to being able to go to the OEMs and say, “Hey, you want to build to compete with Tesla, Lucid, Rivian, all these car of the future companies that are building on a native digital chassis. We have the pit parts and pieces here at Qualcomm to do it.” It’s been an impressive run for the company, a lot of work left to do, but it was a good move to get this deal close so quickly.

Patrick Moorhead: That’s some great analysis there, buddy.

Daniel Newman: Nothing left. But we’ve covered it before. So, it’s a rehash, right?

Patrick Moorhead: Yeah. I think, the important thing for the audience to always keep in mind is that, you mentioned the electrification of the auto. And, as much as that’s happening is the software defined nature of the car with this idea of constant updates. And, it’s funny, sometimes people talk about taking on Tesla and they just talk about the electric part. But, what they don’t fully understand is the constant innovation and updates that are done with the software. It used to be a time, Daniel, when you would fire and forget for three years. You wouldn’t change anything on a car, right? But now, very much like software, the software is updated and even some of the mechanical parts here. So, Arriver clearly got Qualcomm into the self-driving, and in the future, the autonomous vehicle space.

And, three years ago, they stealth all of us with the first demonstration of, I’ll call it, an L1+ maybe an L2-. And then, they’re showing off L4 type of technology. And, they have huge customers that are notoriously safe in their precision, like BMW. And in fact, this combination of the digital chassis, which includes the Arriver software, they’re actually doing what I would consider a joint venture, where they can actually offer the platform to other auto manufacturers. I don’t know how successful that will be in the future because essentially it would be having to buy from a competitor. But, it certainly does make you think. It’s a pretty good business model, because there’s only so many companies that have to scale to go and do this. So, I like this. I like what they did. And, they had to split off parts of the business, but that was just a requirement for regulatory purposes.

Daniel Newman: Yeah, it was regulatory. And I don’t think they wanted the other parts of the business. It enabled them to move faster to specialize the move. Just a quick boomerang, and I want to spend a second here, Pat, because there was something else that happened this week. And, we love to talk about things that are entertaining. Elon Musk jumped into our… He’s the automotive guy, right? The Tesla guy. I just want to ask your opinion. What do you think of his Twitter move? The car guy just bought a chunk of Twitter, is that good?

Patrick Moorhead: Listen, I like any type of shake up out there that’s legal. And, listen, there’s nobody I’ve ever known that didn’t love parts of Twitter, but also hated parts of Twitter. And right now, I think, there’s clearly a split, the first amendment folks who believe that Musk is going to come in and basically go 1A. And then, you’ve got the other folks who are like, “Well, listen, you don’t have to abide by 1A, because it’s a company, not a government, right? But, that’s the funny part, capitalism, which came in and it’s like, “Okay. Well, you’re not a public utility. So, I’m going to buy part of you if I don’t like the way that you’re running.”

So, I mean, I like chaos, Daniel. I mean, it’s entertaining. I don’t think they’re going to harm people in this, but it’s great to stir things up. And, the Twitter CEO was very in an interview a year and a half ago. He says his platform is not about 1A, right? He says it’s about decency and doing the right thing. But the challenge is that one person’s decency is another person’s lie and cover up. Look at all the news that was censored on Twitter that ended up being true, right? I don’t want to get censored on YouTube, so I’m not even going to use the terms, but it’s interesting. I’m glad you asked.

Daniel Newman: And obviously it has nothing to do with the Arriver deal, but everything to do with the fact that Tesla is the bar right now when it comes to next generation the digital vehicle, the whole experience. I mean, they have one big tablet, everything has happens there, it’s updated constantly. That has become the bar in a lot of ways. And so, Musk always, he’s an enigma. He’s enigmatic in his style. When I talked to the Wall Street Journal about it, I basically said, this is great for Twitter. And it is great for Twitter. I said, first off, it’s great for its shareholders, they gain 30% a day. But it’s also great for the fact that it brings it back into the light.

I don’t know about you Pat, but I think we would agree, it is our fire hose of information. I mean, we love Twitter because of how real-time it is. And, historically how unfiltered it was. I mean, that’s going to be the big question going forward, but he certainly doesn’t hold back his opinion. So, I mean, what are they going to do when he makes his next crazy tweet? Are they going to cancel the guy that owns 10% of it? I don’t know. I don’t know what you’d do. Because he says some things that cross lines that people have been removed for less, let’s just say.

So, all right, we got to keep moving though. Just a little sidebar there. Couldn’t help myself. Let’s talk about a big launch. IBM z16. Now again, for everyone, there’s a cycle within IBM. This is an important cycle for its mainframe. And, by the way, you wrote a really great article that, would you say the mainframe’s dead? No, no, no. You said the mainframe’s not dead.

Patrick Moorhead: There we go. I know. I’m an industry analyst, but unlike industry analysts, we’re so proud of our content, we don’t put it behind a firewall. And yeah, so I write on Forbes and you got to have some sort of a splashy headline. And my headline was, IBM z16. The mainframe is dead. Long live the mainframe. Listen, I got upfront and personal in my first job with an IBM System/360 back in 1990, when I was at NCR. There were two big players in financial accounts, it was NCR and it was IBM. NCR had the edge and IBM had the big mainframe and the AS/400. So, I’ve been in and around these mainframes for, I guess, going on 31 years here. And, I like many, thought that the mainframe was going to die and was a colossal waste of money. I admit.

But six years ago I had a change, did a lot of research, visited the z folks in New York, and realized, “Wow, consumption is skyrocketing on mainframes. It’s hard for you to do a credit card transaction anywhere on the planet that doesn’t go through a z. It’s hard to do a retail transaction that doesn’t go through a z. It’s hard to name a bank that doesn’t have a z, or a retail.” And why is that? Well, it is a transaction engine. It is a transaction engine that does it quicker, more reliably, and safer than any other platform out there. And, I’m very careful with my words, I mean, like you, I research all the IAAS folks, I research all of… But, there’s a reason that it keeps on going.

Now, it’s not like they did a fire and forget. z16 is updated for modern workloads. And I would say the big points here are doing inference inside of the z. So, typically if you were doing machine learning, you would do the transaction, you would do what we call, mainframe guys, ETL out to another system, maybe an x86 system either doing inferences on the processor or a small NVIDIA GPU card, right? But now, you can do real-time inference. Well, what does that mean? Well, you can do credit scoring, you can do credit risk at the point of transaction, as opposed to having another system do this. I’m going to follow-up with some more workloads on what inference means for the mainframe. But I thought that was very interesting. Along with that, bigger, better, faster processor, the Telum processor, it improved performance per watt using less energy.

I did want to talk about one thing and just remind people. z is very much a modern platform, a cloud platform. You might be laughing right now, but here are the facts. It runs Linux, it runs Red Hat, Linux, okay? That’s optimized for the platform. And, it runs Red Hat containers. Surprise. So, by the definition of cloud, which is scalable resources, typically Linux, and using containers, you can do all of that on the IBM z. And now, you can do inference at the point of transaction.

The final think I’ll mention is that, it also supports quantum safe cryptography. And, well, what does that mean? So, in the future, you’re going to have different algorithms done by faster traditional computing systems, but also by quantum computers. And essentially, the new z16 is quantum proof in that those new future algorithms, you are safe and you can be protected from all of that. So, by the way, I need to do a little bit more research on how that’s possible, because it’s like, “Well, how do you know what’s going to happen in five years?” But anyways, very rarely if ever does IBM make a claim on z16 that isn’t backed by an incredible amount of thought and research.

Daniel Newman: Great dive. I’m going to add a couple of thoughts and keep us moving. But, first of all, a big for our IBM. On the financial level, something to think about too is, they do these launches of their z every 8 to 10 quarters. The last one was done in September of 2019. There tends to be an upgrade cycle that’s pretty significant. And in the wake of the spinoff of Kyndryl, it’s going to be more significant to the overall revenue number because that particular portion of the revenue has been locked off. So, the impact of a z cycle, it’s a very high margin part of the business. There’s been quarters where the systems business is legitimately carried by the z cycle and the profitability of the z. This is a product that the people who buy it, to your point Pat, absolutely know it is the only option. And they’ve stuck with this particular technology for a long, long time. And despite all of the innovation that’s gone on in cloud, usually it’s highly regulated industries and special type of transacting businesses that this is the only option.

I’m going to share a link in the show notes, our mainframe analyst, Steve Dickens did a deep dive and he basically broke down… He went through the 80 page red book and broke down the entire mainframe z16 announcement. And he found Pat, pretty much the same things you did. The on chip integrated accelerator is a big deal. It’s going to make a big difference for people that are in… It’s one of the most compelling upgrade reasons from past generations is what they’re doing with Telum and how they’re moving forward with the on chip integrated.

They’ve redesigned the cash, which is something else you focused on. That’s a little bit more of a transaction item, but if you’re in data… If you’re, sorry, in mainframe, it’s probably a high volume processing reason that you’re in it. And so, the updates to the cash apparently are going to give higher performance, about one and a half times capacity. They’ve got some upgrades in the memory they call RAIM, which is what they call Redundant Array Independent Memory. And that’s all about availability, which is a key aspect of this technology. They’ve added connectivity capabilities, security and encryption abilities, what they call pervasive encryption, which you talked about Pat, which I thought was very interesting and does require a little bit more.

And something else I liked that I want to dig into a little bit is what they’re calling their z security compliance center. As companies are under more and more duress to address compliance requirements. IBM is basically saying there’s a capability in z16 to simplify and streamline compliance tasks. So, that’s going to be an interesting area too, as poor the customers banks. I mean, a lot of them are banks. And so, compliance is a huge headache for banks. So, if IBM’s simplifying that process, I can see a lot of value there as well, so.

Patrick Moorhead: Yeah, a little bit of a boomerang here. I find it ironic that now everybody thinks that enclosed systems with custom silicon is now the rage, right? And, that’s exactly what the z has. I mean, z has had a custom processor since 1963, right? And its own software ecosystem, right? It’s an open ecosystem, as it uses Red Hat, but I just find it ironic that it’s the cool thing now. What is Andreessen Horowitz would say, “The current thing.” Right?

Daniel Newman: I think that’s what Musk said that he supports.

Patrick Moorhead: No, there’s t-shirts now, “I support the current thing.” Anyways, I find it great, it’s good to see the z team basking in the glory. They do deserve it. I mean, people have tried to kill the mainframe for 50 years. And consumption’s going up, so.

Daniel Newman: You should write an article with some analysis that says the mainframe is dead. And then, do something ironical, like, “Long live the mainframe.”

Patrick Moorhead: That’d be a great idea.

Daniel Newman: That’s a great title. It’s probably going to get… I don’t know. There’s probably 30,000 people in the world that care about mainframes of the billions. So, you’ll probably get all 30,000 of them to read it. So, it is a really great move. It’s going to be a big one over the next couple of quarters for IBM and we’ll have to watch how that plays out, both on their financials and in terms of winning customer loyalty.

Pat, let’s keep moving. So, I went out to Washington D.C. and attended… Something else you and I really enjoyed talking about, is IP, intellectual property, innovation, antitrust, and this meeting called Leadership takes place in Washington. It’s basically a combination of regulators, policy makers, lobbyists, analysts, enterprise business leaders. And, I think the “item” that came to the forefront of this meeting is semiconductors are having a moment.

Anyone that probably watch television or the news three years ago, you would’ve said, “What do you think about semiconductors?” They would’ve been like, “What’s a semiconductor?” Nobody really even knew. It was a small little industry, not really, but it was a small little industry in terms of government officials didn’t really care. They cared about automotive. They cared about manufacturing. They cared about jobs. And, in the end, what happened is we had this little pandemic, and amidst this pandemic, we had, I don’t know, some supply chain issues for things like vehicles that people care about, iPhones, and other devices, and laptops that people care about. And suddenly, we couldn’t get things or televisions and whatever toys we wanted to buy, we could couldn’t get them. And, what happens when suddenly people can’t get their stuff is that lawmakers take notice.

And so, semiconductors came into focus and effectively what’s going on now is, over the last 30 years or so, the United States has done a couple of things. One is, in a very positive note, we’ve continued to be the leader on a world scale in terms of the design and research of next generation semiconductors. We’ve also concurrently become completely dependent on the rest of the world to do all of our manufacturing. Sounds a little bit like what we’ve done in oil and gas, and what we’ve done in information services, and employees, and consulting and we basically outsourced it all. And so, when suddenly, China shuts down and Taiwan shuts down during the pandemic, when companies didn’t know what was going to happen, we couldn’t get our stuff, couldn’t get our chips. And the whole supply chain was exposed as broken.

This meeting was focused on a couple of different things. And Pat, we could probably do a whole show on this. We did have a great episode with the chief economist of Qualcomm, where we talk about a lot… But the meeting addressed two or three things, addressed the Chips Act, which is all about repatriating some of our manufacturing. It also focused on the need for government policy makers and lawmakers not to lose sight of the fact that we are the leader in terms of research, and design, and intellectual property, which companies like Qualcomm, but a lot of other companies create this IP needs to be protected. And that was a big part of this story too is because we have lawmakers in the current administration, people that basically want to take power away from the inventors of technology to give more power to the implementers.

And so, going back to many conversations that we had over the years, this was what happened with the Apple, Qualcomm case. But this is what’s happened with China and just about everything we invent, is when you take away power from the inventor to license and protect that license, you actually risk the leadership of our country in terms of… Sorry, design, research, and then ultimately the manufacturing of semiconductors. So that was a big topic in focus. And so, the Chips Act really was about how much do we need to bring back in terms of repatriating, and do we need to bring it back? And there seems to be some mixed opinion there. The other key focal point was China, right? Was how big of a threat is China. And there seems to be some inconsistent reactions to that, because they’re a big trading partner. A lot of our stuff comes from China.

And so, in any actions that we might take to give the U.S. more power and take some of that away from China, there’s always risk on the geopolitical standpoint. So, that was a big topic in focus. And then, it was how do we protect the inventor? And that largely the implementers are getting stronger and stronger, both here in the U.S. and on a global scale. And those that are spending the money, decades of research, Pat, which you often say a lot of R… Or sorry, very little R and a lot of development. Well, the R, the people taking 10 years to help develop a standard, like 5G or 6G, how are they actually going to be protected if they spend all that time and all that effort to carry forward innovation, and then people license it and pay appropriately for that work that’s been done.

So, again, it’s hard in a few minutes to summate all that went on at this meeting. But, I guess, my take and conclusion is that we’re at a very interesting crossroads for policy antitrust and national security. My biggest takeaway here is that we have to not only focus on repatriating manufacturing, that’s part of what we have to do, but it’s actually, we cannot lose sight of the fact that we are leading in innovation and design in the semiconductor space. Semiconductors run everything we do, our phones, our cars, our software, our clouds, all on semiconductors. Pat, can’t run it on air. And, long story short, if we don’t protect, we take away things like injunctive relief, we allow implementers around the world to take the IP that’s being developed here and run with it without having the ability to use the legal system efficiently, we’re going to create a lot of risk for our ongoing leadership. And we’ve already done that with our manufacturing. So, hopefully we have a plan, but I wouldn’t say I left confident. I left even more uncertain as to exactly how we’re going to take this forward.

Patrick Moorhead: You preach buddy. You preach. That was a good eight minutes.

Daniel Newman: That was not eight minutes. That was four.

Patrick Moorhead: Oh, it was? Okay. Well, time flies when you’re having fun.

Daniel Newman: It felt like forever.

Patrick Moorhead: So, no, I’m going to try my best to be additive here. It’s not this simple, but it’s funny, we’re sitting back looking at Germany’s reliance on Russia, and they were warned. And now, they’re really looking not as smart as it could be with the invasion of Ukraine. Well, we’re even bigger reliance on China, as a company for some very strategic infrastructure that we have for military, for banking, finance, healthcare, and things like that. So, here we are, we are in this situation. And, I think you’d be a fool to think that there’s less than a 50% chance that China invades Taiwan at some point and tries to repatriate it, like Crimea, or Donbas, or something like that. So, we really need to be serious about this.

And, I’m with you on, you must give inventors back the value that they’ve created, otherwise they’re not going to create. That is just the wheel of innovation. Government can’t be the innovator, right? And, you can’t make money off of research, the big R, and don’t confuse the R and the D, then it’s going to stop. And essentially, if we’re not doing the research in this country, then somebody else will. Our government is not going to be able to do the research that requires there is not a single country out there that does that. I think the only caveat there might be some of the university research that China does, which is funded by the government, but we haven’t made that work great here.

And, it’s a game. The folks who don’t want to incent the research and the innovators are just like you said, they’re the people downstream. I’m not going to name names, but they’re the people who want to make everything open source, because they have been the arbiters of aggregation, of all that innovation. And, they’re some of the top companies that are out there that are fighting against giving money to the innovators out there.

So, very important stuff. I’m hoping that we don’t degrade and go back to an era where we were four or five years ago, where there was a question on whether there was going to be benefit from innovating or not. And, I think we also have to have a long-term strategy, not one that goes between different administrations, because as we’ve seen, any yo-yoing has the effect to limit the amount of research that companies do out there.

Daniel Newman: Yeah. You said a lot of great things. And, I’m going to pretty much leave it at that. I think what’s super interesting is that most of our policy makers can’t see past next week. Everyone’s focused on manufacturing because that’s the problem we’re trying to solve. It’s the paper cut, right? I need a bandaid. We need to do it. But, it’s not the only thing. And so, hopefully, we’ll focus on both, doing what we need to do for this short-term, but also protecting ourselves and the leadership we’ve invested in the long-term. So Pat, great analysis, great adds. You have a wealth of knowledge in that space. So, don’t sell yourself short on that one, buddy. You’ve been in this space forever.

Speaking of this space forever, here we go Pat, over the last year we’ve spent a lot of time talking about AWS, homegrown, what their plan is. And we’ve been saying, “What’s Azure going to do? What’s Azure going to do?” And now, Azure’s starting to talk about what their plans are, with an announcement this week.

Patrick Moorhead: Yeah. So, let me give you a little bit of a backdrop here. So, for about 20 years, people have been saying that compute is commoditized, but the industry keeps proving everybody wrong, right? And that’s because in the last 20 years the industry has taken different approaches. It used to be that only merchant silicon vendors were available for data centers and that was Intel, right? That was the standard. And, AMD got up to, I think, 20% at its maximum market share back when I was at the company. And then, it went down to 1%, and now it’s up around 15%. But, along the way, over the last 10 years, the ability to create your own SOC with a combination of ARM IP, ARM ecosystem IP, and the tools from companies like Synopsis and Cadence combined with the ability to take those designs into a TSMC have really transformed the industry.

You look at Apple with its M1. You look at AWS with Graviton, Graviton2, Inferentia, Trainium, and what I referred to before with Nitro, and you can see that with all these things happening and the desire to de-commoditize compute, we are here with Azure. And, Azure announced that it was going ARM with some of its instances with a company called Ampere, by the way, the other requirement out there in the cloud was that they really wanted one processor for one instance. Okay? As opposed to using hyper threading, because what the hyperscalers tell me is that the quality of service is more consistent. And there were stuff on merchant chips that people just didn’t want, right? That came with Intel and AMD.

So, it’s been five years since Azure made its big announcement with Qualcomm and Cavium. But, challenge was Qualcomm got out of the business when it was under attack by regulators, Broadcom and Apple wasn’t paying their bills. And, Cavium was acquired by Marvell. And Marvell did an analysis of the market and just said, “Listen, we can’t compete in this general purpose market. But what we can compete with is more of a directed application specific type processor.” And they decided to leverage off the shelf ARM cores and take into TSMC 5 nanometer.

So, it took a while, but Azure is here. Now, if I look at the economics, right, between Azure and AWS, right? AWS is designing its own microprocessors, Azure is buying its microprocessors. So, AWS will have higher R&D, but Azure will likely have a higher bomb cost, because essentially, all AWS is paying for is the Silicon at TSMC. So, hard for me now to say which is better, building or buying, financially. But, overall I think with this, puts the exclamation point on is the two largest IAAS providers. And, I think some people would call Oracle the third have gone ARN. And, going ARM means you’re not going Intel or AMD.

All these companies are going Intel, AMD, and ARM, but it does signify, I would say, a strategic open arms hug on ARN, because you can’t just say, “Support ARM.” You need your operating systems, you need your development tools, you need push button capability to move an instance from an Intel instance to an Ampere instance, very similar to what AWS is doing with their Graviton challenge, which by the way was announced at Six Five Summit 2021. Thank you Dave Brown and AWS. But, this is a marathon and not a sprint. So, I’m not going to get into the performance claims. By the way, Microsoft and Ampere claimed up to 50% better price performance than comparable x86 Azure VMs for scale out workloads. Wasn’t asterisked, wasn’t footnoted. I was a little disappointed and I have to call them out on that.

Daniel Newman: Yeah, I like that you do that. That’s a Moorhead special. In my way, I appreciate that. No, I think there’s a couple of sub themes here. I think your point is that, these companies are going to be arbiter of choice. And they’re going to allow customers to pick which compute they want to run their workloads on. They’re going to have all of them, they’re going to do it for compute, they’re going to do it for GPU. And they’re going to build integrations that allow companies… Because the thing is, nobody’s going to have a 100% of the market in anything, looking, not networking, not in storage.

So, they’re going to always be building integration. And so, Microsoft is no different, but there’s another sub plot here at Pat, is that these companies are increasingly raising their hand and saying, “We can give better performance for lower cost if you use our compute.” And, it started with obviously AWS, but Alibaba is doing this overseas too. You’ve got Microsoft now coming into market. Oracle is heading down this path as well. And by the way, it’s smart. It raises another challenge for Intel and AMD, but something both companies are going to have to figure out how to address, because ARM is growing in popularity. Companies are figuring out how to “build for and on ARM.” And, companies that are building around more modernized and native cloud apps, your Snowflakes, your S/4s, your next generation Oracle. This is easier to do. It’s easier to run on these newer types of architectures.

And so, what’s probably protected some of the legacy compute has been all the legacy technical debt that a lot of these companies have. They have old database technology, old ERP technology. And, it’s not easy to refactor it for these new type of compute offerings, but as that changes, and it will change, that’s going to make ARM more and more competitive, which Pat takes me back, by the way, to a comment about the 22% of the market. Now again, one thing I will keep saying, and I think it bears repeating Pat, is that, the overall demand for compute is also growing. So, while sometimes you hear about market share in a disruption, if you can keep a chunk of market share and the market is significantly larger, you can actually still grow revenue while conceding market share. So, everybody that’s like, that this is a binary thing, or all or nothing, the amount of compute that’s going to be required to run an enterprise to run anything is going to keep growing.

And so, all of these companies have plenty of opportunity, but it’s an arms race, and semiconductors are at the core. And, oh, I didn’t even think about that. God, I’m on fire today. ARM is going to have a bigger and bigger impact now that the NVIDIA deal’s in the rear view. And Pat, by the way, I know NVIDIA only started with its big Grace hopper, and it’s big HPC CPUs on ARM, but do you really think they’re not going to come down? Do you really think there’s not going to be more and more ARM and general purpose stuff that’s going to come out of NVIDIA over the next few years? I think that’s probably in the works as well.

So, again, I love competition. I think it just gives us things to talk about, it gives something to focus on. And by the way, when there’s great competition amongst a number of great companies, you know who wins? Consumers, the enterprises, the businesses, because they’re going to win because of choice. So, good for a Microsoft. They’ve got a way to go here, but I think at least it seems that they’ve picked a path, and they’re coming out, and now we can get on with it. So, good news Pat, good analysis as always, let’s take it home to topic six, which isn’t a news topic, except it’s a news topic. This in my opinion is the biggest story of the week.

And that’s, you and I are hosting, launching our third inaugural Six Five Summit, June 7 to 9. It’s going to be an on-demand event, virtual. And, all of you are welcome to sign up, register, and attend. Having said that Pat, we have a good chunk of our lineup now secure. It’s going to be three days this year, 12 tracks everything from chips to SAS, quantum and metaverse, ESG, cloud and automotive. So, we’re going to be covering a wider swath of technology than we’ve ever covered at the event. Very proud to announce our top opening event keynote speaker, IBM CEO, Arvind Krishna, thrilled to have him joining us, Pat. And also, we have three day opener keynotes. I’ll give one of them and then I’ll let you give a couple, so I don’t take them all. But, very proud to be announcing that Matt Murphy, Marvell’s CEO, which we’ve talked a number of times about here on the show will be joining us to do one of the day openers. And then, Pat, we got two more. Who are they?

Patrick Moorhead: Yeah. So, Ericcson North America CEO, Niklas Heuveldop, and Honeywell CEO, Darius-

Daniel Newman: Adamczyk.

Patrick Moorhead: … Adamczyk. Thank you.

Daniel Newman: Yeah. It’s a pronunciation thing.

Patrick Moorhead: Usually I can say it, I have a hard time spelling it.

Daniel Newman: Aren’t you in Phoenix to see some cool Honeywell tech today?

Patrick Moorhead: I am. In fact, I’m visiting an aerospace facility they have here. I’m going to see some incredible drones.

Daniel Newman: It is still like sub seven o’clock there, so coffee it up.

Patrick Moorhead: Yeah, it’s 7:06 AM, I should be chipper.

Daniel Newman: And then we have a pretty awesome list of track openers, Pat. I think what are we up to about 14, 15 publicly traded CEOs that’ll be speaking at the event now? The whole event will be somewhere around 90 total speakers. We will have an absolute blast having these conversations and just thrilled at all the participation. I mean, you and I probably need to get one of those logo slides, but last year I think we had about 30, 33 companies participate. And I think this year we’re going to be closer to 50.

Patrick Moorhead: Oh yeah. We’ve already had 33 sign up, so we are well ahead of where we were last year. And I think last year was impressive. I mean, let’s do a little reminiscing here. So, yeah, here’s who is here last year. It’s impressive.

Daniel Newman: Yeah. And almost everybody’s back. We’ve added a whole bunch more. And just remember, last year, so we have 55 speakers, 36 companies, 15 global CEOs. We’ll probably be closer to 80 to 90 speakers. We’ll have probably 50 companies, and probably no less than 20, 25 global CEOs, huge support from the media, 2.7 million people viewed these videos last year. So, an absolute just killer event. And so, I think, we try to not do too much self promo here. We try to talk about what’s going on in the market, but this event Pat… And by the way, we worked extremely hard. So, for everyone out there that is checking this out, we would love to have you register if you’re in the industry, and you’re following our show, and you’re not participating, ping us. We’d love to get you involved in the event. It’s going to be world class.

And again, we’re going to talk about all the things… Not just about products and services. This is really a global thought leadership event. I mean, if you look at the lineup of the speakers that we’ve had over the past few years, this is Davos for the high-tech industry. And, it’s just so exciting, Pat.

So, a little chest beating, a little chest pounding that hey, we’ve got a lineup of speakers that we are going to provide to you, by the way, the public for free. You do not have to pay. You can register, you can attend. All these sessions are going to be available on demand. There will be content that will be relevant for you to listen to for a year, or more, because it isn’t just products. There’s a few things that’ll get launched and a few news items that’ll pop out of the event, but it’s really visionary. And how we’re going to keep the momentum and innovation going forward even as we leave the pandemic, crossing fingers, and as we enter this next era of what I would say, tougher growth, as the economics are changing as the commodity fed policy and liquidity is slowing down. But the Six Five and the Six Five Summit 2022 is a must if you care about what’s going on in tech. So sign up now. Pat, is there anything else that we need to say about that?

Patrick Moorhead: I don’t think we do. I think you drained that. But, what I’m going to do is just simplify, if you’re into thought leadership from the most influential people in tech, talking about thought leadership and strategy tune in. And it is thanks to the sponsors that we can bring it free to you. So, I want to thank you. So maybe, Daniel, we go through the full lineup next week.

Daniel Newman: Yeah. We’re going to keep teasing this. So, it’s the only way to make sure we use this great audience and all of our great listeners as a chance. And like I said, we really hope you do tune in. So, hit that subscribe, subscribe to our podcast, subscribe to attend the event, hit that registration, be there. We promise it will be worthwhile. In this episode though, Mr. Moorhead and I have to say goodbye, we got some other work to do. Believe it or not, this isn’t the only thing we do, it just is so good you would think it’s the only thing that we do.

But we’re back at it, we’ll be back next week. Appreciate all the support, appreciate all of you that listen in, and tune in each and every week, and share, and socialize, and comment. But, Pat, I think it’s time to say goodbye.

Patrick Moorhead: Take care, everybody. Have a great weekend.

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio