Here's what the new Intel will look like

The chip maker is scaling back its PC efforts and going deep on 3D memory, FPGAs and silicon photonics

Intel logo
Intel CEO Brian Krzanich speaks at an Intel IoT event in San Francisco on Nov. 3, 2015 Credit: James Niccolai

The PC market has been in trouble for ages, but last year was worse. Shipments dropped below 300 million for the first time since 2008, and market research firm IDC declared it the worst year in history. That explains a lot about what happened at Intel this week.

The chip maker has been reducing its dependency on PCs for some time, preferring to focus on its more successful data center business. But the announcement that it would lay off 12,000 people is a sign that Intel is finally turning a corner.

"Intel appears to have decided that it can’t wait any longer for a hoped-for revitalization of traditional PC markets," said Pund-IT analyst Charles King in a blog post.

Intel will still make PC chips for growth areas like 2-in-1s devices and gaming. But the cutbacks will allow it to increase investments in forward-looking technologies like silicon photonics, FPGAs (field-programmable gate arrays), its 3D Xpoint memory and the Internet of Things.

Put another way, Intel missed an opportunity with smartphones, but there's still the cloud.

"We're in the middle of some pretty big changes in the industry and we've seen the emergence of handsets as the primary client. Intel's piece of the business is the back-end, which is the cloud," said Dean McCarron, principal analyst at Mercury Research.

Here's a look at the markets that Intel CEO Brian Krzanich says Intel will focus on moving forward.

2-in-1s: Demand for convertible PCs -- those with keyboards that can be detached or that fold back to make a tablet -- is growing in an otherwise down market. Products like the Surface Pro spurred other PC makers to get on board. Intel provides 2-in-1 designs to PC makers to spur the market, and it will continue investing in low-power chips like the Core M that power them.

Gaming rigs: Expensive laptops and desktops for gaming are also doing well, though they're only a sliver of the overall PC market. Intel reckons gamers upgrade their system every two years, or much more often than regular users. That means it can sell more of its pricey chips. A 10-core, Core i7-6950X could be on its way soon, and it's heavily anticipated by gamers. However, Intel still lacks a world class GPU, which is vital for gaming.

3D Xpoint: Intel promises huge speed boosts for this new technology developed with Micron. Intel claims it will be up to 1,000 faster than NAND flash, and 10 times denser than conventional memory. We'll see about that when it arrives. 3D Xpoint components are sampling now, and Intel says the technology will ship Optane-branded SSDs by the end of the year, with memory for PCs and servers to follow.

FPGAs: Intel is thinking beyond CPUs with field programmable gate arrays, a type of co-processor that can be programmed to perform specific tasks very quickly. It got the technology from its $16.7 billion acquisition of Altera last year. Intel is shipping test chips that pair an Altera Arria 10 FPGA with a Xeon E5-2600 v4 processor in a multi-chip module. Ultimately, Intel will solder the FPGAs on the same die as its server chips. It also plans to sell FPGAs for cars, robots, drones and IoT devices.

Xeon server CPUs: Let's not forget the humble x86 server chip. Servers have been driving Intel's revenue through the PC market slump and generating most of its profits. It faces new competition from IBM Power and even ARM-based processors, but the Xeon is still king of the data center. Intel says it takes a rack-scale view -- providing everything from interconnects to boards to networking and storage products -- which it hopes will help it stand out.

Silicon photonics: Forget copper wires, Intel sees the future of data transfer using beams of light. That's the premise of silicon photonics, which the company hopes to initially implement at the rack level in servers. Optical data transfers will help servers communicate faster, and potentially change how systems are built by decoupling processing, storage and memory into different boxes. After delays, Intel will ship modules to implement silicon photonics later this year.

Internet of Things: It's still early for IoT, and Intel is trying to find its place in the market by offering a whole suite of products, including not just chips but also analytics software and even cloud services to help collect and analyze all that data. It's trying to avoid a repeat of the smartphone market, which passed it by. Its efforts also include providing components for 5G networks, which could provide long-range communication for some IoT devices.

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