Steam Engines versus Diesel and wishful thinking

There is too much confidence about Intel capabilities. It seems that a lot of analysts, investors, and technology enthusiasts think that Intel can pay its way out of any problem, thus, if AMD is Intel's problem, Intel will use its resources to kill the problem, and AMD will be destroyed. I disagree with that point of view, my reasons follow.

Intel is a greedy monopoly. The business model depends on both characteristics to be able to exploit customers and to have happy employees stuffed with stock options. That is one reason to think that Intel won't incurr in any price wars (1). Management, who relies on stock options as their main source of income (2), wouldn't want to do that; not even for long term good prospects, their exploitative and greedy attitude demand instant satisfaction. "In the long run, we are all dead" (Keynes) would seem one of their mottoes.

But they can try a similar approach: If the crux of their problems is that they have been outcompeted, and the market finally became aware of that, then the company has to offer better products. But since they are so hopelessly behind in the technology (While AMD is already doing Silicon On Insulator, Integrated Memory Controller, the upcoming single die quad cores, the coprocessor architecture that HTT 3.0 allows, APM; Intel "counters" with things such as "CopyExact!), they can't come to the market with truly better products.

The next option is to try to outcompete AMD following the brute force approach of putting more of everything known to work and selling the package for about the same price the competition sells. That is a sort of price-war: Not to manufacture products of equivalent costs to that of the competition's while selling them at steep discounts, but to manufacture extremely costly products to sell them at about the same prices as the competition. That is to sell a 4Mb L2 cache at the same price as 2Mb, 65nm at 90nm price.

That approach has been tried many times before in many markets and technologies. The latest steam train engines were by far the most complex ever designed and built, they had the largest boilers, etc.; because only through sheer sizes they were able to be up to the capabilities of the uprising Diesel/Electric engines. And the efforts to keep up were futile in the end:

The design ideas and techniques of Steam Engines were exhausted, played out, but Diesel's had the whole world ahead.

Intel's new lineup of products are steam engines. There aren't any new ideas to further the basic Pentium Pro architecture; I, for one, am skeptical from the professional point of view (summary here), about some of the design compromises Intel chose; and in particular, there are some assertions that my considerable understanding of this subject are not capable of explaining, such as the claims of higher power efficiency, or how is Intel going to successfully deal with the problem of trading off combinatorial complexities for marginal benefits so pervasive in all engineering disciplines; especially with Intel's track record.

I recently heard Henri Richard from AMD repeating the common saying that not even with 9 women it is possible to have a baby in one month; that is, it doesn't matter how much money Intel may have, the design gap is not possible to be closed in less than two years.

The problem is that AMD is in high gear, not in a reckless drive, but *cruising*, ramping two times more production capacity, with the highest market share it has ever had, highest revenue share, highest mind share, highest credibility.

Thus at Intel they have to follow for years the route of profitless existence that AMD followed until its recent emancipation. I wonder what makes the market think that AMD, which has the same management and engineers who reversed the roles with Intel at the brink of bankruptcy, all of a sudden are going to screw it all and at the same time, Intel's management, who allowed this reversal of roles, is suddenly aware of all of their mistakes and going to pull off a momentous come back after those two years.

That is wishful thinking. The market overvalued Intel and undervalued AMD. AMD demonstrated its worth, flew to the point of reaching $42 per share, too high so as to not force the comparison with Intel, thus forced the market to decide whether Intel was overvalued or not. But still the market's money was on Intel, every positive news about Intel was received with joy, every positive news about AMD with concern; that leads to a very easy to understand psychological phenomenon: Wishful thinking.

There are those who say that Intel has managed in the past to quash AMD's rebellions, that's true, but AMD never managed to get this strength before, Intel hadn't screwed it up so badly; in the past Intel could dump products in the only segment in which AMD was competitive, and succeeded because AMD never was able to get out of the "value desktop player" typecasting; today, it is Intel who is outcompeted all across the board but in mobiles in which they only have a bit of "residual" competitiveness.

The wishful thinking that supplies the credibility for more promises and more dissapointments will make the slide toward insignificance of Intel and Dell just slow and uneventful, but equally inexorable.

(1) There is a distiction between "channel clearing", what Intel is doing and proper price war.
(2) Unconfirmed