Intel, Mobileye, and Smiling Curves

Microprocessor manufacturing or the establishment of brand name business comes with a higher entry barrier, and requires many years of strength accumulation to achieve progress. However, computer assembly is very easy. That is why no-brand computers are found everywhere in electronic shopping malls.

Apple used software to bundle together manufacturing (done under contract) and the final product marketed to consumers; over time the company also added components, specifically microprocessors, to the bundle (also built under contract). The result was the most successful product of all time.

Google, meanwhile, made Android free; the bundle, such as there was, was between the operating system and Google’s cloud. The rest of the ecosystem was left to fight it out: distribution and marketing helped Samsung profit on the right, while R&D and manufacturing prowess meant profits for ARM, Samsung, and Qualcomm, along with a host of specialized component suppliers, on the left. Still, no one was as profitable as Intel was in the PC era, because no one had the software bundle.

The cloud took the commodification wave that hit PCs to a new extreme: major cloud providers, armed with massive scale and their own reference designs, hired Asian manufacturers directly. The one exception was Intel and its Xeon chips (which themselves undercut purpose-built server processors from companies like Sun and IBM), which continue to be the most important contributors to Intel’s bottom-line. Still, the real value in the cloud is on the right, where the software is: Facebook, Google, AWS.

(…) changes happening in the personal transportation industry simultaneously:

1. Drivetrains were changing from the internal combustion engine to electric

2. Car operation was moving from human-based to computer-based (i.e. self-driving cars)

3. Ownership was shifting from individuals to fleets, dispatched by ride-sharing services