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Despite reporting a second-quarter loss last night, due in part to costs associated with the faulty packaging on some of its chips placed in thousands of laptops, Nvidia still has a plan for semiconductor domination through the GPU. But if it wants to execute, it needs to accept the realities that come with stepping into a competitive market. The earnings call shows Nvidia still has a lot to learn.

In yesterday evening’s call, CEO Jen-Hsun Huang admitted to a $196 million charge because of problems with its GPUs in some laptops. He also talked about some pricing mishaps that occurred as AMD pushed out a highly competitive product with a lower price. Nvidia is learning, but there are two bright spots in the call, related to its Tegra chipset for mobile Internet devices and smartphones and bringing high-level parallel processing to the consumer.

Huang said Tegra wouldn’t be shipping in products until next year (something he told us earlier this year in an interview), but growth from CUDA on laptops and desktops should have an impact over the second half of this year (which will be the second half of fiscal 2009 for the firm). CUDA is a programming tool that allows software coded in C languages to run on the multiple cores in a GPU. It helped the company make inroads in the scientific computing community, and thanks to software from startups such as Elemental Technologies, the goal is to bring that level of parallel processing to consumers.

“We can’t just keep selling chips that make graphics run faster and cheaper. I mean, that’s all very nice and it’s all good but we need to advance the visual computing field in some remarkable and important way, and parallel computing is one of the most important investments that we are making,” Huang said on the call.

Such a shift, if well executed, will bring a level of power to computers that has been reserved for research institutions and mainframes. The next laptop you purchase could very well be able to analyze real-time trading data and spit out investment decisions. The key will be building software that’s designed to take advantage of it.

image courtesy of Nvidia

AMD isn’t going after the mobile Internet device market that Intel and other chip vendors are eying. AMD’s senior VP and chief marketing officer, Nigel Dessau, told eWeek, “What we are saying is that we are a smaller company and we have to focus on what we do well at this point. We are watching that segment rather than playing in it, but as it matures we’ll see where it goes.” Sounds like a good plan for AMD, which already has chips that might work for Netbooks and needs to focus on righting itself.

Yesterday afternoon, Intel’s CEO Paul Otellini seemed a little hazy on the future home for Intel’s Atom processor during the chip maker’s quarterly earnings call — a fact I don’t find all that surprising since the netbooks or mobile Internet devices the chips are designed for exist only in a marketer’s imagination and failed product implementations.

Otellini was excited about Atom, calling demand for the chip” robust,” but analysts pressed Otellini about Atom’s end market and whether the chip would cannibalize Intel’s low-end Celeron processor. The Celeron ranges from speeds of 2.13 GHz to 3.6 GHz, and is faster than Atom’s 1.8 GHz or 1.6 GHz. Otellini’s responses were less than a ringing endorsement of the chip. “[Atom] is less than a third of the performance of our Centrino (high-end mobile processor),” said Otellini. “You’re dealing with something that most of us wouldn’t use.”

Wait a second. Just weeks ago before the Computex trade show in June, Otellini told the Financial Times he anticipated a $40 billion market opportunity for Atom chips over the next few years. If most of us aren’t using these low-end chips, then who is? Otellini envisions the Atom chip for small computers in emerging markets that happen to have IP-based voice, but in late 2009 Intel will launch an Atom chip for smartphones. In emerging countries, a lot of computing is already carried out on cell phones, begging the question of where Intel’s demand for Atom is coming from. Will those products actually succeed?

As for cannibalization, Otellini said, “We do not see [Atom] replacing Celeron. If you look at the netbook products being built around Atom, they’re all lower-priced, lower features, smaller screen size notebooks aimed at first-time buyers or the second, third or fourth machine in a household. We don’t see any cannibalization.”

So Atom chips are designed for slow web access on cheap, portable machines that will act as the backup computer in my home. Wait, I have one of those already. It’s called a smartphone and plenty of companies already make processors for that market.

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For a while there, covering the chip industry was like covering a race run by a rabbit and a cheetah. AMD was the rabbit, while Intel — with its much larger market cap and greater profits — was the cheetah. Evey now and then the rabbit would fool you into thinking he was going to pull ahead, but we all knew who was going to win. In the past few years, however, two things have brought more runners and more diversity to the course: a challenge to the x86 architecture, and the iPhone.

I could probably find a way to credit the iPhone for changing the furniture industry if I tried hard enough (it could be the new Six Degrees of Kevin Bacon game for tech journalists.) But in this case the iPhone pushed the real Internet — as opposed to a carrier-defined portal — out to mobile consumers and showed them how compelling such access could be. That made clear to carriers that data usage, which was already on the rise, could become a huge revenue booster if consumers were given the right type of devices. Which prompted chip makers to see gold in the form of the 33.2 million high-end handsets sold around the world.

That pushed the chip world into viewing these devices as mini computers requiring their very own processors. Obviously these processors need to be small, use very little energy and still cycle fast enough to load and display web pages, pictures and other mobile computing tasks. Chip firms had been thinking about those functions for years, but the success of the iPhone showed how important the mobile computing experience could be. So Intel begat Atom, a chip designed not for a mobile phone but for a smaller laptop that Intel calls a mobile Internet device.

Other chips firms aren’t standing still, either. Via Technologies, which for a long time had the handheld computer market to itself, is refreshing its line of chips. Qualcomm now has Snapdragon, and Texas Instruments is offering OMAP chips. The dark horse in all of this frenzy comes from Nvidia’s Tegra offering, which is really compelling in demos. But Nvidia has an uneven record of supporting its products, so it remains to be seen if the real-life experience can meet the high expectations set by the demos.

Nvidia is also making my chip coverage fun with its efforts to knock out the x86 architecture. Intel and AMD dual-, triple- and quad-core chips will never go away, but both Nvidia and IBM are pushing credible alternatives for high-end processing. Nvidia’s dressing up its graphics processing chips (GPUs) to run scientific queries, visually intensive tasks and repetitive problems than can be done in parallel, such as video decoding and encoding. The influx of digital media is creating a need for such capabilities in an increasing number of data centers.

IBM, meanwhile, is pushing its Cell processor — which was designed with Sony and Toshiba eight years ago for the PlayStation 3 — for enterprise servers and high-performance computing. In many ways it’s attacking the same problems Nvidia’s GPUs are, with encoding and Monte Carlo simulations showing off the Cell’s specially designed, nine-core architecture. IBM may have an advantage over Nvidia because of its enterprise focus. It offers an enterprise-ready Cell-based blade server, while Nvidia sells its chips to firms such as Atrato and Rackable for corporate consumption.

So the two-company race that was never all that competitive has turned into several races with multiple players. Ironically AMD doesn’t have a mobile processor yet, and isn’t really pushing its GPUs into jobs other than running graphics. Perhaps it believes that if it stays the PC course it can pass the cheetah while Intel focuses on Atom and smaller devices.

Nvidia and AMD today each launched two graphics chips for the PC market — but the two companies are pursuing divergent strategies. Both share a recent focus on high-end graphics, which underlines how important visual computing has become; but the different approaches taken by each firm may cost Nvidia market share if its monolithic high-end chips can’t deliver the graphic punch to compete with a multi-GPU strategy embraced by AMD and Intel.

Nvidia launched its GTX 280 and GTX 260 chips, which are larger multi-core processors on a single chip. AMD on the other hand, has taken a bottoms-up approach with smaller, multi-core chips that can be harnessed to a second graphics processing chip on a board to deliver higher-level performance. Lower-end PCs can rely on one AMD processor and those needing more power can turn to two AMD chips or Nvidia’s single, high-power chip.

The real question is how the graphics will look on the screen. And, as in most chip releases, the proof will be a while in coming. Nvidia already has HP signed up to use its new chip in a new Voodoo desktop especially for gaming. That makes sense. Nividia’s chip will rock the high-end application, while AMD’s is designed to provide compelling imagery for cheaper, power-efficient PCs and laptops at a large scale. The real battle will be whether AMD’s dual-chip strategy takes business away from Nvidia for specialty graphics computers and high-performance technical computing. If that occurs, Nvidia will have to be on guard: Intel’s planning to follow the same dual-chip path with its Larrabee GPUs.

AMD’s Sisyphean task of grabbing market share from Intel begins anew with the launch of its latest line of laptop chips laptop platform formerly code-named Puma. Today, AMD launched a refresh of its Turion mobile processor combined with an integrated ATI graphics processor, designed for mobile use form the ground up. AMD also announced it would provide a discrete graphics processor that could work in conjunction with the integrated graphics processor to boost performance.

Puma will both help AMD compete with Intel again in the still growing laptop market and justify the company’s $5.4 billion acquisition of ATI Technologies back in 2006. As graphics become more important to the PC user, both Intel and AMD are shoring up their expertise in that department. AMD bought ATI, while Intel is pushing its own platform strategy with in-house graphics processing.

The Puma platform will launch in laptops from Toshiba, NEC, HP, Asus and Acer. Lucky for AMD, Intel’s planned upgrade to its Santa Rosa laptop platform — the Monetevina platform — has been delayed until July, giving AMD a few-month head start on wowing consumers and the back-to-school buyers.

No one knows exactly how big the market for mobile Internet devices will be, but the major chip makers are betting it will be huge (it’s one of the reasons they’re making chips for mobile devices at 45 nanometers.) We’ve covered efforts by Intel, Qualcomm, and Via Technologies to get their chips into devices sized somewhere between a smartphone and a PC, but Texas Instruments wants to play, too.

TI formalized its MID effort, based on its own OMAP architecture, last month. It’s entering this market with its third generation of OMAP multimedia processors, which were designed four years ago specifically to fit into smartphones. The second-generation chips are currently in the Nokia 800 and 770; the third-generation chips that underlie the formal MID group will be in an undisclosed number of products by the end of the year.

TI’s chips will compete directly with Qualcomm’s Snapdragon chipset and Intel’s Atom chips. Comparatively speaking, TI’s chips show a greater flexibility for the end products. The power-sipping (at 500 mW-750 mW) 800 GHz MHz processor is slower than both Qualcomm’s and Intel’s efforts and requires less power than Intel’s Atom processors, which can require up to 2.4 watts. Ramesh Iyer, a MID product strategy manager with TI, says the lower clock speed is a conscious decision to reduce the power consumption; combining several types of cores with TI software allows for a higher utilization of existing megahertz, he notes.

As products containing chips from competing vendors hit the market, my hunch is that TI’s might be the best when it comes to general purpose use and battery power, followed by Qualcomm’s Snapdragon, which will also be battery-friendly and perhaps perform better than TI’s in general purpose use. Device specs for MIDs based on Intel’s Atom processor are larger, but the x86 architecture might win converts because it’s familiar and plenty of applications are designed for it. And that raises the very legit question of what role the operating system will play in how MIDs are used. I’ll get back to that in a few posts.

Poor AMD. Cray has decided to build its next generation of supercomputers around Intel’s Xeon chips. Cray’s previous line was built around AMD’s Opteron processor, which was introduced in 2003, but AMD’s latest quad-core chip — the Barcelona — has been delayed. Into that delay has stepped Intel, with an ambitious effort to not only provide chips, but also to build an R&D partnership around the future of supercomputing centered on Intel’s multicore processors. With Cray bringing on such a potent partner (Intel has almost 71 percent of the market when it comes to providing processors for the Top 500 supercomputers) other chip vendors such as IBM should take note, too. Chart image from Top500.org.

Intel’s Mash Maker application, which launches today, isn’t exactly a new idea; Yahoo Pipes and Microsoft’s Popfly are similar. But Mash Maker marks the first time Intel has launched a software effort with no hardware attached. Presumably you can run Mash Maker on a computer with an AMD inside without melting your motherboard.

I was super skeptical at first and frankly, still am. According to Robert Ennals, senior researcher at Intel Research Berkeley and the architect for Mash Maker, the goal of Intel Research is to make the computing experience better. He said Intel Research and Intel Capital are the only divisions at Intel who have the freedom to think outside the PC box, as it were. Fine, Intel launched Mash Maker to make the Internet a better place. Does it?

Jeff Klaus, marketing director for Intel Mash Maker, said it is more useful than Pipes or Popfly because it not only allows users to make mashups, but also allows those who have downloaded the Mash Maker client to see which previous Mash Maker mashups might improve their web surfing experience. This way users of Mash Maker can benefit even if they don’t know how to create mashups. As one of the biggest complaints I have about Pipes is the difficulty I have using it (yes, it’s a me-centric complaint), I have to think there are others who could benefit from this.

In the meantime, I’ll watch with interest as Intel moves outside of its chip-centric world. A few years ago it made the decision with its Intel Capital venture investing arm to look not just for companies that could eventually sell more Intel chips, but also those that might make for a good return. In 2007 it started investing in seed deals, especially consumer-facing startups, as part of that expanding mission.

As for selling more chips, programs such as Mash Maker may not directly influence buying decisions, but by making the computer easier to use, Intel makes them more important and thus, more necessary. And by associating its brand with a fun application, Intel is achieving brand recognition in a much more sophisticated way than its dancing bunny-suited guys back in the 90s.

As often as I reference Moore’s Law you’d think I’d know everything about Gordon Moore, the former co-founder, president and chairman of Intel who helped create the chip industry today. In a fit of wild extrapolation, he came up with the idea that the number of transistors on a chip would double every year, and later, based on his experience, he reasoned out the eponymous law that says transistors will double every 2 years. But an in-depth interview with Moore conducted by SEMI has taught me a thing or two about the man.

1. He can blow glass. I’ve done this folks, and it’s not easy. Or safe.
2. He once evaporated several thousand dollars worth of platinum inside a furnace.
3. He inhaled. Arsenic.
4. The man has no heroes, but he did like his math teacher.
5. And he believes that, in the chip industry, when the going gets tough, the tough speed new product development.

AMD has unleashed a line of desktop chips at a time when PC sales are slowing and even Intel is experiencing tighter margins (although, that’s because of memory prices). No matter how good AMD’s offerings are, it’s going to be hard for the company to gain traction in this market. Intel can afford to cut costs to drive sales into PCs, while AMD has a much harder time.

Despite the economic crunch, AMD has put forth a strong line of chips for the desktop with its Phenom series. It includes the X3 8000, the industry’s first triple-core chip for desktops, and the X4 line of souped-up quad-core chips for desktops designed to run really high-end graphics. The X4 9100e, a power-sipping quad-core x86 processor that only uses 65 watts, makes me hopeful that a computer built with it might run cool enough to sit in the living room as a media player without the constant whir of a fan.

Today AMD said it has 45 nanometer chips for desktops and servers running in development systems. That’s fantastic, but the chips won’t be in actual devices until the second half of the year, putting AMD’s most advanced chips at least six months behind Intels’s 45 nanometer chips.

Also, one of the touted benefits of 45nm is increased power efficiency, which makes them a good fit for mobile computing. Intel launched its 45nm chips first in a new laptop, but AMD won’t have 45 nm chips in laptops until 2009. By then Intel will be working on 32 nanometer chips, which leads me to wonder how long AMD can play this game.

Intel and STMicroelectronics have managed to produce a breakthrough in a new type of memory technology that could replace flash. Members of their joint venture Numonyx, which is trying to develop memory chips reliant on phase-change memory (PRAM) to store information, will present a paper today demonstrating how they’ve used it to double the amount of information they can store. It’s good news, but it still means it will cost twice as much to store the same amount of data on PRAM chips compared with the competing flash technology.

Phase-change memory relies on changes in temperature to store data; it competes with NOR flash, which is used to store the programs that run your VCR, set-top box and cell phone. The other type of flash, NAND, is used to store larger amounts of memory, such as the songs on an iPod.

Like all chips, memory follows Moore’s Law, which requires the space between transistors to get smaller. Kind of like doing the limbo, flash memory may not be able to go any lower. By allowing storage capacity to continue to expand while making chips ever smaller (and more cost-effective to produce), PRAM could provide the next breakthrough. However, although the breakthrough from Intel and STMicro puts PRAM at the same cost as NOR flash, it only stores half the data. So another breakthrough is still needed.