Technology - see the future from history

[tw]

As I begin to write this, I suspect this will become so long as to be multiple posts. We learn from history. This will demonstrate how to learn even how to invest by addressing the only thing that makes jobs, industries, markets, products, wealth, and happiness.

In designing semiconductors for a calculator, Intel stumbled upon a concept nobody had considered. A microprocessor. Intel bought the design back from that Japanese calculator manufacturer (who soon went bankrupt). And developed products with famous numbers. 4004. 4040. 8008. And the most famous - 8080. The 8080 became the basis of uprocessors that would be on most every home. Intel had only one problem. Wall Street was becoming dominated by business school types. Stock brokers were incapable of investing in innovation due to their business school training.

In the meantime, Intel was doing what any patriot company does. They developed semiconductor memory. Static RAMS (ie 2104). Dynamic RAMS (ie 1103). Non-volatile memory (2704). Single chip computer (8051). Single chip peripherals (8251). and non-volatile programmable single chip computer (8751). In each case, first two digits defined the design family. Notice a difference between a uprocessor and a single chip computer - a significance that will have relevance later. Most parts found standard in a computer were originally pioneered by Intel. Intel also attempted to break into other businesses (motherboard, RealTime Operating Systems, household appliance networking, automobile electronics (ie CAN bus), multiprocessor computing (Multibus), etc. Many of these businesses had no legs. Intel sold off many (memory, peripheral, single chip computers) to concentrate on what it did best.

Intel also pioneered new business models such as DIX. The consortium of Digital Equipment (ie VAX), Intel, and Xerox (Apple's MacIntosh) that created a standard we still use today. Ethernet. An Intel created standards so that other companies could contribute what they did best (ATX standard).

Fundamental to what Intel did was something Andy Moore created as an afterthought for an article in Electronics Magazine. Moore's law became a benchmark to identify business school myopia before it adversely affected the spread sheet. Moore's Law went a long way in saving Intel. Meanwhile those other two DIX partners feel victim to what is taught in business schools. DEC stopped innovating with the VAX. Xerox had begun to stifle innovation when the DIX standard was created. By the time business school thinking was identified, the damage was so great as to even affect the spread sheets.

Intel's history is full of upstart competitors who sometimes had superior products. An early one was Zilog (Z-80) that was superior to the 8080. Intel's answer (8085) was inferior to the Z-80. But Intel also innovated elsewhere. Intel abandoned the 8 bit microprocessor market by making an 8080 equivalent in a 16 bit uprocessor (8086). That processor was recommended by Bill Gates for the original IBM-PC. And that processor finally meant Intel could get investment money to build a Fab. To make processors on an industrial scale. The Silicon Valley did not yet develop another new business model - venture capitalists (Sand Hill Road). Wall Street was already so business school brainwashed as to not invest in Intel. IBM's investment to make possible an 8086 production line is why Intel was finally able to become profitable.

Keeping Intel productive were other challengers. Zilog was a first that could not innovate beyond the Z-80. And was eventually bought, and then dismantled, by Exxon. The next was Motorola's 68000 line. Anyone who thought they knew computers because they were programmers love the 68000. All its (16?) registers could do counting, access peripherals, and memory indexing. Anyone who actually knew computer immediately recognized the 68000 as a disaster for the same reason. An example of two completely different conclusions from the same fact. But only one is accurate due to also learning background and history. Apple abandoned their underpowered Motorola 6805 for the 68000. Even software had to be completely rewritten. Eventually, the defect in Motorola's 68050 was so obvious that Motorola canceled that processor after completing the design.

Bottlenecks in processor are speed (processor speed, memory size, and memory access), power (heat), and software. Zilog made a processor that ran all Intel 8080 software, was faster, and consumed less power. Motorola threw lots of money keeping their slower architecture as fast as Intel's, and had to develop all new hardware (including peripheral chips) and software from scratch. Motorola just could not complete against a company that kept benchmarking itself against Moore's law.

The POWER had been developed in Austin TX as the next wave of innovation. About once per decade, IBM would scrap their entire processor design to build something completely new. The 360 Series being the most famous. But even that was replaced by the 370 series. Then business school graduates took over. What should have been the next architecture in the IBM line was the POWER series. But business school graduates routinely stifle innovation in the name of technical ignorance and fear.

Apple, also in the process of self destructing, ran to IBM for another processor. A stripped down POWER processor renamed the POWER-PC. Apple had even built and demonstrated Macs using Intel's processors. But, like at IBM, business school graduates could not understand the advantage; only saw fear. We all know how bad Apple was becoming, in part, because it used an inferior processor. Eventually, IBM could not compete with Intel. Intel had a benchmark based in the product. IBM was using spread sheets and business school concepts to first destroy the IBM-PC business (Entry Systems Division). Stifle innovation (VGA monitor, OS2, Micro-Channel). And attempt to make profits at the expense of all other industry partners.

While Motorola was failing, IBM was also so pathetic that in 1990, none of the PCs in corporate could execute any retail software. IBM was still using 1984 hardware in 1990 offices - at least two generations obsolete. Their president and the head of their PC division did not even know how computers work. IBM would blame Intel, Microsoft, PC clones, and even the Japanese for their problems.
{continues in the next few posts}

[tw]

[from the previous post}

As IBM was self destructing, the PC business suddenly found a dearth of innovation. IBM under Estridge directed each wave of innovation. With Estridge promoted to the penalty box, and an MBA named Cannovino stifling innovation, IBM in 1990 was not introducing innovation standards. Step forward Compaq. Compaq addressed one serious bottleneck in computers - the ISA bus. IBM had introduced MircoChannel as the solution. And then (like AT&T and Unix), chose to stifle the innovation with massive royalties that only made sense on a spread sheet. So Compaq and a large number of PC companies developed the EISA bus. Well, the consortium was unwieldy. It could not get the innovation out fast enough. But from those mistakes, the industry learned how to expand on and advance what was demonstrated previously by DIX.

The bottleneck was eventually replaced by an even better solution - PCI bus. The fundamentals still exist today. A standard by which any manufacturer could contribute innovation to the PC. While Apple remained foolishly attached to Mac's closed architecture and their obsolete processors. Apple was being run into the ground by two business school graduates - Sculley and then Spindler.

Intel had successfully out innovated Zilog, Motorola, and IBM by using product oriented benchmarks. Not using business school (spread sheet and money game) benchmarks. As a result, Intel had amassed quite a few crown jewels. Especially their fundamental research and innovation into semiconductor manufacturing.

The original 1980 Intel processors used NMOS. However in the 1960s, RCA had already developed a CMOS microprocessor (COSMAC). A computer that could run on a battery. But that is when business school graduates started replacing innovators in RCA. Business school graduates would not let innovators in Somerville NJ developed software (ie programming language, compiler, etc) until the product had started making a profit. Which it could not without the necessary software. But again, that is what business school graduates do. Make judgments based upon profits rather than learn anything about the product.

RCA had pioneered CMOS logic (4000 series) which eventually every digital company would convert to a decade later (Texas Instruments, et al would redesign the entire and legendary 7400 family into CMOS). Even Intel abandoned NMOS processors for CMOS. And implemented other innovations (ie power down) by sharing technology with other innovators (Harris Semiconductor). That was in the days when Intel was in competition with Motorola's 68000. Others were given the rights to manufacturer and market Intel products in exchange for innovating new devices. Harris was one. Another was Advanced Micro Devices (AMD).

Well, AMD did no innovation. AMD simply started manufacturing and selling Intel products. Intel and AMD began long, legal battles. AMD's objective was right out of the business schools. Profits. Innovation costs too much. As a result, AMD had no profits and a stifled engineering. Then something major happened in AMD. NexGen was designing an Intel 80686 compatible processor. AMD bought NexGen. Then kept the entire NexGen engineering department intact. And banned any AMD management from even talking to the engineers. The result was a product oriented development known as the K-6. It was equal to Intel's products and was sold at a lower price.

As happens to all companies, business school disease infects the organization. That happened in another of Intel's crown jewel. The processor architectural development group. Processors are first designed at the architectural level. This group, for some reason, started to design the Pentium as if it was a Motorola 68000. They stuffed it with all kinds of new concepts (pipelining). The processor became so large as to be impractical in manufacturing. But the architectural group, for some reason, had no grasp of the monster they were creating. Suddenly Intel had an inferior product. In an emergency redesign, the Pentium 4 was stripped down. To maintain Moore's Law, compilers had to be redesigned to reorder machine instructions. If in the right order, a Pentium 4 was equal to AMD's K-6. But if instructions were not properly ordered, the Pentium 4 would slow to a crawl.

And so again, the only thing keeping Intel alive was Moore's Law. A benchmark to quantify innovation four and more years before those innovations could be seen on a spread sheet. AMD spend quite a few years prospering at Intel's expense because AMD kept management away from their innovators - the team mostly composed of NexGen designers.

AMD also moved production operations to Germany. To take advantage of optics technology and lower labor costs found in Dresden. But that does not address AMD's major problem. AMD did not have the semiconductor innovation abilities that helped Intel to constantly meet Moore's Law.

Read back to a series of earlier posts where I discuss the major problem in semiconductors. A CMOS transistor has a glass surface. A charge on one side of that glass caused the other side to conduct (turn on or off). This glass was reduced so thin as to be only three atoms thick. Made that thin to make the transistor faster. Current leaking through that glass cause processors to consume 60 watts. Wave after wave of innovation (stressed silicon) was increasing the speed. But still not addressing the bottleneck - heat and power consumption.

AMD's solution was to implement technologies from other companies. Hoping others could provide better transistors. A business model that would have significance later to other companies.

Everyone knew where the ultimate solution lay - High K materials. A material with insulating abilities superior to glass. But nobody could make it work.

{one more post follows}

[tw]

{continued from previous two posts}


IBM had since deposed of their business school graduates. Gerstner had redirected IBM's research and development abilities into making better products. No longer worry about profits. So IBM was a major manufacturer of semiconductors for other company's products. IBM started production of a new High K material based in Hafnium. While in production, the glass pealed off the semiconductor. IBM, like so many semiconductor manufacturers, could not make Hafnium work in production.

Both Intel and AMD were suffering the same problems. AMD processors had become so hot that some even had burned leg skin if using an AMD laptop on their lap. But Intel had Moore's Law. Which dictated that a High K solution had to work. As noted so many times previously, how long does it take to develop an innovative product? Four to ten years. Intel CPUs are no different. Intel starts each new CPU by first making a static RAM. To prove the process. If it works, then a CPU is constructed around that static memory. But Intel could not make Hafnium work.

It took balls and the benchmark called Moore's Law. Intel decided to design the next generation processor using Hafnium (High K transistors) even though the process was not working. And knowing the major disaster that happened in IBM. Two years later, the risk paid off. Intel processors can be faster while consuming less power than an AMD. Intel's massive risk, if it failed, meant Intel might not have a new product for at least another year. A financial disaster. But again, the benchmark quantified by Moore's Law meant the spread sheet would see undisturbed profits four and ten years later.

AMD is about to go the way of Zilog, Motorola, and IBM. Intel drove a further nail into the AMD coffins when it developed the ATOM processor line. The processor that made possible notebook computers.

Which brings us to current history. But again, let's go back.

In 1990, Apple tried to make a Tablet computer then called a PDA (Newton). Apple cofounded a new microprocessor in the late 1980s with Advanced RISC Machine (ARM) in the UK. To develop a RISC processor. The Motorola 68000 was a CISC processor. Therefore failed. Intel was successful because their architecture was more RISC. For example, only one register did counting. Two others did index pointing to memory locations. Only one register could input/output data to peripherals. Two registers processed a continuous series of data (ie a text string). Clearly RISC was a superior solution. But 1990 Apple was run by business school graduates. So the Newton was a disaster. Apple had to sell their piece of the ARM processor. The near disaster force the British in ARM to upgrade the business model previously used by DIX, the Intel/Harris/AMD, et al consortium, and Compaq's EISA.

ARM had to collect partners to perform different aspects of a processor design. Rather than design, build, and market the entire processor, ARM licensed the basic design. This meant an entire semiconductor could be manufactured also containing an entire computer. Remember uprocessor and single chip computer? This is called System on a Chip (SoC). Partners include everyone from Cisco to Cadence Systems. competitors Qualcomm and Broadcom, Nvidia, or the many PC/104 companies. Even Intel has licensed the processor.

Discussed were three bottlenecks. Speed, power, and software. Intel held the high ground with products that already had all three solved. But those advantages do not apply to smart phones or tablets. With all new software and a demand more concerned with power (ie less chips), the ARM processor is now the denominate processor in those product. Intel's ATOM for notebooks may not be sufficient when the high ground has moved like a wave on the ocean. Fundamental to that change was the final arrival of interactive displays. Eliminating the keyboard and mouse. Next may be voice recognition.

Well, Moore's Law worked when processor processing power was important. Moore's Law no longer applies to the next wave of innovation. Computers are now designed inside the integrated circuits (SoC) rather than the Central Processing Unit. To some extent, that was obvious long ago. All PC keyboards were always a complete computer (8051). Disk drives contain their own computer. NIC for Ethernet and WiFi controllers are a single chip already containing a computer (SoC). To have software stuck with hardware from only two manufacturers (AMD or Intel) no longer makes sense.

IBM's mainframes were undermined by the mini-computer. Mini-computers somewhat undermined by Workstations. Which in turn became PCs. Then laptops. And now mobile computers (smart phones and tablets). Missing is the shoe phone.

To understand where industry is going, where jobs are, and how to make money in investing; first learn from this history and trends. What is coming can be found in what already existed. The progression of the processor. The next business model based in what the technical challenges really are. How innovation works when business school concepts are properly disparaged. What happens when top management does not come from where the work gets done. And most important, benchmarks defined by a product oriented parameter - Moore's Law.

So, what is a benchmark to replace Moore's Law? That simple concept helped to drive out business school thinking - keep America productive. Free market competition alone is not enough. In free market competition, the damage is done long before competition punishes the bad company for not throwing out management. And that, folks, demonstrates what is necessary to know and make successful investments.

Successful companies must have benchmarks to quantify the only thing that matters. Spread sheets only report that reality typically four and more years later - too late. For example, Big Pharma has no quantifier. Essential is to see a product (product oriented thinking) long before spread sheets can measure innovation. Intel's long successful history demonstrates it.

[Gravdigr]

Go, man, go!

[Undertoad]

Originally Posted by Bill Gates in 1998

“What I can’t figure out is why he (Steve Jobs) is even trying? ” wondered Bill. “He knows he can’t win.”

He won.

[HungLikeJesus]

Including and excluding iPads? How is that shown in that chart?

[Undertoad]

Are iPads a "computer"? The whole chart excludes them up to the last line.

It's actually not an appropriate way to display this information....

[classicman]

I thought Lenovo was owned by by HP now? Shouldn't their info be combined and represented as one?

[HungLikeJesus]

IBM sold their laptop division to Lenovo.

[ZenGum]

Acer, Dell, HP and Lenovo all run windows, don't they?

MAC = 22%

Windows machines = 78%

Bill is kicking Steve's ass. He doesn't need to sell the machines, just the code.

And what is that "including and excluding iPads" BS? They haven't just allowed a new source of data in late in the game to make it look like apple is growing a huge share, have they?

Who made this graph? Oh yes, bottom left corner ... IDC Apple.

[classicman]

thanks guys. I knew something happened. Doh' and my bro in law works for IBM.
Guess thats where I heard it.

[ZenGum]

Did anyone read TW's posts? I glazed over early on and skipped the rest.

[infinite monkey]

That's the beauty of it. You don't have to read it, but if you're interested you can. *shrug*

[Lamplighter]

But if you do read it all... you've been told !

And that, folks, demonstrates what is necessary to know and make successful investments.