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Tag: Qualcomm

Why VR Could be as Big as the Smartphone Revolution

Technology in the 1990s and early 2000s marched to the beat of an Intel-and-Microsoft-led drum.

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via IT Portal

Intel would release new chips at a regular cadence: each cheaper, faster, and more energy efficient than the last. This would let Microsoft push out new, more performance-hungry software, which would, in turn, get customers to want Intel’s next, more awesome chip. Couple that virtuous cycle with the fact that millions of households were buying their first PCs and getting onto the Internet for the first time – and great opportunities were created to build businesses and products across software and hardware.

But, over time, that cycle broke down. By the mid-2000s, Intel’s technological progress bumped into the limits of what physics would allow with regards to chip performance and cost. Complacency from its enviable market share coupled with software bloat from its Windows and Office franchises had a similar effect on Microsoft. The result was that the Intel and Microsoft drum stopped beating as they became unable to give the mass market a compelling reason to upgrade to each subsequent generation of devices.

The result was a hollowing out of the hardware and semiconductor industries tied to the PC market that was only masked by the innovation stemming from the rise of the Internet and the dawn of a new technology cycle in the late 2000s in the form of Apple’s iPhone and its Android competitors: the smartphone.

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via Mashable

A new, but eerily familiar cycle began: like clockwork, Qualcomm, Samsung, and Apple (playing the part of Intel) would devise new, more awesome chips which would feed the creation of new performance-hungry software from Google and Apple (playing the part of Microsoft) which led to demand for the next generation of hardware. Just as with the PC cycle, new and lucrative software, hardware, and service businesses flourished.

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But, just as with the PC cycle, the smartphone cycle is starting to show signs of maturity. Apple’s recent slower than expected growth has already been blamed on smartphone market saturation. Users are beginning to see each new generation of smartphone as marginal improvements. There are also eery parallels between the growing complaints over Apple software quality from even Apple fans and the position Microsoft was in near the end of the PC cycle.

While its too early to call the end for Apple and Google, history suggests that we will eventually enter a similar phase with smartphones that the PC industry experienced. This begs the question: what’s next? Many of the traditional answers to this question – connected cars, the “Internet of Things”, Wearables, Digital TVs – have not yet proven themselves to be truly mass market, nor have they shown the virtuous technology upgrade cycle that characterized the PC and smartphone industries.

This brings us to Virtual Reality. With VR, we have a new technology paradigm that can (potentially) appeal to the mass market (new types of games, new ways of doing work, new ways of experiencing the world, etc.). It also has a high bar for hardware performance that will benefit dramatically from advances in technology, not dissimilar from what we saw with the PC and smartphone.

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via Forbes

The ultimate proof will be whether or not a compelling ecosystem of VR software and services emerges to make this technology more of a mainstream “must-have” (something that, admittedly, the high price of the first generation Facebook/Oculus, HTC/Valve, and Microsoft products may hinder).

As a tech enthusiast, its easy to get excited. Not only is VR just frickin’ cool (it is!), its probably the first thing since the smartphone with the mass appeal and virtuous upgrade cycle that can bring about the huge flourishing of products and companies that makes tech so dynamic to be involved with.

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Qualcomm Trying to Up its PR with Snapdragon Stadium

I’m very partial towards “enabling technologies” – the underlying technology that makes stuff tick. That’s one reason I’m so interested in semiconductors: much of the technology we see today has its origins in something that a chip or semiconductor product enabled. But, despite the key role they (and other enabling technologies) play in creating the products that we know and love, most people have no idea what “chips” or “semiconductors” are.

Part of that ignorance is deliberate – chip companies exist to help electronics/product companies, not steal the spotlight. The only exception to that rule that I can think of is Intel which has spent a fair amount over the years on its “Intel Inside” branding and the numerous Intel Inside commercials that have popped up.

While NVIDIA has been good at generating buzz amongst enthusiasts, I would maintain that no other semiconductor company has quite succeeded at matching Intel in terms of getting public brand awareness – an awareness that probably has helped Intel command a higher price point because the public thinks (whether wrongly or rightly) that computers with “Intel inside” are better.

Well Qualcomm looks like they want to upset that. Qualcomm make chips that go into mobile phones and tablets and has benefitted greatly from the rise in smartphones and tablets over the past few years, getting to the point where some might say they have a shot at being a real rival for Intel in terms of importance and reach. But for years, the most your typical non-techy person might have heard about them is the fact that they have the naming rights to San Diego’s Qualcomm Stadium – home of the San Diego Chargers and former home of the San Diego Padres.

Well, on December 16th, in what is probably a very interesting test by Qualcomm to see if they can boost the consumer awareness of the Snapdragon product line they’re aiming at the next-generation of mobile phones and tablets, Qualcomm announced it will rename Qualcomm Stadium to Snapdragon Stadium for 10 days (coinciding with the San Diego County Credit Union Poinsettia Bowl and Bridgepoint Education Holiday Bowl) – check out the pictures from the Qualcomm blog below!

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Will this work? Well, if the goal is to get millions of people to, overnight, buy phones with Snapdragon chips inside – the answer is probably a no. Running this sort of rebranding for only 10 days for games that aren’t the SuperBowl just won’t deliver the right PR boost. But, as a test to see if their consumer branding efforts raises consumer awareness about the chips that power their phones, and potentially demand for “those Snapdragon watchamacallits” in particular? This might be just what the doctor ordered.

I, for one, am hopeful that it does work – I’m a sucker for seeing enabling technologies and the companies behind them like Qualcomm and Intel get the credit they deserve for making our devices work better, and, frankly, having more people talk about the chips in their phones/tablets will push device manufacturers and chip companies to innovate faster.

(Image credit: Qualcomm blog)

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Innovator’s Business Model

image A few weeks back, I wrote a quick overview of Clayton Christensen’s explanation for how new technologies/products can “disrupt” existing products and technologies. In a nutshell, Christensen explains that new “disruptive innovations” succeed not because they win in a head-to-head comparison with existing products (i.e. laptops versus desktops), but because they have three things:

  1. Good enough performance in one area for a certain segment of users (i.e. laptops were generally good enough to run simple productivity applications)
  2. Very strong performance on an unrelated feature which eventually will become very important for more than one small niche (i.e. laptops were portable, desktops were not, and that became very important as consumers everywhere started demanding laptops)
  3. Have the potential to improve by leveraging their industry learning curve to the point where they can compete head-to-head with an existing product (i.e. laptops now can be as fast if not faster than most desktops)

But, while most people think of Christensen’s findings as applied to product and technology shifts, this model of how innovations overtake one another can be just as easily applied to business models.

A great example of this lies in the semiconductor industry. For years, the dominant business model for semiconductor companies was the Integrated Device Manufacturer (IDM) model – a business model whereby semiconductor companies both designed and manufactured their own product. The primary benefit of this was tighter integration of design and manufacturing. Semiconductor manufacturing is highly sophisticated, requiring all sorts of specialized processes and chemicals and equipment, and there are a great deal of intricacies between one’s designs and one’s manufacturing process. Having both design and manufacturing under one roof allowed IDMs to create better products more quickly as they were able to exploit the interplays between design and manufacturing and more readily correct problems as they arose. IDMs were also able to tweak their manufacturing processes to push specific features, letting IDMs differentiate their products from their peers.

image But, a new semiconductor model emerged in the early 1990s – the fabless model. Unlike the IDM model, fabless companies don’t own their own semiconductor factories (called fabs – hence the name “fabless”) and outsource their manufacturing to either IDMs with spare manufacturing capacity or dedicated contract manufacturers called foundries (the two largest of which are based in Taiwan).

At first, the industry scoffed at the fabless model. After all, these companies could not tightly link their designs to manufacturing, had to rely on the spare capacity of IDMs (who would readily take it away if they needed it) or on foundries in Taiwan, China, and Singapore which lagged the leading IDMs in manufacturing capability by several years.

But, the key to Christensen’s disruptive innovation model is not that the “new” is necessarily better than the “old,” but that it is good enough on one dimension and great on other, more important dimensions. So, while fabless companies were at first unable to keep up in terms of bleeding edge manufacturing technology with the dominant IDMs, the fabless model had a significant cost advantage (due to fabless companies not needing to build and operate expensive fabs) and strategic advantage, as their management could focus their resources and attention on building the best designs rather than also worrying about running a smooth manufacturing setup.

The result? Fabless companies like Xilinx, NVIDIA, Qualcomm, and Broadcom took the semiconductor industry by storm, growing rapidly and bringing their allies, the foundries, along with them to achieve technological parity with the leading IDMs. This model has been so successful that, today, much of the semiconductor space is either fabless or pursuing a fab-lite model (where they outsource significant volumes to foundries, while holding on to a few fabs only for certain products), and TSMC, the world’s largest foundry, is considered to be on par in manufacturing technology with the last few leading IDMs (i.e. Intel and Samsung). This gap has been closed so impressively, in fact, that former IDM-technology leaders like Texas Instruments and Fujitsu have now decided to rely on TSMC for their most advanced manufacturing technology.

To use Christensen’s logic: the fabless model was “good enough” on manufacturing technology for a niche of semiconductor companies, but great in terms of cost. This cost advantage helped the fabless companies and their allies, the foundries, to quickly move up the learning curve and advance in technological capability to the point where they disrupted the old IDM business model.

This type of disruptive business model innovation is not limited to imagethe semiconductor industry. A couple of weeks ago The Economist ran a great series of articles on the mobile phone “ecosystem” in emerging markets. The entire time while I was reading it, I was struck by the numerous ways in which the rise of the mobile phone in emerging markets was creating disruptive business models. One in particular caught my eye as something which was very similar to the fabless semiconductor model story: the so-called “Indian model” of managing a mobile phone network.

Traditional Western/Japanese mobile phone carriers like AT&T and Verizon set up very expensive networks using equipment that they purchase from telecommunications equipment providers like Nokia-Siemens, Alcatel-Lucent, and Ericsson. (In theory,) the carriers are able to invest heavily in their own networks to roll out new services and new coverage because they own their own networks and because they are able to charge customers, on average, ~$50/month. These investments (in theory) produce better networks and services which reinforce their ability to charge premium dollar on a per customer basis.

In emerging markets, this is much harder to pull off since customers don’t have enough money to pay $50/month. The “Indian model”, which began in emerging countries like India, is a way for carriers in  low-cost countries to adapt to the cost constraints imposed by the inability of customers to pay high $50/month bills, and is generally thought to consist of two pieces. The first involves having multiple carriers share large swaths of network infrastructure, something which many Western carriers shied away from due to intellectual property fears and questions of who would pay for maintenance/traffic/etc. Another plank of the “Indian model” is to outsource network management to equipment providers (Ericsson helped to pioneer this model, in much the same way that the foundries helped the first fabless companies take off) — again, something traditional carrier shied away from given the lack of control a firm would have over its own infrastructure and services.

Just as in the fabless semiconductor company case, this low-cost network management business model has many risks, but it has enabled carriers in India, Africa, and Latin America to focus on getting and retaining customers, rather than building expensive networks. The result? We’re starting to see some Western carriers adopt “Indian model” style innovations. One of the most prominent examples of this is Sprint’s deal to outsource its day-to-day network operations to Ericsson! Is this a sign that the “Indian model” might disrupt the traditional carrier model? Only time will tell, but I wouldn’t be surprised.

(Image credit) (Image credit – Foundry market share) (Image credit – mobile users via Economist)

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