The ground beneath Intel is starting to give. The once solid foundation of PC sales, which supported the chip maker for the last several decades, is beginning to show cracks and Intel can't afford to fill them with upgraded processors. The fact is that PC market saturation occurred about five years ago, and Intel is only beginning to see the effects. Much like the other Goliath of the aging PC industry (aka Microsoft), Intel is going to need to broaden its horizons. This means 12,000 layoffs in the short term, which caused quite the uproar in Arizona, but what does the new strategy really mean for its future in Arizona?
Nobody ever hears "Microsoft" and thinks of inspired and innovative policy. But believe it or not, Microsoft saw the PC stall coming long before Intel did. Remember those terrible Microsoft ads from a few years ago? "Get to the cloud," whispered awestruck families as they hurriedly unsheathed their laptops during little 30 second clips that left viewers clueless. Well not all viewers, maybe just you and me. Corporations knew what Microsoft was talking about. In the past six years, Microsoft's cloud computing division, Azure, has seen triple digit growth thanks to adoption by big hitters like Heineken, GE, 3M and Pearson.
The adoption is only logical. As the Internet has grown (and, boy, it has) efficient use of its resources has become paramount to a company's success. Cloud computing offers this efficiency, removing the need for on site servers, which are expensive and inefficient in small quantities. Only when hosting in bulk, via big servers located in cold regions to reduce cooling costs, does the Internet become an efficient resource for companies. This is cloud computing, as bland and unromantic as it sounds, and there's no stopping it now.
While Microsoft began converting to the cloud years ago, Intel has only just started. Up until now they've been pretty safe relying on PC chips to rake in a consistent profit. Over half of their revenue still comes from their famed consumer chips. But the company has begun to see the wounds, and the slow bleed of profit might soon turn into something much more dangerous. This past quarter has been only the second in the company's history that consumer chips haven't performed up to expectations, and it will most likely only worsen. Since PC sales fell 10.4 percent in 2015, Intel needs to look elsewhere for profit.
To the cloud, then. Intel needs to make quite a few adjustments in order to enter the arena of cloud computing giants like Microsoft and Google. That starts with dropping a lot of dead weight. The company is a big time employer, the seventh largest in Arizona. Dropping 12,000 employees who are unequipped for this cloud strategy is a big deal. It will surely have a tremendous impact in the state, spelling out trouble for their 11,300 employees currently living here. The decision will even have an impact at ASU, where Intel regularly recruits. The company is trying to get lean, which makes for a painful situation here in Arizona.
Don't fret. As Intel adapts to the changing tides in computer trends, so does ASU. The University has begun to include cloud computing courses in its curriculum. All the bright young stars who view the layoffs as a sign to look elsewhere for employment might want to think again. As Intel lays off employees with little knowledge of the cloud, they will be looking for those who can fill in the gaps. The new breed of ASU computer science and electrical engineering majors will be prime candidates. So even as Intel takes a wrecking ball to their dated business model, the new generation of graduates can look ahead with optimism. They will be the new bricks upon which a revamped and reinvigorated Intel is situated.
Related links:
ASU Herberger Academy student becomes youngest person to obtain Intel job
Intel Corp. facility opens opportunity for students
Reach the columnist at sdeadric@asu.edu.
Editor’s note: The opinions presented in this column are the author’s and do not imply any endorsement from The State Press or its editors.
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