Comment by jonstokes | Hacker News Reader

Comment by jonstokes | Hacker News Reader

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This comments thread is off-track. This is not yet another article about how ARM is poised to eat Intel's lunch, and that cites (worthless) Geekbench scores to make that claim. No, this was written by Timothy Prickett Morgan, who actually knows hardware.

His basic argument, at least on my quick reading, is that right now, Intel's Xeon margins are insane -- some 50% -- and x86's market share is north of 99% in servers. Furthermore, Intel, Microsoft, and Red Hat are sucking up all of the margin in the stack, and leaving everyone else to fight for scraps. (We've seen this "Intel eats all the margin" movie before in the PC space, and I wrote about it here: https://techcrunch.com/2016/05/17/how-intel-missed-the-iphon...)

So, these three things -- an x86 monoculture, crazy high margins, and three companies sucking up all the profits from the rest of the stack -- are both individually and collectively unsustainable. Morgan seems to be arguing that a rational market is going to take care of this arrangement one way or the other. By virtue of its margins and market dominance, Xeon has a massive target on its back, and there is a ton of ingenuity gunning for it. So at some point things will change.

So no, this isn't yet another in a near-decade long string of "ARM vs. x86 as told by Geekbench, with a side of OMG Apple" articles. He's actually pointing out that, technical considerations aside, there is a set of market conditions currently prevailing that looks unsustainable on its face, and at some point, like when pressure builds up along a fault line and then gives way, there will be a big shift.

A long article, but the real quote is "The truly remarkable thing is that the market for servers continues to be diverse. ". But then if you look at the table, which is ranked by revenue you see the ODM market is moving into 3rd place (its behind IBM by accelerating past them) with a 13% growth.

Which is just large sections of the market realizing that paying $800+ for BMC features from HP/Dell that everyone else gives away, or 5x the street price for storage/ram differing only in who's sticker is stuck on top of the micron/WD/etc hardware is dumb. So, the revenue numbers hide the volume difference which is strongly shifing away from the IBM's and to the smaller whitebox manufactures.

The only question is will Dell/HP wake up before supermicro/levnovo finish off what amazon/microsoft have started.

I agree that Intel margins are pretty high. But at 50% margins, when there is a shift, they can move the price point down some.

I just re-read your article and it appears to be mostly about the mid->low power market (ie, Atoms from Intel) as an example.

The Server article posted is about the high end Intel chips, the $4500 ones you find in servers.

Your post is spot on about Intel in general, I think at the low ends we will start to see more shifts away from x86 at the desktop / laptop levels as other chipsets become faster / highly available. But I think in the server space, Intel has lots of running room left in the x86 space.

Morgan is a very smart guy, but I think his reliance on Gartner may have pulled him off the mark.

He's actually pointing out that, technical considerations aside, there is a set of market conditions currently prevailing that looks unsustainable on its face, and at some point, like when pressure builds up along a fault line and then gives way, there will be a big shift.

Fair enough. But why wouldn't the change be something like: Intel buys ailing server businesses cheap, keeps them going with even less margin than before, just to keep x86 flowing into the market? That would end the "unsustainable" situation but wouldn't really shake up the market much.

> arguing that a rational market is going to take care of this arrangement one way or the other

That's a silly argument. If the market would be rational and it would take care of this we wouldn't have landed in this situation in the first place.

The reality is more that we're more in a winner takes it all situation.

Drop the "rational" to avoid that baggage, and the argument is certainly valid.

It could be a winner takes all if it was a huge technical hurdle to move many x86-based systems to ARM and back. But it's likely never been easier, and a lot of software already works on x86 and ARM. Unless x86 can consistently perform better for less power consumption and price, there will be competition.

There's aren't any big architectural reasons that x86 would need to be less power efficient. Intel already had a go at that side but very few people bought the low power server chips (Avoton etc). AMD also hasn't had much luck with low power server chips (see SeaMicro etc).

One big reason is that halving the CPU power consumption doesn't nearly halve the server power consumption, but it often goes pretty close to halving the system performance. And CPUs are pretty efficient at idling so you're really only paying for the power consumption when there is work to be done - instead paying for larger fleet of reserve servers. And of course scaling to more but slower servers means a lot of expensive software/admin complexity.

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