 From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. Exactly one week after Pat Gelsinger's announcement of his plans to reinvent Intel, ARM announced version nine of its architecture and laid out its vision for the next decade. We believe this vision is extremely strong as it combines an end-to-end capability from edge to cloud to the data center to the home and everything in between. ARM's aspirations are ambitious and powerful, leveraging its business model, ecosystem, and software compatibility in the previous generations. Hello and welcome to this week's Wikibon Cube Insights powered by ETR. And this Breaking Analysis will explain why we think this announcement is so important and what it means for Intel and the broader technology landscape. We'll also share with you some feedback that we received from theCUBE community on last week's episode and a little inside baseball on how Intel, IBM, Samsung, TSMC, and the US government might be thinking about the shifting landscape of semiconductor technology. Now there were two notable announcements this week that were directly related to Intel's announcement of March 23rd. The ARM V9 news and TSMC's plans to invest $100 billion in chip manufacturing and development over the next three years. That is a big number and it appears to Trump Intel's planned $20 billion investment to launch two new fabs in the US starting in 2024. You may remember back in 2019, Samsung pledged to invest $116 billion to diversify its production beyond memory chips. Why are all these companies getting so aggressive and won't this cause a glut in chips? Well, first, China looms large and aims to dominate its local markets, which in turn is going to confer advantages globally. Second, there's a huge chip shortage right now and the belief is that it's going to continue through the decade and possibly beyond. We are seeing a new inflection point in demand as we discussed last week, stemming from digital, IoT, cloud, autos and new use cases in the home as so well presented by Sarbjit Johal in our community. As to the glut, these manufacturers believe that demand will outstrip supply indefinitely and they understand that a lack of manufacturing capacity is actually more deadly than an oversupply. Look, if there's a glut, manufacturers can cut production and take the financial hit, whereas capacity constraints mean you can miss entire cycles of growth and really miss out on the demand and the cost reductions. So, all these manufacturers are going for it. Now, let's talk about ARM, its approach and the announcements that it made this week. Now, last week we talked about how Pat Gelsinger's vision of a system on package was an attempt to leapfrog system on chip, SOC. Well, ARM has taken a similar system approach, but in our view, it's even broader than the vision laid out by Pat at Intel. ARM is targeting a wide variety of use cases as shown here. ARM's fundamental philosophy is that the future will require highly specialized chips and Intel, as you recall from Pat's announcement, would agree. But ARM historically takes an ecosystem approach that is different from Intel's model. ARM is all about enabling the production of specialized chips to really fit a specific application. For example, think about the amount of AI going on in iPhones. They move from, remember, a fingerprint to face recognition. This requires specialized neural processing units, NPUs, that are designed by Apple for that particular use case. ARM is facilitating the creation of these specialized chips to be designed and produced by the ecosystem. Intel, on the other hand, has historically taken a one-size-fits-all approach built around the X86. Intel's design has always been about improving the processor, for example, in terms of speed, density, adding vector processing to accommodate AI, et cetera. And Intel does all the design in the manufacturing and any specialization for the ecosystem is done by Intel. Much of the value that's added from the ecosystem has frankly been bending metal or adding displays or other features at the margin. But the advantage is that the X86 architecture is well understood, it's consistent, reliable, and let's face it, most enterprise software runs on X86. So, but very, very different models historically, which we heard from Gelsinger last week, they were going to change with a new trusted foundry strategy. Now, let's go through an example that might help explain the power of ARM's model. Let's say you're AWS and you're doing Graviton, designing Graviton or Graviton 2, or Apple designing the M1 chip or Tesla designing its own chip or any other company in any one of these use cases that are shown here. Tesla's a really good example. In order to optimize for video processing, Tesla needed to add specialized code of firmware in the NPU for its specific use case within Autos. It was happy to take off the shelf CPU or GPUs or whatever and leverage ARM's standards there. Then it added its own value in the NPU. So the advantage of this model is Tesla could go from tape out in less than a year versus, or get the tape out in less than a year versus what would normally take many years. Think of ARM as like customized Lego blocks that enable unique value add by the ecosystem with a much faster time to market. So like I say, Tesla goes from logical tape out, if you will, to Samsung and then says, okay, run this against your manufacturing process and it should all work as advertised by ARM. Tesla interestingly, just as an aside, chose the 14 nanometer process to keep its costs down. It didn't need the latest and greatest density. Okay, so you can see big difference in philosophies historically between ARM and Intel. And you can see Intel vectoring toward the ARM model based on what Gelsinger said last week for its foundry business, essentially it has to. Now, ARM announced a new ARM architecture, ARM V9. V9 is backwards compatible with previous generations. Perhaps ARM learned from Intel's failed itanium effort, for those who remember that where it had no backward compatibility and it really floundered. As well, ARM adds some additional capabilities. Today we're going to focus on the two areas that have highlighted machine learning, piece and security. I'll take note of the call out, 300 billion chips. That's ARM's vision. That's a lot. And we've said before, ARM wafer volumes are 10x those of x86. Volume, we sound like a broken record, volume equals cost reduction. We'll come back to that a little bit later. Now let's have a word on AI and machine learning. ARM is betting on AI and ML big as are many others. And this chart really shows why. It's a graphic that shows ETR data and spending momentum and pervasiveness in the data set across all the different sectors that ETR tracks within its taxonomy. Note that ML slash AI gets the top spot on the vertical axis, which represents net score. That's a measure of spending momentum or spending velocity. The horizontal axis is market share or presence in the data set. And we give this sector four stars to signify its consistent lead in the data. So pretty reasonable bet by ARM. But the other area that we're going to talk about is security. At its vision day, ARM talked about confidential compute architecture and these things called realms. Note on the left hand side showing data traveling all over the different use cases and around the world and the call out from the CISO below it's a large public airline CISO that spoke at an ETR event round table. This individual noted that the shifting end points increase the threat vectors. We all know that. ARM said something that really resonated. Specifically, they said today there's far too much trust on the OS and the hypervisor that are running these applications. And their broad access to data is a weakness. ARM's concept of realms as shown in the right hand side underscores the company's strategy to remove the assumption that privileged software like the hypervisor needs to be able to see the data. So by creating realms in a virtualized multi-tenant environment, data can be more protected from memory leaks which of course is a major opportunity for hackers that they exploit. So it's a nice concept in a way for the system to isolate a tenant's data from other users. Okay, we want to share some feedback that we got last week from the community on our analysis of Intel. A tech exec from Citi pointed out that Intel really didn't miss mobile as we said. It really missed smartphones. In fact, while this is kind of a minor distinction, it's important to recognize one thing because Intel facilitated Wi-Fi with Centrino under the direction of Paul Olini, who by the way was not an engineer. I think he was the first non-engineer to be the CEO of Intel. He was a marketing person by background. Ironically, Intel's work in Wi-Fi connectivity and they actually enabled the smartphone revolution. And maybe that makes the smartphone miss by Intel all that more egregious. I don't know. Now, the other piece of feedback we receive related to our IBM scenario and our three-way joint venture prediction, bringing together Intel, IBM, and Samsung in a triumvirate where Intel brings the foundry and its process manufacturing. IBM brings its disaggregated memory technology and Samsung brings its volume and its knowledge of volume down the learning curve. Let's start with IBM. Remember, we said that IBM with Power 10 has the best technology in terms of this notion of disaggregating compute from memory and sharing memory in a pool across different processor types. So a few things in this regard. IBM when it restructured its microelectronics business under Ginny Rometti, catalyzed the partnership with global foundries. And this picture in the upper right, it shows the global foundries facility outside of Albany, New York and Malta. And the partnership included AMD and Samsung. But we believe that global foundries is backed away from some of its contractual commitments with IBM causing a bit of a rift between the companies and leaving a hole in the original strategy. And evidently AMD hasn't really leaned in to move the needle in any way. And so the New York foundry is in a bit of a state of limbo with respect to its original vision. Now, while Arvin Krishna was the face of the Intel announcement it clearly has deep knowledge of IBM semiconductor strategy. Garry O'Gill, we think is a key player in the mix. He's the senior vice president and director of IBM research. It is in a position to affect some knowledge sharing and maybe even knowledge transfer with Intel possibly as it relates to disaggregated architectures. Questions remain as to how open IBM will be and how protective it will be with its IP. It's got to, as we said last week it's got to have an incentive to do so. Now, why would IBM do that? Well, it wants to compete more effectively with VMware who has done a great job leveraging x86. And that's the biggest competitor and threat to OpenShift. So Arvin needs Intel chips to really execute on IBM's cloud strategy because almost all of IBM's customers are running apps on x86. So IBM's cloud and hybrid cloud strategy really need to leverage that Intel partnership. Now Intel for its part has great FinFET technology. FinFET is a tech that goes beyond CMOS. You all main framers might remember when IBM burned the boat on ECL, and it'll emitter a couple logic and then move to CMOS for its mainframes. Well, this is the next gen beyond. And it could give Intel a leg up on AMD's chiplet intellectual property especially as it relates to latency. And there could be some benefits there for IBM. So maybe there's a quid pro quo going on. Now where it really gets interesting is New York Senator Chuck Schumer is keen on building up an alternative to Silicon Valley in New York known as Silicon Alley. So it's possible that Intel, who by the way has really good process technology, and this is it aside, it really allowed TSMC to run the table with the whole seven nanometer versus 10 nanometer narrative. TSMC was at seven nanometer Intel was at 10 nanometer. And really we've said in the past that Intel's 10 nanometer tech is pretty close to TSMC seven. So Intel's ahead in that regard, even though in terms of the nanometer thickness density, it's not, these are sort of games that these semiconductor companies pay play. But it's possible that Intel with the US government and IBM and Samsung could make a play for that New York foundry as part of Intel's trusted foundry strategy and kind of reshuffle that deck in Albany. Sounds like a game of thrones, doesn't it? By the way, TSMC has been so consumed servicing Apple for five nanometer and eventually four nanometer that it's dropped the ball on some of its other customers, namely NVIDIA. And remember long-term competitiveness and cost reductions, they all come down to volume. And we think that Intel can't get to volume without an arm strategy. It's okay. So maybe the JV, the joint venture that we talked about, maybe we're out on a limb there and that's a stretch. And perhaps Samsung's not willing to play ball given it's made huge investments in fabs and infrastructure and other resources locally. But we think it's still viable scenario because we think Samsung definitely would covet a presence in the United States. Maybe I could do that directly but maybe a partnership makes more sense in terms of gaining ground on TSMC. But anyway, let's say Intel can become a trusted foundry with the help of IBM and the US government. Maybe then it could compete on volume. Well, how would that work? Well, let's say NVIDIA, let's say they're not too happy with TSMC maybe with entertain Intel as a second source. Would that do it? In and of itself, no, but what about AWS and Google and Facebook? Maybe this is a way to placate the US government and call off the antitrust dogs. Hey, we'll give Intel foundry our business to secure America's semiconductor leadership in future. And, hey, US government, why don't you chill out back off a little bit? Microsoft, even though it's not getting as much scrutiny from the US government, it's antitrust days maybe, perhaps are behind it and knows, but I think Microsoft would be happy to play ball as well. Now, would this give Intel a competitive volume posture? Yes, we think it would. For sure, if it can gain the trust of these companies, the volume would be there. But as we've said, currently this is a long shot. It's going to take years to play out and a lot of money. There are those who believe that Intel could actually go bankrupt trying to affect this strategy. Sounds crazy, but the dots are beginning to connect in this scenario and the stakes are exceedingly high. Look, the bottom line is Intel is in a fight for its life. This is about China, China, China, and volume, volume, volume. And look, we've seen ARM and TSMC, they have responded in a big way. You see ARM moving beyond SOC, system on chip, trying to leapfrog as well, just as Intel was trying to do and is trying to do. Intel's got to secure the high end. And we actually feel pretty confident that it can do that, but it puts immense pressure on Intel to be the trusted foundry in order to get that volume and compete with China. And really the US government remains a key, as we said last week, Intel is too strategic to fail. Okay, that's it for now. Thanks to the community for your comments and insights. And thanks again to David Floyer, whose analysis around ARM and semiconductors and this work that he's done for the past decade is a tremendous help. Remember, I publish each week on wikibon.com and siliconangle.com. And these episodes are all available as podcasts, just search for Breaking Analysis Podcast and you can always connect on Twitter, you can hit the chat right here on this live event or email me at david.balante at siliconangle.com. Look, I always appreciate the comments on LinkedIn and Clubhouse, you can follow me so you're notified when we start a room and riff on these topics as well as others. And don't forget to check out ETR.plus for all the survey data. This is Dave Vellante for theCUBE Insights powered by ETR. Be well and we'll see you next time.