On Friday, the news came that Intel, which among other things manufactures microprocessors, is making a loss of 1.6 billion dollars in the second quarter.
Now the IT giant will have to save 10 billion dollars next year and also reduce its workforce by over 15 percent – which corresponds to at least 15,000 employees, according to The Verge.
The red figures have several causes – and a longer history, according to Magnus Mähring. It started already when smartphones came.
There arose a need to build processors for smartphones, with architecture that draws much less power.
But they didn't catch on, which made them miss a market that became big.
Pure luck for Nvidia
The second and main reason is that they haven't kept up with AI development. Intel has specialized in ordinary processors, unlike for example Nvidia which makes graphics processors – and it's that type of processor that's primarily used in AI applications.
But according to Magnus Mähring, it was a coincidence that Nvidia would become leading in AI.
Nvidia was working on a niche product that a few percent of all PC owners bought because they wanted to play games. It was seen rather as a complement to what Intel did.
But then the AI boom came and precisely the type of processors that Nvidia manufactured were superior for AI applications.
Too late to catch up
He means that it was already too late for Intel to catch up. And the dominance they had previously in their area, they won't have in the future, he says.
But that doesn't mean that life is over. It's the same as for IBM, which also lost its dominant position, but it's still a well-run and profitable company.
The technology company IBM was dominant when it came to large and medium-sized computers for a very long time. But in the PC boom, there were many companies that no longer needed their products, since Intel-based personal computers instead took over many applications.
Then the demand for IBM's mainframes fell and their entire business model had to be re-evaluated.
So it's roughly the same thing that's happening now between Intel and Nvidia?
Yes exactly. One can say that Intel got a taste of its own medicine.
