It’s Time the US Faces Reality
As a technology investor, how do you think in paradigms?
Paradigms can change a prediction into a system of the world. You can parlay one insight into a new technology horizon.
Let me provide you with an example from the early 1990s, one my regular readers may be bored to hear again.
I essentially parlayed my Moore’s Law paradigm (a biennial doubling of microchip transistor densities) into predicting the smartphone. I said it would be the dominant computer of the new era — as “portable as your watch, as personal as your wallet, it would recognize speech, navigate streets, collect your news and mail” etc. I also said, “It may not do Windows…”
I thought that might be bad news for Microsoft but that the rest of us could live with it.
Complementary to Microsoft’s Windows, Intel’s x86 standard oriented the leading US chip company toward complex instruction set devices designed for variegated forms of desktop math and business logic, with unlimited power from the wall. For these programs, people could wait for a prolonged “boot-up” before the machine was really available for work.
Until the second decade of the 21st century, this paradigm completely prevailed. But these staples of the Intel empire have now given way to the low-powered, high-connectivity, highly integrated functions of smartphones.
Understanding the Smartphone Paradigm
If you predicted that smartphones were going to be the dominant computers of the 21st century, you could have also anticipated the prevalence of the ARM (Advanced RISC Machines) microprocessor at the heart of most smartphones.
You also might have anticipated the declining dominance of Intel. RISC, or reduced instruction set computing, puts more stress on outside software compilers and outside apps. With everything clouded and connected, there was ever less need for Intel’s complex microprocessor instructions in the local hardware.
The smartphone paradigm would have meant an investment in UK-based Arm Holdings and continued investment in Qualcomm (QCOM), designer of the Snapdragon series of ARM processors optimized for smartphones and their low power, always-on always-connected functions.
Now laptops, notebooks, and tablets also have to be instantly booted up and always linked.
So companies such as HP, Lenovo (China’s IBM), and Asus of Taiwan do not restrict themselves to Intel x86 processors. They increasingly use Qualcomm’s Snapdragon processors in their products.
This leads us to an important point.
The US Should Not Turn its Back on Chinese Tech
Chinese companies still comprise Intel’s biggest competitors and subsequently turn away from the x86. Meaning, the balance of power in world technology is shifting East.
With its huge population and its millions of engineers graduating yearly, China has become the largest and fastest moving technology market.
Now the US has persuaded Arm Holdings to deny ARM technology to China. The reverberations will be seismic. All Google’s Android and Apple iPhones and their licensees in China use ARM.
DisARMed, they will also have to eschew Snapdragon from Qualcomm. Meanwhile, the leading chip manufacturing company in the world is Taiwan’s TSMC, producing leading edge 7-nanometer geometries for AMD, Apple, Huawei and other Chinese players – while Intel stalls at 10 nanometers.
The current move to exclude Chinese technology from the US as a security threat is in fact a significant threat to US security. The US is forcing Chinese companies to turn away from the US.
Now Alibaba (the Chinese Amazon-eBay combination) is forgoing Snapdragon and doing serious development of “RISC-5” open source alternatives.
As the world’s runner up smartphone producer and world’s leading producer of telecom gear, Huawei is now developing its own microprocessors.
China will suffer immediate setbacks, but with its tremendous engineering resources it will come back stronger and more self-sufficient than ever.
Developed as an open source ARM alternative at Berkeley, RISC-5 is fueling a new technology paradigm, with a number of private companies now in a path to public markets.
Prophecy #1: The US is not going to turn the world’s biggest capitalist economy and technology manufacturer into an adversary. Instead, the US will recognize reality: China is the world leader in the next generation of chip manufacturing in Taiwan and the leader in the next generation of wireless through Huawei. They are not “stealing” from us anymore.
Prophecy #2: The world tech industry faces an inflection point. Connectivity and low power are the key paradigm of chip development. Everything is connected. Intel faces a crisis and even Arm Holdings and Qualcomm will have to move nimbly to keep ahead while US entrepreneurs develop new ARM alternatives based on RISC-5.
Editor, Gilder’s Daily Prophecy