Intel (Nasdaq: INTC) announced a pilot program that allows a user to un-lock extra performance from a microchip at $50, which is seen as a test of a new revenue model rather than a new technological breakthrough.

The new plan, called Intel Upgrade Service, allows a user to unlock the latent capacity of a microchip that has been limited by design. The upgrade currently works on a G6951 processor. A user has to buy a $50 card, which installs a 4MB program that extends an extra 1MB of L3 cache and hyper-threading -- and that will make the chip perform as if had extra processor cores by creating virtual cores.

The program has received substantial flak from the industry, which perceives the feature as money minting ploy. However, Intel defended its strategy as a way of granting customers greater flexibility.

"Intel is exploring a way to give customers the flexibility to determine the level of performance they want in their processor, without having to change hardware," said Gordon Dolfie, director of product marketing for Intel's reseller products group.http:/img.ibtimes.com/www/site/us/images/1px.gif

Whether the program is targeted towards retail or business customers is not clear yet, though in a statement to PC World, Intel confirmed that the service will be available for home computers.

The strategy has raised issues of fair-play. As Intel purposely puts DRM-style software limits on a microprocessor and then offers to augment its performance with additional cost. The strategy favors Intel as it can create economies of scale -- a desired end for an industry where fixed costs are high -- by putting a single chip with a specific configuration on multiple devices. It can create chips which can cater to the critical minimum requirements with additional performance at a premium.

The above strategy also creates vendor lock-in issues, a benefit for Intel but a fence for users, by locking the chip and allowing it to be opened by only an Intel key, thus restricting third-party solutions.

The strategy also smacks of an experiment with a walled-garden approach that Intel might be attempting to create. In fact, Intel's Paul Otellini described Intel's motivation in buying McAfee at the Intel Developer Forum as moving "from a known-bad model to a known-good model."

Currently anti-virus vendors create a library of potential threats and then create an antidote. However, Intel plans to go past this by only allowing trusted codes to run on x86 chips, thus hitting at the root of the anti-virus industry.

A few industry watchers have suggested the upgrade is an attempt to drive channel sales by offering vendors the opportunity to cash in on upgrades.

With Intel's ambitions to march into the smartphone segment through its Infineon acquisition, Intel can apply a similar strategy, as a smartphone has certain physical limitations like battery power. Thus, it can offer chips for smartphones that allow users the flexibility to upgrade the chip performance based on the battery usage -- as CPU performance has direct effect on power consumption.

Essentially, the Intel Upgrade Service is designed to be a laboratory where Intel is testing some core revenue generation and marketing strategies and also its key strategy to be a walled company.

Ibtimes

International Business Times, The Global Business News Leader

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