Intel’s Ivy Bridge-EX Could Cut IBM’s POWER

In the server market, proprietary RISC architectures such as IBM's (NYSE: IBM  ) POWER and Oracle's (NYSE: ORCL  ) SPARC have seen significant market share erosion as the world has moved from high-end, proprietary systems to commodity X86 systems. While the chips from IBM and Oracle are certainly formidable for their specific niches, Intel's breadth and depth of offerings for a wide variety of datacenter workloads has been – quite frankly – unmatched. Unfortunately for IBM, Intel's (NASDAQ: INTC  ) next big server chip – Ivy Bridge-EX – is likely to move further into IBM's POWER territory.

IBM's POWER – a magnificent engineering feat
While not all investors are CPU nerds, it doesn't take much to convince most that IBM's POWER chips – and in particular, IBM's upcoming POWER 8 – are pretty beastly feats of engineering goodness:

(Source: IBM)

In terms of raw performance per core and per chip, thanks to some pretty beefy designs as well as a rather liberal thermal envelope, IBM's POWER 8 – when it shows up in systems likely later this year – is set to be a performance beast. This makes sense, particularly given how strong the current generation POWER 7+ chips are in a number of industry-standard benchmarks such as SPEC and given the rather substantial improvements that IBM has put into POWER 8.

Unfortunately, the hardware story looks bad for IBM
In IBM's earnings report, the company had some pretty ugly numbers to report across the board in hardware. Total systems revenue declined by 25%, with System z taking a 37% hit, POWER systems declining 31% and System x (Intel-based) dropping 16% (all year-over-year). This isn't a pretty picture by any means, although the relative rates of decline tend to suggest that POWER is losing the architecture battle against Intel's X86 (as the declines here were substantially narrower than the POWER based systems).

Further, another big hint that POWER may not be doing so well is that IBM has been very keen to license its POWER 8 micro-architecture to anybody willing to take the IP. On top of that, in addition to licensing out POWER, the company has actually taken ARM (NASDAQ: ARMH  ) processor licenses itself for some of its lower-end network routers, switches, and base-stations rather than try to develop more apropos POWER instruction set based IP for its custom chip clients.

Intel's Ivy Bridge-EX likely to further erode high end POWER sales
As Intel has gained more share of the server market, it has moved further up the value chain with specialized chips based on its high-end PC cores (so there's a lot of design leverage here vis-à-vis the cores, although the rest of the chip is custom). Interestingly enough, Intel's last X86 chip launch intended to go directly against IBM's POWER – known as Westmere-EX – was launched back in 2011. This year, the company finally goes ahead and refreshes this part with Ivy Bridge-EX.

(Source: Intel)

This will be a 15-core chip (a 50% increase from Westmere-EX's 10-core configuration), sport a much improved cache structure, faster memory support, improved cores, and will be built on the company's 22-nanometer process (which allows for more performance and more densely packed logic elements). All in all, it should be a significant step up from the old parts which, in themselves, were good enough on a performance per dollar and performance per watt basis to take share against the formidable POWER 7 chips. Intel is likely to gain further share with its big-iron focused X86 parts at IBM's expense.

Foolish bottom line
Intel's share gain story across the datacenter is pretty clear at this point and, barring some epic screw-up on Intel's part, the momentum on Intel's part should continue as the company continues to push on its manufacturing lead as well as its increasing architecture prowess across the compute continuum. Does this mean that IBM is done for? Of course not – the company 's bread and butter is software and services. But POWER's weakening position as well as IBM's sale of its System x to Lenovo means that IBM's days as a big iron hardware powerhouse are likely to slowly wind to a close. 

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Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 28, 2014, at 3:07 PM, keeperoftheq wrote:

    Three reasons why Intel might lose server market even faster than consumer

    Posted on January 28, 2014 by admin under all, tech

    One of the biggest challenges to Intel’s x86 hegemony in consumer market has been the emergence of smart phones where ARM based processors have 90% market share. The PC market where Intel has a strong hold is declining at (estimated) 10% annual rate.

    While a lot of coverage has been to given to Intel’s decline in consumer market, I believe Intel has tough road ahead in server market too. One major advantage Intel has is the amount of (legacy) code which has been written for x86 (the same thing which keeps Cobol on life support), this advantage is diminishing rapidly due to following trends.

    1.Demise of gcc and rise of LLVM

    For years Gcc was used and since x86 was dominant ISA (instruction set architecture), several optimisations were done for optimised x86 code generation.

    Now, gcc is being replaced with LLVM and clang by Google and Apple. Given that both companies are heavily focused on their ARM based devices, it should not come as a surprise that LLVM will have better support for ARM code generation in long run. Rumours of Google (Intel’s 5th largest customer) working on ARM based servers are already out.

    2.VM (virtual machine) based languages

    A lot of server side software development (web or otherwise) has moved to VM based languages (Java, PHP being the old leaders and Ruby, Python, Node.js the new ones).

    VMs makes these platform agnostic and hence making a move from x86 to ARM even simpler (since only the VM has to support underlying platform).

    3.PaaS (platform as a service)

    As more and more services are being moved into cloud whose underlying infrastructure is being dominated by only a few players (Amazon, Google etc.), it makes it even more easier and economical for these players to design their own custom ARM processors and offer it to their customers.

  • Report this Comment On January 28, 2014, at 3:29 PM, ixin wrote:

    How is this relevant to the article?

  • Report this Comment On January 28, 2014, at 5:41 PM, SSchlesinger wrote:

    These guys are posting like crazy " Rumours of Google (Intel’s 5th largest customer) working on ARM based servers are already out."

    Interesting how 'Rumors' was spelled with the British U added in. Now we know where you're blogging from. Please tell your friends back in Cambridge that they don't have a PR problem as much as they have a manufacturing crises.

    Google is like many corporations around the world. They have R&D folks that play with server parts. They even looked into IBM's PowerPC. Playing with a server technology is a long way from flat kicking out Intel. If this is what will save ARMH in the future, fill out your resume tonight.

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