Nvidia Ion Threatens Core 2 Sales with Intel’s Own Atom

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Intel and Nvidia have exchanged unkind comments before, but general derision is getting specific and things are reaching fever pitch. Words became action with Intel taking Nvidia to court to stop them from making motherboards for Nehalem CPUs. Put together with the smear campaign Intel launched against the Ion platform, it may look like Intel wants nothing further to do with Nvidia.

But Intel has grudgingly tolerated the sale of Nvidia chipsets for Intel CPUs for years. Though it cost Intel in terms of selling their own chipsets, there were more options and innovations in chipsets because of the competition. And a larger choice of better platforms means Intel sells more CPUs.

So what has changed? Does Intel really want to drive Nvidia out of the integrated graphics and chipset markets as far as Intel CPUs are concerned? Are they actually going to use Larrabee to go after Nvidia in the discrete graphics market?

Answering the questions in inverted order: probably not to a large extent; no; and market segmentation.

Market Segmentation Is More than Marketing

Intel is trying to segment the computer market. If you’re not up on your biz-speak, that might not mean a lot to you. Market segmentation means organizing customers into different groups and tailoring your efforts on a group by group basis.

It is most often thought of in terms of marketing. For instance, Ford sponsors monster trucks and museums, but the latter is usually done under the Lincoln brand. In computing terms, Intel salespeople probably didn’t spend a lot of timing pitching the enthusiast Core i7 line to public elementary schools. Market segmentation is broader than that however. Focusing the ads without focusing the products and processes, only works so well.

Continuing with the auto market, you usually can’t get the cheapest car in a company’s line-up, with the small engine, no AC, and manual transmission, then turn around and ask for it with a leather interior.

Which makes sense: so few people are looking for that configuration that no one can make it in such low volume at a competitive price. In computing terms, let’s say you want a small desktop that has good graphics, so you need a Micro-ATX board and will be using a graphics card.

Finding a Micro-ATX that doesn’t have the integrated graphics you don’t need is a tall order. Most small systems get by on integrated graphics, so you pay a little more for something you won’t use because you landed between two market segments.

The Smarmy Side of Market Segmentation

The same thing happens if you go further up the auto market. If you want any two of GPS, sun roof, engine upgrade, or leather, you are likely to end up with one or more of the options you didn’t want. Part of this has to do with streamlining manufacturing, as explained above. The other part though, is kind of shifty: upselling.

In the car example, anyone who has been through the experience knows exactly what this means. If you pick and choose three options, the Fancydoodle Package has those three and a matching tandem bicycle, for only several hundred more. Tell ya what, I’ll even throw in the rust proof undercoating (on the bike).

Intel, taking the past tolerance and recent comments into account, doesn’t seem to be seeking a situation where Nvidia doesn’t make chipsets for Intel CPUs. They just want to make sure Nvidia isn’t offering too many bells and whistles on models with cheap CPUs.

Intel Rains All Over Ion Parade

Intel’s low-end chipsets, specifically, those with integrated graphics, have been loosing ground to the 9300/9400 from Nvidia left and right. Even when Apple decided to switch many of its mobile products to the Nvidia chipset, Intel was pretty quiet. So why are they flipping out over Ion?

A leaked Intel document revealed points their sales people were supposed to make to buyers about Ion. And it was pretty ugly, claiming, amongst other things, that Ion might not handle HD video as well as Nvidia said it could, and that the 9400 was just a desk and laptop platform being recycled for netbooks.

The latter is explained by selective amnesia, as it’s not like Intel’s 945G chipset, currently found in netbooks, was borne from the mind of Zeus. It has made the rounds of the desk and laptop, and for a much longer time than the 9400.

The former is a non-starter. Base on any review you find of the Ion reference platform Nvidia sent out to journalists, HD playback is stellar. So why the fud-fest? Because, though the 9400 cost Intel chipset sales, it also kept people buying Intel CPUs. The Ion uses an Atom, so again, what’s stuck in Intel’s craw?

Ion Un-Segments Atom and Core 2 Low-End

By making HD video possible with an Atom CPU, it appears the Nvidia Ion does Intel a favor. But, if all you need is day to day office stuff and graphics good enough to watch HD, maybe some light gaming, then you only need an Atom. Until now, Intel was able to make you step up to a full-sized, and more expensive, CPU.

Intel can handle selling fewer chipsets, but letting people walk out of the showroom having spent half of what they could have on the CPU is a big problem.

Intel Doesn’t Want Ion Situation for Nehalem

In taking Nvidia to court to prevent them from making chipsets for Nehalem, Intel may just be trying to avoid having an Ion situation all over again, this time at the other end of the market. Intel has plans for three different sockets for Nehalems, tying the platform’s chipset functionalities to a specific type of CPU.

Nvidia could create chipsets which include features that are only found on Intel chipsets that support more expensive CPUs. It isn’t the chipset competition, which Intel has tolerated for years. It is watching people who might have bought enthusiast processors, going with mid-range processors instead that has Intel in a tizzy.

There are specific reasons that this might be true, but they take some explaining. The Nehalem lawsuit, and Nvidia cozying up to Via in possible response, are explained here.