Monday, August 23, 2010

End of Moore's Law

The recent announcement that Intel is buying McAfee, the security software company, has the analysts and pundits talking. The ostensible reason for the deal is that Intel wants the security company to help them add security to their chips. Now, while security is important, I do not believe that is the reason Intel bought McAfee. In my opinion, this purchase signals that Intel sees the coming end of Moore's Law.

In 2005, the Computer History Museum celebrated 40 years of Moore's Law, the technology trend that every 2 years, the number of transistors on a silicon chip, and thus its capabilities doubles. On the stage Gordon Moore told us that throughout the 40 years, "they have always been able to see out about 3 generations of manufacturing technology", where each generation is about 2 years. So Intel can see its technology path for about the next 6 years. At that time Moore told us that they could still see how they were going to carry on Moore's Law for the next three generations.

Now what would happen if Intel looked 6 years into the future and saw that it was no longer there. That they could see the end of Moore's law and that meant that they would no longer have the ability to create new and more powerful chips to keep their revenue growing. I believe that they would start looking to buy up other profitable companies in related lines of business to diversify their revenue.

McAfee is a large security software company, its main business is selling security solutions to large enterprises. If Intel had wanted to buy security technology they could have gone out and bought a security start-up with better technology than McAfee for a few hundred million dollars. Instead they are spending an expensive 8 billion dollars on an enterprise security software company. This deal does not make sense for the reasons given, however it does make sense if Intel wants to start buying its way into other lines of business.

Now there are many reasons that Intel wants diversify their business. Perhaps they see the profitable sales of processor chips disappearing as chips gain so many transistors that they do not know what to do with them. However the most likely reason is that they can see the end of Moore's Law and that it is now time to move on and add some other lines of business.

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