Intel can’t survive on chips as competitors eat its lunch

Big tech is in governments’ crosshairs. There’s no let up in criticism of Silicon Valley’s giants over privacy scandals, social media censorship and alleged abuse coming from monopoly powers. Meanwhile, small business owners lament their fate as Amazon rakes in more and more of their business -- how can they compete? Government must step in!

I have a different perspective on this. Some companies are in a dominant position, of course. But a snapshot in one moment does not show us that this is the way it will be for all time. A perfect example is Intel.

Intel remains the biggest US microchip maker, but probably not for much longer. At one time, Intel’s position must have seemed invulnerable. At one time or another, this multi-billion dollar company made chips for all the big names -- Microsoft, Apple, Google, Dell, HP, etc. For a long time, Intel and Microsoft had a kind of unholy alliance some called WINTEL, with synergies between the two companies creating a seemingly unstoppable advantage.

But now, Microsoft is building its own chips. So is Apple. So is Google. You get the idea.

Even before those announcements, Intel was hurting from another issue: thanks to Qualcomm’s apparently anti-competitive business practices, Intel felt forced to sell its modem business -- an area where it had invested billions -- for $1 billion from Apple. A billion dollars is a lot of money… but it didn’t recoup its investment. Meanwhile, Apple used that as the basis to design its own chips. And now the shoe is on the other foot, with Intel taking inspiration (copying?) from Apple’s ARM chips going into the newest generation of Macs.

The pain doesn’t seem to be stopping for Intel, no matter what it does. In the summer, it made the decision to stop manufacturing chips, outsource that part of its business and just focus on design.

Was it a smart decision? I’ll put it this way. It’s stock dropped 25 percent as the market as a whole went up 25 percent.

Just a few years ago, a company like Intel might have seemed absolutely unstoppable.

If they saw trouble coming up ahead, surely they would have all the smart people and resources they need to change course. But Intel seems to be in an increasingly hopeless position.

Intel is just one of countless examples showing that no matter how big a company gets, eventually, it falls. Over half of the companies listed on the Fortune 500 from 20 years ago are dead.

There seems to be no need for governments to get involved. If people really do hate these companies for all kinds of reasons -- lack of privacy, censorship or other reasons (like when I spent days this week, emailing, chatting and phoning customer service representatives who were not accountable and couldn’t help me) then they will change their buying behavior. Some companies will be able to adapt. Some won’t, leaving room for newcomers.

And that’s the recurrent pattern.