Intel's ominous future

If you're old enough to remember when personal computers first became a household item, you're probably familiar with the company Intel.

Every computer, smartphone, or tablet needs a processor. It's basically the brain — the central chip that does all the major computing. For a long time, processors were synonymous with Intel: Whether you had a PC running Windows or an Apple laptop, it probably had an Intel processor inside.

But for years, Intel's position has been assailed by competitors. And it may soon be dethroned entirely.

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"Until about 10 years ago, all the PCs were basically Intel," Eugenio Culurciello, a professor at Purdue and the president of FWDNXT, which specializes in machine learning, explained to The Week. There were a few rivals, but Intel basically reigned supreme. Then technology changed.

Intel had been developing its processor architecture since the 1970s. But that architecture was based around traditional desktop PCs and laptops. As the internet took off, smartphones arrived, and the gaming industry blew up, the variety of needs that processors had to meet exploded.

There are still the traditional central processing units. But now graphics processing units — which can work calculations in parallel instead of linearly, and are particularly valuable to gaming consoles and the like — are in the mix. Then there are the smaller processors for smartphones and tablets and other mobile devices, which need to handle graphics, cameras, video, and everything else while consuming relatively little power. Smaller versions of these mobile processors can already be found in appliances like refrigerators, televisions, and microwaves, and they'll only become more ubiquitous as homes grow more and more connected to the "internet of things."

Intel's architecture wasn't well suited to this massive explosion in variety. Into that breach stepped Arm, a British company. Arm developed a new processor architecture that could operate at very low power. That made their processors ideal for the mobile device market. And then the company licensed out its architecture so other manufacturers could use it.

One of those licensees, Qualcomm, now controls a little over 40 percent of the mobile processor market. Mediatek and Apple control roughly another 40 percent, and other players divvy up the rest. For the most part, they all rely on Arm's architecture.

"Intel tried to make a mobile unit," Culurciello said. "But it just wasn't going anywhere." In mid-2016, Intel effectively surrendered the mobile processor market to its rivals.

For a long time, Intel still had the PC market locked up pretty tight. The problem, as you may have guessed, is the mobile market as a whole started eating into desktop and laptop sales. The latter peaked somewhere between 300 and 400 million units sold globally in 2011, right around the same time that smartphone sales pulled even. By 2015, laptop and desktop sales had fallen to around 300 million, while smartphones absolutely exploded to 1.4 billion.

The tablet market ate into PCs as well. And while tablets sales are projected to fall from their peak, they remain almost as big as desktop and laptop sales combined.

Intel's position looks even worse when you widen your gaze to other chips besides just processors. The massive boom in technology has driven the demand for flash memory chips way up. It's not a field everyone excels in, but Samsung does. And while Intel specializes in processors instead, and is still posting revenue growth, it finally wasn't enough. Fueled by massive growth in its memory chip business, Samsung just pulled ahead of Intel to become the biggest producer of chips overall.

Now Intel faces yet another challenge: Its rivals are eating away at its share of the PC market from within.

Apple is already working on its own processors for its MacBooks, relying on a version of Arm's architecture. And for several years now it's been building its own graphics processing units. But two Apple PCs — the MacBook Pro with Touch Bar and the iMac Pro — already run on custom processors Apple developed outside the Arm framework. Bloomberg recently reported that Apple is aiming to add its in-house processors to three more Mac models.

While Apple appears to be the furthest along, other companies are setting off on this path as well. If nothing else, developing more of your own processors means not having to pay licensing fees to Arm. And if, like Apple, you run a pretty closed ecosystem, building your own processors from scratch allows you to more seamlessly integrate all your various devices. News that both Intel processors and Arm processors (basically, just about all PCs and mobile devices) are vulnerable to two hacking strategies also delivered a recent burst of urgency.

Intel still has a few footholds. For one thing, Culurciello explained, they control a lot of the market for data center services. As major internet companies like Facebook, Google, and Amazon continue to expand, they need big data centers to crunch through massive amounts of information. And Intel is still one of the go-to companies in that space.

Intel is also taking a crack at the next technological wave: neural processors. These are processors specifically designed to handle machine learning algorithms, which power things like face and speech recognition and autonomous driving. But the market is still developing, so it's anyone's guess how much of it Intel could claim.

All these moves only underscore the company's increasingly shaky position. With the mobile market lost and its PC business besieged, Intel has to look for reinforcements elsewhere. And if it doesn't find them soon, it might just lose its crown.