D2D: Intel, Ericsson, HPE and More
We also propose combining SWKS and QRVO, then splitting them in two
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We will be attending Mobile World Congress March 26 to March 29 in Barcelona. If you would like schedule a meeting in Barcelona click here.
Highlights from our Blog
Intel guided to a surprisingly soft Q1. As bad as the numbers were, and they were bad, we think the bigger problem was the way in which management approached the problem. They seemed to revert to patterns from the Intel of old. Ten years ago they could count on upcoming process improvement to wash away any problems. But the Intel of today is in a very different position and needs to work harder at rebuilding its credibility with the Street.
HP Enterprise is buying Juniper. We got to this one late because it took us a while to understand why this deal happened. Juniper is moving to a world where it’s 50’s% gross margin are likely to move closer to HPE’s 30’s% gross margins, better to jump now then get pushed later. After we published that note we heard from people at both companies who thought we were overly diplomatic in how we framed the outlook for both.
Qorvo and Skyworks face a common set of problems. Their core mobile products face a stagnant market where Qualcomm holds most of the cards. Yet neither company has made much progress over the years in growing their non-mobile products, which internally struggle for management attention and resources. We the think the two companies should merge and then spin off the non-mobile products into a separate company. This would provide both sides better scale to compete and better align objectives.
We looked again at the AT&T deal which gives Ericsson control of its radio access network (RAN). AT&T likely saw a way to get a big discount on gear now, with the hope that its move to “open” networks would give it leverage over Ericsson down the road. For its part, the deal likely gives Ericsson the ability to control the definition of “open”. Meaning down that road AT&T may not have the ven. dor choice it needs for that leverage.
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Noteworthy Items
Semis and Hardware
“Assessment of the Status of the Microelectronics Industrial Base in the United States” published by the Bureau of Industry and Security (BIS). Lots of interesting detail in here and an important lens into how the US government views the semiconductor industry. And a useful explainer from the mysterious Lithosgraphene.
Stacey Ragson at Bernstein published a note that shows “more than all” of the gains in semis revenues over the past five years came from price increases. This is behind the Bernstein paywall, so if anyone can share a copy….
Interesting white paper from our friends at Expedera on trends in semiconductor intellectual property (IP). This area becomes more critical as leading edge chips get more expensive and AI becomes more important.
Money is “pouring” into fabs and semiconductor manufacturing capabilities. This is a positive trend, but there is devil in those details. If that money goes to building new capabilities and processes it will be a huge driver for the industry, but the risk is that it just goes into adding more trailing edge capacity, which the world really does not need right now.
Benchmarks show that Google’s latest TPU outperforms Nvidia’s H100 on training AI models. Interesting to see real TPU measurements in the open, but when it comes to AI take all benchmarks with a heavy dose of salt. There is a lot of ‘art’ in benchmarking which belies the ‘science’ quantitative measures imply.
The Rocky Mountain Institute published a great guide to the “The Rise of Batteries in Six Charts”. Batteries have become so much cheaper and more capable in just the past few years. The RMI focuses on the significance for cars, but we think this is evident in many other fields as well. On a related topic, the US grid battery capacity is about to double - again.
Networking and Wireless
Dean Bubley published a thoughtful note on the role of Private Networks. This is an interesting space. The telecom operators and vendors got ahead of the market on this one, and are scaling down just as the market seems to be gaining traction. On the other hand, this is not really a telco story, this is advanced enterprise wireless networking.
Light Reading’s Mike Dano visits a Dish 5G cell site. A great piece of hacker tourism. Noteworthy to see just how much less gear is needed for Dish’s systems in comparison to the multiple refrigerator-sized Verizon units. On the other hand, the limitations of the system are also clear - for instance they still rely on roaming partners (like Verizon) for indoor coverage.
A recurring topic for us is the growing importance of cooling. Our devices from the cloud to our pockets are getting hotter, and we need new ways to cool them.
Software and the Cloud
In a time of big layoffs across tech the scope of Amazon’s cuts at Twitch stand out for us. Over the past year, Amazon has cut 50% of the staff there. Twitch is a fairly remarkable asset with a large, active, engaged user base. Few competitors have really been able to chip away at its core. Yet Amazon has never really been able to make the acquisition click (puns intended). Twitch should be a serious rival to YouTube, but seems to be just barely holding on.
Broadcom is wasting no time in putting its stamp on freshly-acquired VMWare, and no one seems happy about. We are not surprised to see the new corporate overlord making deep cuts, but they seem to be rooting out big pieces of their customer and partner base in order to focus on the largest customers, who are now likely to see price increases for some of their critical software.
Techcrunch claims “only” 150 apps have been designed for the Apple Vision Pro. We would turn this on its head - the fact that Apple got 150 apps for a device that hadn’t launched, with at most a million possible customers in year one, is a pretty good achievement.
“Is Cloud the New Mainframe”.Technology is a pendulum.
A slightly disturbing review of the latest malware attack vector on iPhones.
Diversions
A review of the US’s Machine Tool Industry. Interesting to think about this in the context of semis and national industrial policy. No easy answers anywhere.
Comparison of the distribution of venture returns to profits from 19th century whaling expeditions. Hint: without the legend you cannot tell the difference.
Image by Microsoft Co-Pilot
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Really interest insights. Silicon for AI is all the rage, and being purely mobile focused may not be the best for growth.