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As the chips fall: A wild week in semiconductors

As the chips fall: A wild week in semiconductors

Welcome to Protocol | Enterprise, your comprehensive roundup of everything you need to know about the week in cloud and enterprise software. This Monday: Chip madness, Okta's big dreams, and Zoom makes a $14.7 billion call.

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The Big Story

Chiplash

Last week was a wild one in the semiconductor industry. And that's saying a lot for a sector that is now constantly in the news cycle amid the ongoing chip shortage and any one of the major acquisitions that have been announced recently, like Nvidia's $40 billion attempt to buy Arm or AMD's $30 billion purchase of Xilinx.

The rumor mill just churned out two new possible deals: Intel's $30 billion bid to buy GlobalFoundries and Broadcom's (now lifeless) attempt to purchase enterprise software provider SAS. And they got wildly different reactions.

But there are some key questions surrounding the deal. GlobalFoundries, for example, is owned by the Abu Dhabi government via its investment arm, Mubadala Investment Company.

  • While that may raise some eyebrows, industry experts say the connection likely wouldn't serve as a barrier. The news does come, however, as Intel is investing in its U.S. manufacturing operations and trying to convince lawmakers and regulators to invest more in domestic production.
  • Still, Intel is a global company and already produces chips in places outside the U.S. And a larger Intel would likely be viewed by many as beneficial because it would reduce global reliance on Taiwan-based TSMC, a particularly important goal as tensions between Taiwan and China grow more hostile.
  • But China could also present a major hurdle for Intel. GlobalFoundries doesn't have major operations there; the company recently shut down its only factory in China. But the country, which is trying to build up its own semiconductor industry, could need to approve the deal — similar to how the Nvidia-Arm deal also requires regulatory approval from China.

On the flip side, Broadcom's rumored bid for SAS befuddled many insiders. While the chipmaker previously acquired CA Technologies and assets from Symantec, both enterprise tech providers, analysts didn't see much value in the company doubling down on that business.

  • The reality is running an enterprise software business is wildly different than running a chip maker. And even if the two were to operate separately, there's not much crossover benefit.
  • "I don't know what Broadcom is doing," Forrester principal analyst Mike Gualtieri told Protocol. "When I look at Broadcom, it's two companies under one umbrella. I don't see a winning hand where they say: 'If you have to use this software, it has to run on our chips.'"
  • Broadcom CEO Hock Tan is known as a bit of an eccentric, according to analysts. And he's clearly on the acquisition hunt. (The company's bid to buy Qualcomm for $117 billion was abandoned after it was blocked by U.S. regulators in 2018.)
  • SAS would fit into an evolving vision to expand beyond semiconductors, but the motivation behind that broader effort is still a bit of a mystery.
  • "It doesn't make a whole lot of sense," said O'Donnell. "They want to broaden the base and build a huge tech conglomerate … and the thought is, to avoid potential concerns around regulatory [issues], going sideways instead of vertically makes more sense. That's the only logic I can apply to it."

The activity is a reflection of just how chaotic the semiconductor industry has become. Outside the shortage, key purchasers are scaling up production of their own chips. And that's forcing some providers to quickly pivot to new markets.

  • Among those hit the hardest by that move is Qualcomm. With Apple reportedly developing its own chips, analysts expect one of Qualcomm's biggest customers to reduce its reliance on the company as a partner.
  • While new CEO Cristiano Amon thinks Qualcomm can dominate Apple on laptops, he's also eying other major end-markets that align closely with Qualcomm's strengths.
  • One of those is digital twins, a logical extension for Qualcomm given its growing prominence in the so-called "internet of things" and AR/VR industries.
  • For digital twins to happen, "you need devices to be part of an intelligent, connected edge. And that's where we come and where we are likely going to have … a lot of partnerships with companies," Amon told reporters earlier this month.

Alongside all the other activity, the global demand for chips is drawing the attention of global regulators, who also see investing in the sector as a key part of curbing China's global dominance.

But fabrication plants are not easy to build or scale; it will take years to see many of today's investments pay off. Get ready for one of the most vibrant eras in the semiconductor industry since the original Pentium.

— Joe Williams

A MESSAGE FROM VMWARE

More than 80% of CIOs are building and deploying applications across the data center, multiple public clouds, and at the edge. Hear VMware, Salesforce and GfK leaders discuss the complexity of managing different clouds and apps and the best practices for navigating today's multi-cloud reality.

Learn More

This Week On Protocol

Salesforce 2.0: Okta's leadership team is stacked with ex-Salesforce execs, including its co-founders Todd McKinnon and Frederic Kerrest. The newest addition is John Zissimos, who will serve as Okta's first chief digital officer. The mandate is to do with Okta what he helped do with Salesforce: take a mid-tier SaaS provider and turn it mainstream.

Big pie, small slice: The database sector has a $100 billion opportunity ahead, and sees big potential in owning just a portion of the overall market. The company, which specializes in graph databases, recently raised $325 million, which it claims is the most ever for a database startup.

Five Questions For...

Andrew Davidson, VP of cloud products, MongoDB

Davidson was on our recent list of 10 people defining the new database landscape. Read the whole list here.

What was your first foray into the world of databases?

I grew up in Palo Alto in the heart of Silicon Valley and worked at Google Maps where I was exposed to large-scale data. Still, I was more of a "business user" of data, and the back-end systems were an abstraction to me. I had grown up immersed in the true lowest level of the stack, in labs where equipment for physical semiconductor production was being designed and studied physics based on the apparently-naive assumption that the namesake "silicon" of the valley was going to remain the center of action, before realizing software was going to eat the world. When I moved to NYC and found a deep-tech company in MongoDB, in many ways I got lucky: Here was a company whose focus resonated with my DNA.

What excites you the most about the future of the industry?

Everything is moving up yet another level of abstraction as we're entering into a new cloud chapter. The contours we're shaping now are the ripples in the big bang of the digital economy; those ripples will define the the galaxies of where the overall world economy is going in the decades to come. There's never been a bigger chance to truly "plug into the matrix" and foundationally enable the possibilities of tomorrow.

What's your advice to younger technologists who want to build a career in this field?

Take an unorthodox path and get perspective out there however you can. Focus on the people — they are the real reason you're doing this, both the people you work with and the people whose lives you're improving by using your technology.

What's the biggest hurdle companies are going to face in becoming a data-driven enterprise?

Understanding that all companies need to become software companies and embed that mentality into their DNA: It's not enough to call yourself a software company, to bring in some consultants, to give a team a new name, etc. You have to really operate differently to thrive, to focus on making your software engineers as productive as possible, to give them a modern data platform that allows them to elegantly express a wide set of data models and workloads in a unified platform built for them.

What's one piece of reading that you think should be a requirement for those in the industry?

Computer Science from the Bottom Up.

Around the Enterprise

A MESSAGE FROM VMWARE

More than 80% of CIOs are building and deploying applications across the data center, multiple public clouds, and at the edge. Hear VMware, Salesforce and GfK leaders discuss the complexity of managing different clouds and apps and the best practices for navigating today's multi-cloud reality.

Learn More

Thanks for reading — see you Thursday!

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