It is no secret that Intel (NASDAQ:INTC) and Advanced MicroDevices (NYSE:AMD) are locked in a hypercompetitive battle to develop the highest-performing next-generation computer chip. To date, most of the competition has rightly focused on processing speed and performance. (Although lately Intel has initiated a fierce price war with AMD and has been slashing its prices in an effort to stem the loss of further market share to its competitor.)
There is, however, another race now under way, and it is centered on who can develop the most energy-efficient chip. This race is more important than might be generally recognized. On average, every 18 months the semiconductor industry doubles the number of transistors it places on each computer chip. And while this impressive engineering feat continues to increase performance levels, it also carries a downside in that as ever more transistors are packed onto each chip, the energy it takes to power those chips is also increasing.
The effect for consumers is that laptop batteries can be depleted sooner; and for large businesses the cost to operate huge server farms -- such as those owned by IBM (NYSE:IBM), Google (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT) -- also increases.
Pressure to address this issue has elicited a spirited response from the semiconductor industry. Earlier this year, AMD unveiled a new line of energy-aware chips and, just yesterday, Intel announced that it was pledging its support for the Environmental Protection Agency's revised "Energy Star" computer specification. To receive the rating, a computer must use 65%-70% less electricity than it otherwise would have if it didn't possess any new power-management features.
Time will tell whether Intel or AMD address this issue more satisfactorily, but the issue bears watching. I encourage investors who only assess the two companies in terms of their chips' price and processing performance to also pay attention to energy-efficiency, because it is going to become an increasingly important metric by which computer users judge a chip. And the company that develops the most efficient models could have a powerful new weapon with which to beat back its opponent.
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Intel is a Motley Fool Inside Value selection.
Fool contributor Jack Uldrich is all in favor of energy-efficient chips, but what he really wants is a tasty, low-calorie potato chip. He owns stock in Intel, IBM, Google, and Microsoft. The Fool has a strict disclosure policy.
