The New WiFi Technology That is About to Change Everything
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Note: This article erroneously referenced AMD's historical stock price. The error has been corrected.
To hear the Wall St. Journal tell it, Intel's (NASDAQ: INTC) best years -- the halcyon days of Pentium processors and the Wintel Monopoly -- are behind it, the phrase "Intel Inside" are as charmingly dated as the words "It's toasted!" on a pack of Lucky Strikes. Once the unstoppable juggernaut who put the “silicon” in Silicon Valley, Intel is now a Dog of the Dow.
But though temporarily upstaged by ARM (NASDAQ: ARMH) in the race to mobile, and only now emerging from a decade long price war with AMD (NYSE: AMD), the Santa Clara-based microprocessor giant hasn't laid down its hand and quit the holy game of poker, quite the contrary; Intel has been hard at work re-inventing the rules of the game itself.
Clocking in at 10 years of development, more time and effort have been spent on “Radio Free Intel” than two Manhattan Projects.
To understand what Intel has done, you first have to understand something about Moore's Law. Moore's Law was discovered at Intel by Intel co-founder Gordon E. Moore, who described the trend in his 1965 paper, "Cramming more components onto integrated circuits." Moore's Law states that the number of transistors that can be squeezed onto a silicon chip will double every two years, while costs decrease by half.
Over the last 40 years, Moore's insight has proven to be correct. The problem is that Moore's Law doesn't apply to most WiFi components. If you squeeze transistors onto a silicon chip, the efficiency of the microprocessor increases in tandem with heat.
But with analog components, like the ones found in WiFi chipsets, the opposite is true. That's because wireless radios and processors both give off radiation that interfere with each other. The more you shrink WiFi components, the less efficient they become.
So Intel decided to find a way to put a digital WiFi radio directly on a chip.
Intel has christened the result “Moore's Law Radio”, although it is more commonly known as Rosepoint or “Radio Free Intel.” Intel estimates that it will be packaged and ready to ship in just over 2 years, after which it will appear in everything from your mobile phone and television to your car and even your kitchen appliances. Because it’s on a chip, you can keep shrinking it smaller and smaller, until Intel is literally inside everything.
The shake up couldn't come at a better time for Intel.
While consumers reap the benefits of ever-cheaper computing power, the cost of "growing" and fabricating the chips haven't decreased at all. Any benefits the manufacturers recieve due to economies of scale are quickly canceled out by the rapid pace of innovation. Every technological advance in miniaturization requires an overhaul of expensive wafer fabrication plants. Intel's new plant in Arizona cost $5 billion dollars.
This "technology treadmill" has already crippled AMD. In 2008, AMD outsourced its fabrication plants to Globalfoundries, with the majority stake of the new company going to the government of Abu Dhabi. The real threat to Intel's continued dominance is ARM.
ARM doesn't manufacture its own processors like Intel does, and has none of AMD's outsourcing headaches. Instead, the company licenses its intellectual property directly to customers, who can fine-tune the designs any way they want, and have the finished chips assembled anywhere in the world.
Enter Rosepoint. Rosepoint has given Intel is a generational advantage that ARM can't replicate with a 6 month crash R&D program. Intel's scientists and engineers have been tinkering with this for 10 years; which means that Intel already knows what works and what doesn't.
If there's more than one way to cram WiFi onto a chip, you can bet that Intel has patented it too.
Intel didn't stop there. In anticipation of a drawn out legal battle that could block the sale of Rosepoint while buying ARM valuable R&D time, Intel purchased Interdigital's portfolio of 1,700 WiFi patents in June, 2012; which include core patents relating to 3G as well as LTE and LTE-Advanced 4G technologies.
The message to ARM Holdings CEO Warren East could hardly be clearer: ARM's core business may be chip design, but its SoC technology, along with hundreds of ARM's ecosystem partners rely on the patents Intel now holds. If ARM seeks an injuction against Rosepoint's in 2015, it can expect Intel to seek a similar injunction against its SoC technology every WiFi/LTE product with an ARM chip.
Intel is pitting ARM against Moore's Law, and its a fight ARM can't win. Intel can just keep shrinking and shrinking Rosepoint until ARM folds. Even if it threw everything it had into its own version between now and 2015, ARM will still be years behind Radio Free Intel.
And that's very good news for Intel investors.
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