Do you remember brands like Remington and Olivetti? Or, if you are less than 30 years old, it’s better to ask, have you ever heard of these brands? Chances are you have yet to hear of them or see the typewriters they used to make. Thereby hangs the tale of how big brands can emerge and vanish as the shifting sands of technology tear businesses apart, producing new winners and losers.
As the artificial intelligence (AI) revolution sweeps the world of economics, business, and much else, it is best to reveal the moral of the story before telling that tale: it is better to disrupt yourself and feel some gainful pain rather than be rudely disrupted by forces beyond your control.
The chips are down for Intel. The microchip maker has been summarily steamrollered by the rise of Nvidia in an AI upsurge. It calls for a Bollywood-style flashback to the days when Intel was steamrollering Texas Instruments (TI) and Motorola, the world’s early integrated circuit (IC) manufacturers.
The Elephant Couldn’t Dance, After All
Intel reminds one of Guru Dutt’s semi-autobiographical classic, Kagaz Ke Phool (Paper Flowers) in which a filmmaker falls on bad days after a phenomenal period. The chipmaker falling to Nvidia’s surge could have picked up a lesson or two from IBM, whose famous ability to adapt was captured in a book titled Who Says Elephants Can’t Dance? The writer, Louis Gerstner Jr., was IBM’s CEO during a tumultuous period of restructuring.
To understand the forces behind such change, it is best to remember two things: some technology changes may appear like extensions of an old one, but are in effect epoch-making paradigm shifts during which what we end up with is not an improved product but a whole new category of products or services that lead to the emergence of new brands that often kill establish leaders.
IBM used to dominate the market with large mainframe computers and proprietary software inside until the 1980s. But it embraced computer brands such as Compaq so that smaller computers could be made as “IBM compatible” ones to boost penetration and reach in a vast market. Later, it embedded Microsoft’s famous Disk Operating System software. DOS, which then gave rise to Microsoft’s Windows OS, refers to several closely related operating systems that dominated the IBM PC-compatible market between 1981 and 1995 as PCs (personal computers) replaced typewriters, including short-lived electronic typewriters worldwide. The PC revolution was enabled by ‘Intel Inside’ microchips’; the ‘Wintel’ (Windows + Intel) combination overshadowed Apple’s Mac as the planet’s ubiquitous desktop, and later, laptop PCs increasingly linked to networks.
How IBM And Microsoft Kept Up
A hard look would tell you that while IBM and Microsoft successfully reinvented themselves, Intel never really went there. The current AI revolution has left it in a difficult spot in the semiconductor stakes in a reversal of fortunes from its PC revolution days.
The writing is on the wall for industry watchers and insiders alike as AI is only just taking off: Do not mistake a paradigm (framework) shift that will shape a new ecosystem for an improvement in the old product line. New-age partnerships, services, regulation and laws will dramatically change the landscape that would require industry elephants to dance innovatively or be swatted like bees.
Olivetti and Remington were typewriter brands that were killed by the rise of PCs. As a result, you rarely hear of careers or job titles like “stenographer” in an age when data scientists and software engineers spell new career horizons. In fact, even software engineers are under threat from AI models, much like basic writers or graphic artists. You have to get better in the old game, and, in addition, learn how to play the new game to be on top of the situation.
IBM, which has since sold off its PC business to the Chinese Lenovo, is now focused on providing hybrid cloud computing and artificial intelligence (AI) solutions to businesses, while Microsoft, which once made PC software, is today a cutting-edge player through its difficult but fruitful partnership with OpenAI, whose ChatGPT chatbot generates human-like conversational responses to user questions.
Dwindling Numbers
Market numbers starkly reveal how Intel has fallen, reminding one of brands like early smartphone maker Nokia and Web content company Yahoo, both of which failed to respond adequately to revolutionary changes in technology-driven ecosystems.
Apple, like IBM and Microsoft, has embraced change well, and, in fact, generated new categories that keep its brand alive. It has shifted from Mac (desktop) to iPod (music player) to iPhone (smartphone with content ecosystem) to Apple Watch (wearable computer).
Nvidia has stolen what could have been Intel’s thunder if only the Windows-era giant had spotted a new threat from AI and turned it into an opportunity. Intel’s 12-month revenues to June 2024 rose year-on-year by a mere 1.99% to $55.11 from $54.22 billion, while Nvidia Corporation’s fiscal 2024 revenue, at $60.9 billion, is up 126% from the previous year’s $26.97 billion.
The market capitalisation of these two corporate brands shows the contrast between growth and decline, even though their annual revenues are comparable in absolute numbers. Intel’s market value on stock exchanges is $104.4 billion, while Nvidia stands at $3.61 trillion. The market worth of Nvidia is now about 35 times that of Intel. Let that sink in.
A Tech-Tonic Shift
New-age data centres are embracing Nvidia’s AI-powering microchips favoured by cutting-edge users and gaming industries. Intel’s data centre revenues are going downhill. While Intel faces the music, Nvidia, which used to be a graphics processing unit (GPU) maker that played second fiddle to Intel in the PC era, is now an AI-age leader. Cloud-computing giants such as Amazon Web Services and Microsoft Azure are among its collaborators as critical AI infrastructure grows in size and scale.
Intel is an elephant that could not learn the steps necessary to dance. The tectonic industry shift shows how AI is a bus that cannot be missed. It should better be seen as a new category spawning a new ecosystem that needs to be understood from scratch. It is a leap, not a jump.
The good news is that AI is also throwing up new opportunities. That would be another story.
(Madhavan Narayanan is senior editor, writer and columnist with more than 30 years of experience, having worked for Reuters, The Economic Times, Business Standard and Hindustan Times after starting out in the Times of India Group.)