A teardown analysis conducted by the market research firm IHS, due to be released tomorrow, has pegged Samsung’s cost of materials and manufacturing to produce the U.S. version of the 32 gigabyte model of the S4 at slightly above $237 per unit. Without a contract subsidy, the entry-level 16GB version of the phone costs $639 when sold by AT&T Wireless.

The cost is somewhat higher than that of Apple’s iPhone 5, the base model of which costs $205 to build for a 16GB version, according to an IHS analysis conducted last fall. It’s also well above the cost of Nokia’s Lumia 900, which costs $209 to build, IHS found at the time.

The S4 cost is not far below the cost of Samsung’s larger Galaxy Note tablet, the cost of which IHS estimated last year to be $270.

Most phone manufacturers source their components from many different suppliers. But Samsung, a large, diversified manufacturer of many different kinds of electronic components, has used its significant capabilities to supply itself with many of the key parts inside most versions of the S4 phone sold around the world.

“Samsung’s strength is this ability to in-source to itself,” IHS analyst Vincent Leung said in an interview. “They just keep adding to the list of components that they can supply to themselves.”

One key component that Samsung did not supply to itself for versions of the phone being sold in the U.S. was the main applications processor. U.S. versions of the phone contain a Snapdragon processor from Qualcomm, which contributes $20 to the overall cost.

Versions of the phone sold in Korea and other markets around the world contain a Samsung-made chip called the Exynos 5 Octa that costs $28. Samsung is known to be manufacturing at least four variations of the phone for different market geographies around the world, including at least two being sold in the U.S., one going to AT&T and T-Mobile, and another going to Verizon Wireless and Sprint, said Andrew Rassweiler, another IHS analyst.

“Samsung is demonstrating its ability to suit the tastes of carriers in different regions of the world,” Rassweiler said. “It comes down to what the market is willing to spend on the features offered.”

The fact that Samsung used the Qualcomm-made chip is a testament to the U.S. chipmaker’s prowess. “Even with all the vertical integration it’s doing, it’s not like Samsung has given up on Qualcomm,” Rassweiler said.

One interesting difference between the U.S. and Korean versions resulted from the difference in the choice of processor. U.S. versions of the phone contain an image-processing chip made by Japan’s Fujitsu that added $1.50 to the total cost. Leung says that in the Korean versions, some of the image processing is handed off to Samsung’s Exynos chip.

Samsung also supplied the flash memory used to store data on the device. IHS estimates that 16GB of memory added $28 to the cost of the device.

The Korean giant also supplied itself with a display and touchscreen parts, which added $75 to the cost of components. The combined display package also includes Gorilla Glass, a strong glass material made by U.S.-based Corning.

Samsung is also thought to have supplied itself with several unlabeled components, including the camera module and some wireless baseband chips.

A few non-Samsung suppliers include Broadcom, which provided Bluetooth and Wi-Fi chips; Maxim, which provided a power-management chip; and Triquint Semiconductor, which provided some wireless chips.

Today is the day HP will formally unveil a product upon which a lot of its hopes for transformation and a return to health have been placed. It’s called Project Moonshot, and HP has been talking about it for about 18 months.

Basically, it’s a server, a very small server that consumes very little energy. During a conversation earlier this year, Dave Donatelli, HP’s executive VP and head of its enterprise, showed me one. Smaller than a typical hardcover book, it consumes 89 percent less energy to operate, and takes up 94 percent less space than a typical server. And, when packed into a large rack with many more servers like it, the amount of computing power that can be harnessed in one relatively small place is pretty impressive.

It’s also highly customizable, in a nearly endless series of mix-and-match combinations: It supports Intel’s Atom line of small and light microprocessors, as well as new up-and-coming server chips based on designs from the British firm ARM. It can also support graphics processing units from companies like Nvidia, as well as standard hard drives or flash-memory based solid-state storage.

HP’s argument to the marketplace is that Moonshot is unique. In a world where companies maintain data centers either for their own operations or as a means of reselling cloud computing capacity, HP’s hope is that the appeal of lower operating costs over time — energy consumption is a big one — will appeal to customers looking to swap out older machines.

And by at least one simple metric, it is. HP’s rivals, including Dell, IBM and Oracle, have nothing quite like it. That doesn’t mean they couldn’t. It is increasingly popular — companies like Google and Facebook do a lot of this — for a company to assemble their own servers from off-the-shelf components. Indeed, chipmaker Intel will be discussing new reference designs — essentially a basic blueprint — for what it calls “micro servers,” based on new versions of its Atom processors, later this week.

The message of Moonshot is also larger. It’s a signal from CEO Meg Whitman that HP can still launch important, innovative products that are different from anything else on the market. That’s a key message, given the tremendous difficulty the company has found itself in over the last few years. Indeed, just last week, Chairman Ray Lane stepped down from that role, and two other directors resigned in response to a proxy campaign by shareholders unhappy with the botched 2011 acquisition of the British software firm Autonomy.

A successful product launch will help shift the HP narrative away from recurring boardroom and executive office dramas, toward the day-to-day business of being the world’s largest technology company. And that’s just as important as the product itself. The sight of HP experiencing a win in a key market segment will go a long way toward making it look as though the longed-for turnaround — one that seemed unthinkable only months ago — is really getting under way.

Stop me if you’ve heard this one before.

Intel has dominated the high-end, performance-oriented desktop space for years, producing some of the most powerful chips on the market.

Problem is, desktops are so last decade. The age of mobile computing was ushered in on the backs of millions of pallets of laptops, netbooks, smartphones and tablets. And the chips that Intel has classically produced just don’t do low-power, low-consumption like those of some of its competitors. CEO Paul Otellini is widely seen as having been nudged out of his job for missing the boat on this shift away from PCs.

So once again at CES in Las Vegas, Intel is reminding the world that yes, it can translate its technology over to mobile and do it well.

The company plans to roll out a new smartphone platform aimed at the low end of the Android market with its “Lexington” project. Intel has its “Bay Trail” quad-core Atom chip on the way to cover the high-end smartphones. New chips to come, too, for the Ultrabooks the company has so loudly trumpeted over the past year. It’s all supposed to last longer, work better and just plain beat competitors like Nvidia and others using ARM-based architecture.

Intel gave us a peek at the way this will work in December, when it revealed a new manufacturing process for making mobile chips using Tri-Gate transistors.

It’ll just take ’em a little while. Most of this stuff won’t hit the market until the 2013 holiday season. Yes, a full year from now.

At the very least, Intel had a few partners on board to show off. For the low-end smartphones, Acer, Safaricom and Lava will use Intel’s forthcoming platform. And some analysts think that however far off, this is a smart play for Intel.

“The Lexington platform is absolutely targeted at emerging regions, which will let Intel deliver a more functional phone than others like, say, a Qualcomm or a Mediatek,” Patrick Moorhead, president and principal analyst at Moore Strategy & Insights, told me. “Combined with some of the higher-end features they’re bringing to the low-end phones, they’ll undoubtedly pick up customers with this silicon.”

But we’ll still have to wait until Christmas to see most of this stuff, while competitors like Nvidia continue to introduce subsequent generations of their successful mobile products.

Perhaps by then, the latest and greatest phones you’re seeing launch today might be outdated enough for you to pick up a new one. That’s Intel’s hope, at least.

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Here’s her question, which you can find on page 48 of the transcript:

Crowley: Mr. President, we have a really short time for a quick discussion here. IPad, the Macs, the iPhones, they are all manufactured in China, and one of the major reasons is labor is so much cheaper [there]. How do you convince a great American company to bring that manufacturing back here?

The correct answer is that, under current conditions, which are highly unlikely to change no matter who is president, the job of assembling iPhones and iPads and other consumer electronics is now done mostly in China by companies that specialize in manufacturing, and will never come back to the U.S. And that’s okay.

Sadly, both Obama and Romney flubbed their answers, and educated voters not at all.

Romney made his response about how China is a currency manipulator and steals American intellectual property. Obama got started down the right path, correctly admitting that certain low-skilled jobs aren’t coming back, and mentioned “high-wage, high-skilled jobs.” But he failed to close the deal on his point. He then got off track talking about investing in research and training engineers. In part because the time was so short, neither delivered a clear correct answer about an issue that is widely and fundamentally misunderstood by most voters.

Here’s what one of them — either one, I don’t care which, and assuming no time limit — should have said in response:

“Candy, I understand how some people might get frustrated when they see Chinese workers assembling iPhones. It’s easy to think that those jobs rightly belong in America. The reality is a little more complex, but when you understand it, there’s a surprising amount of good news for American workers.

“The fact is, assembling iPhones and iPads is the final step of a complex process, and is really a low-skill, low-cost kind of job. China has spent decades building much of its economy around these low-skill jobs, in part because it has such a large labor force and plenty of workers who are willing to do the work. And, frankly, here in America you wouldn’t want to try to support a family on the kind of wages a job like that would pay. I know it sounds harsh, but it’s true. So I know this may sound odd when I say it, but I ask you to hear me out: I’m perfectly comfortable letting those kinds of jobs go to China or somewhere else.

“In fact, some researchers at the University of California at Berkeley found that for every iPad or iPhone manufactured, Chinese workers add $10 or less to the value of an iPad or iPhone. On an iPad, they found that American workers add $162 worth of value, and on an iPhone it was more than twice as much.

“In America, when we talk about manufacturing, we should be talking about advanced manufacturing jobs for highly skilled workers that require a solid education and pay wages on which you can support a family. And the fact is, there’s a lot of American work that goes into an iPad or an iPhone or a Mac.

“For one thing, there’s our semiconductor companies, like Intel, an American company that makes the most advanced and complex device ever created — the microprocessor — and that does it better than any other company in the world. It makes the primary brain that goes inside the Mac, most of the world’s personal computers and most of the servers that power the Internet. And most of those chips are made right here in California and Arizona and Oregon. Some are made in Israel, too. But most are made here in the U.S.A.

“And the microprocessors that go inside the iPad and the iPhone are made right here in America, too. Apple doesn’t make its own chips, and when it went looking for another company to help it do that, it picked a Korean company called Samsung. And where did Samsung decide to build these chips? Some place in Korea? No. The answer will surprise you: Texas. That’s right. Samsung operates one of its very biggest chip factories in Austin.

“Then there’s the shatter-resistant glass that you touch every time you use an iPhone or iPad. It was invented in America. And it’s made in America, too, by American workers at a company called Corning, in Kentucky and New York.

“And that’s just one piece of it. There are a lot of other great jobs held by American workers. Apple has a lot of smart designers who sweated over every little detail of how the iPad and iPhone look, and how they feel in your hand, and how the button works. Teams of software developers slowly, painstakingly designed and built and tweaked and refined the software that makes it so fun and useful.

“And we’re not done there. If you have an iPhone or an iPad, you have a favorite app. Right now, my favorite app is the one created by my campaign staff. And when I take a break on the campaign bus, my wife and I like to relax for a few minutes playing Words With Friends. She beats me every time. And how many apps are there? A million? A zillion? But that’s an example of another American company, Zynga, creating jobs for the people who create game software. And there are lots more Zyngas, some of them really small companies with just a few people, and some a lot bigger. Apple once counted, and said that there were more than 200,000 people working at jobs just making apps.

“And let’s not forget that just a little more than five years ago, this branch of the technology industry didn’t exist at all. Apple brought out the first iPhone in 2007, and the first apps started coming to the marketplace in 2008. And don’t get me started about Google and its Android phones and tablets, and the chips and software that go into those. Or Facebook, and all the interesting things it’s doing.

“So, to answer your question, Candy, I’m not terribly worried that American workers aren’t assembling iPhones and iPads in America. They’re busy doing more important jobs, and earning good wages doing it right here in America. And as president, I’ll do everything in my power to help encourage the creation of more jobs right here in America, and to encourage entrepreneurs to start new companies so they can create the next Apple or Google or Intel or Facebook.

“It’s something we in America do better than anyone else. And we can argue about the details of how we should go about doing that. My opponent and I have some strong differences of opinion on some of those things we might do, and you should learn about those differences and think long and hard about them, because they’re important. But, over the long term, when I look at the iPhone and the iPad, I see something that could only have happened in America. And I feel pretty good about the role the American worker plays in it. And so should you.

“Next question.”

=====
Update: A few people have pointed out that President Obama in his response to Crowley’s question got off to a better start than I initially gave him credit for. However, I don’t think he quite closed the deal on the argument. Then, owing I think in part to the tight time constraints, he got off track. Either way, I’ve adjusted that lead-in paragraph above to reflect this.

For the sake of discussion I’ve added the text of the full exchange below.

CROWLEY: Mr. President, we have a really short time for a quick discussion here.
IPad, the Macs, the iPhones, they are all manufactured in China, and one of the major reasons is labor is so much cheaper [there]. How do you convince a great American company to bring that manufacturing back here?

ROMNEY: The answer is very straightforward. We can compete with anyone in the world as long as the playing field is level. China’s been cheating over the years, one, by holding down the value of their currency, number two, by stealing our intellectual property, our designs, our patents, our technology. There’s even an Apple store in China that’s a counterfeit Apple store selling counterfeit goods. They hack into our computers. We will have to have people play on a fair basis. That’s number one.

Number two, we have to make America the most attractive place for entrepreneurs, for people who want to expand a business. That’s what brings jobs in. The president’s characterization of my tax plan …

OBAMA: How much time you got, Candy?

ROMNEY: …. is completely … is completely false.

CROWLEY: Let me go to the president here, because we really are running out of time. And the question is can we ever get — we can’t get wages like that. It can’t be sustained here.

OBAMA: Candy, there are some jobs that are not going to come back, because they’re low-wage, low-skill jobs. I want high-wage, high-skill jobs. That’s why we have to emphasize manufacturing. That’s why we have to invest in advanced manufacturing. That’s why we’ve got to make sure that we’ve got the best science and research in the world.

And when we talk about deficits, if we’re adding to our deficit for tax cuts for folks who don’t need them and we’re cutting investments in research and science that will create the next Apple, create the next new innovation that will sell products around the world, we will lose that race. If we’re not training engineers to make sure that they are equipped here in this country, then companies won’t come here. Those investments are what’s going to help to make sure that we continue to lead this world economy not just next year, but 10 years from now, 50 years from now, a hundred years from now.

HP shares are trading lower by more than 2 percent in premarket action in partial response to the downgrade note by Peter Misek of Jeffries and Co. Misek lowered his target price for HP shares to $14 from $17, and maintained his already low estimate on its per-share earnings for fiscal year 2013 of $3.58, which is far below the consensus estimate of $4.22.

He has lots of reasons: For one thing, Misek is worried about HP’s intentions in the tablet and smartphone arena. After failing to capitalize on the acquisition of Palm and shutting down the webOS hardware business after sales of the TouchPad tablet failed to gain traction — and a subsequent $3.3 billion write-off for goodwill and inventory — Whitman has promised to try again with another smartphone. Misek sees that “makes sense strategically,” but it carries with it a lot of risk: “On top of adding costs and working capital burdens to an already stressed balance sheet, there could be additional write-offs.”

Meanwhile, HP already has significant trouble with its bread-and-butter PC business. Overall demand in the PC market is slowing, while Microsoft’s Windows 8 doesn’t yet appear to be much of a catalyst, at least if you look at the slow demand for PC microprocessors from Intel.

On top of that, the transition to a renewed emphasis on higher-value IT hardware and services is sputtering. Documents revealed in the lawsuit with Oracle over the Itanium chip — HP won the first round, but Oracle has promised to appeal — laid bare the fact that HP has long been relying heavily on revenue-derived service-and-support contracts with customers who buy Itanium-based servers. Referring to the Business Critical Server unit that sells the servers, Misek writes that his conversations with its customers don’t bode well for HP: “Our conversations with BCS customers indicate a lack of confidence in the longevity of the product platform. While migration off of BCS is not lightly undertaken, we expect continued weakness in BCS hardware and related Services revenues.”

Then there’s the printer business: Inventories of printer ink have built up because they’re selling more slowly than before. The correction, Misek argues, will take several quarters to resolve. He thinks tablets are cutting into demand for printed pages.

Finally, there’s software: The one still-unfinished bit of messy business left over from the 11-month service of former CEO Léo Apotheker is the $11.7 billion acquisition of the British software firm Autonomy, announced 13 months ago. Misek says he expects HP to write off some of the value of Autonomy. This would follow the massive $8 billion write-off announced Aug. 22, related to the EDS acquisition from 2008. After that first big write-off, HP hinted strongly that more goodwill write-offs are in the offing, probably in Software, Misek says. “After Autonomy’s poor performance the last couple quarters, we think HP will write off half of the $6 billion goodwill from the Autonomy acquisition, which will put further pressure on its debt to equity ratio.”

Which brings us to HP’s debt situation. Misek notes that HP has $1 billion in debt payments due in the fourth quarter of this year, and another $5.5 billion due in fiscal 2013. While not unusually high for HP historically, it doesn’t exactly help the already-strained balance sheet. Investors in debt markets have certainly noticed as credit default swaps on HP bonds experienced a textbook case of “blowing out” over the summer, though in all fairness it wasn’t the only PC maker they worried about.

Misek isn’t the first to place a “sell” rating on HP shares. Chris Whitmore of Deutsche Bank Securities was notable for placing a “sell” on HP in August of 2011, and has remained bearish on the shares since then. The bearish case is strong, indeed, and many investors are working it: Short interest in HP shares — an indication of sentiment that the share will fall further — has increased substantially in the last year.

As markets opened for trading in New York, HP shares fell by 15 cents, or a little less than 1 percent, to $16.96 on the New York Stock Exchange, after closing yesterday at $17.11. If HP shares fall to the $14 price target that Misek has set, it would constitute their lowest price since April of 2003.

So says research outfit In-Stat, which just finished up a survey of the chip market that shows Apple on a sharp upward growth trajectory. With demand for the iPhone and iPad growing at an unprecedented pace, and growth in the PC market a bit more lethargic, Apple’s mobile processor business is fast closing the gap on Intel’s. In fact, there’s not much of a gap to close.

In 2011, Apple shipped about 176 million chips in its iOS devices, capturing a 13.5 percent market share. Intel shipped just .4 percent more — 181 million chips, enough to snag a 13.9 percent market share.

With demand for the new iPad running high, the iPhone 4S selling well, and its successor presumably headed to market later this year, Apple will almost certainly pass Intel this year. And if it swaps in its own chip for the Intel chip in the MacBook Air, it may not only pass it, but claim a decent lead, as well.

That said, it should be noted that Intel’s presence in the smartphone and tablet markets is currently miniscule at best. While its chips are used in some tablets, they’re not really used in smartphones at all. Intel, of course, plans to change that — and soon. Its forthcoming Atom chip — codenamed Medfield — is reportedly headed to smartphones and tablets before the end of the year.

UPDATE: It should be noted that In-Stat’s rankings diverge significantly from those of another research firms, strategy Analytics, which in February ranked Qualcomm as the leader in the smartphone apps processor market by unit shipments.

Things are good for ARM Holdings, the British chip company whose designs are central to so many of the chips that make modern life modern. In 2011, some 7.9 billion chips with ARM cores in them were shipped. And yet it’s not a very big company. Where Intel clocked sales of $54 billion, ARM finished the year with sales of $777 million (491.8 million pounds). It all has to do with the differences in how they do business. ARM sells the blueprints to make a core — the central brain of a chip — and then those who buy that blueprint can build their own custom parts of a chip around it.

That means an ARM-based chip from Samsung can be significantly different from an ARM chip from Broadcom or Nvidia. And yet designers from either company could probably exchange jobs, because they’re both familiar with the basic designs. ARM has become something of a lingua franca of electronics design, except in the world of personal computers and servers. Yet with Microsoft set to release a new ARM-friendly version of Windows for notebooks and tablets, and the chip firm Calxeda working on bringing ARM chips to servers, ARM’s influence is growing.

I caught up with ARM CEO Warren East over dinner in New York last week, and we talked about how its business model is going strong, and where the ARM architecture is going.

AllThingsD: When people ask me what ARM is, I tend to liken it to a recipe for cake — a cake for which you buy the basic recipe, but which you can then enhance anyway you like. Is that a fair analogy?

East: Exactly, and the doing whatever you like is very important for our business model. If you couldn’t, and we were like Intel, say, and you had to do this one thing, the only thing our licensees could — if you were to apply a licensing model to that — the only thing they could use to compete against each other is price. Whereas this way, they can do their own stuff around the basic recipe, they can differentiate. But because it’s the same microprocessor architecture, your cake recipe, then investments they make in software, or if you’re using a combination of chips from Samsung and Nivida and Qualcomm, any investment you make toward using Samsung chips is equally applicable to the others.

And you can switch to another vendor later if you like, correct?

You can, because they all do different things. If your product is about video, then Texas Instruments’ video accelerator is very good. If it’s about 3-D graphics, then Nvidia’s chips are very good. If it’s a modem you need, then Qualcomm’s chip is very good. So you can mix and match.

And it’s not uncommon for many manufacturers, whether they’re making phones or something else, to have several ARM-based chips doing many things. In a phone, the main microprocessor will be an ARM-based chip, but then also the surrounding chips doing specialized functions will be ARM chips, as well, correct?

Right. The typical smartphone will have four or five ARM chips in it. There’s the main processor, the thing you interact with as the user. Then there’s the modem, which connects to the phone network. And then there’s a connectivity processor that handles the Bluetooth and the Wi-Fi or both. And then there may be a power management processor, or a touchscreen controller, a camera, or GPS, and so on. And the next one that’s being integrated is NFC, or Near Field Communications, for payments by phone. And your 8-bit processor in the SIM card is turning into a 32-bit microprocessor, and that will likely be an ARM, as well.

When you think about competitors, who is it? Is it MIPS? Is it Intel, perhaps, down the road?

When you think about the consumer electronics space, TVs and the like, MIPS has been very strong in that space. Increasingly, as the TVs become smarter and more connected then they start to look more and more like a smartphone with a 46-inch screen. And so, actually, the infrastructure that exists around ARM makes it very compelling to put an ARM chip in there. In the computing world then, the competition is really Intel and AMD x86 chips.

Speaking of AMD, its CEO, Rory Read, raised some eyebrows at its analyst meeting recently when he mentioned ARM and described a new “ambidextrous” approach to its chips, implying, many think, that AMD might combine its x86 cores in some way with an ARM core. Can you give any visibility into what he might mean?

We can’t tell you really anything about it. But I will say something that we’ve said about this before, when people had picked up similar noises about something like this. AMD is in the business of selling microprocessors. We’re in the business of selling microprocessor designs. We wouldn’t be doing our job properly if we weren’t at least talking to them. And so we have been, for the last 10 years or so. If those discussions go anywhere, and if and when there’s something to announce to the world, we’ll do so.

How many licensees are there? Are there any that surprise you because they’re unusual or unique?

Now there are 290 licensees. It’s a good question, and one we don’t get very often. There are all sorts of weird applications. There’s a glaucoma monitor chip that’s a cubic millimeter. It’s a pressure sensor, a solar panel, a microprocessor and a radio and a battery, all in that space, so it can be fitted inside the eye so you can be tested for glaucoma. On the other extreme, we’re in a neutrino detector that’s in a kilometers-long chain of sensors, with another sensor every few meters, down in the Antarctic. So we’re in applications that are as small as a cubic millimeter to as large as several square kilometers. Looking forward, one of the ones I’m intrigued about at the moment is with a company that makes concrete. The idea is it concerns networks of sensors that would be embedded directly in the concrete. But you get the feeling that one company is going to pour the concrete and another is going to place the sensors. But this company wants to put the sensors in in the first place. We’ll just pour the concrete with the sensors already there. It’s all about energy harvesting from the vibrations in the concrete. The processors come with little wireless communications [abilities], and use hardly any energy, because the communication is only from one sensor to the next. That one is probably a few years off, but the fact that a concrete company is thinking about this is very interesting.

The next big thing is that ARM chips are coming to traditional PCs running Windows. We’ve been hearing about it for more than a year now, and Microsoft is starting to show Windows 8. Is the opportunity for ARM in PCs real, and is it going to happen?

It’s real and it’s going to happen, and it’s absolutely on track. Obviously, the detailed timeline is a matter for Microsoft and not for us. Metro is happening. It’s a big change to the user interface. They have pioneered Metro in their mobile offering, and you can sort of see where they’re going with it. But Windows 8 is going to be about Metro. That lends itself a little more to tablets in a way that they haven’t been before. That is clearly going to happen. For us and for Microsoft there are two different objectives. For them, it’s about getting a route to support the billions of Internet-connected screens that are going to appear over the next decade or so. Most of them are going to have an ARM processor in them. Without Windows on ARM, Microsoft is excluded from those products, so they need Windows on ARM. For us, a great side effect is getting into the PC world where, outside of Apple, Windows is everything, and it has been inextricably linked to Intel and x86. So now if Windows appears on ARM, we can address those 300 million PCs that are sold each year. And for us, it’s like having an extra 300 million smartphones. It’s certainly nice to have.

In 2011, it crossed the threshold of $50 billion in annual sales for the first time, having hit the $40 billion mark only last year. This came after a tough year — 2009 — during which sales declined a bit to $35 billion, down from $37 billion in 2008. But the larger point is clear: Intel continues to be a significant growth machine in a tech ecosystem that is supposed to be on the decline.

Who says so? “The experts.” Earlier this month, Gartner and IDC both reported what they described as the second-worst year for PC sales growth in recorded history, second only to the doldrums of 2001, when the world was beset by the dotcom crash, the onset of the global war on terror and general recession, all in one. This came after the same two outfits made similarly depressing predictions for worldwide IT spending.

Intel’s results tell a different story. Consider its strengths: Sales in its data-center group — chips being sold to companies building servers that will be used to power data and applications running on the Internet — grew 17 percent year on year to north of $10 billion. And the lowly PC? The machine that is said to be on the decline by so many people who claim to know what’s going on? Sales in Intel’s PC client group grew by more than $5 billion year on year to north of $35 billion.

How can that be possible? It’s an argument that Intel has been making for some time now, and is now becoming familiar: Persistent strength in emerging markets. As Intel CEO Paul Otellini said on a conference call with analysts today, emerging markets, where household incomes are improving to the point that consumers are able to buy their first PCs, are accounting for two out of every three units of incremental microprocessor demand. Which means that for every three chips of new growth sold in a year, two are sold in an emerging market.

PC sales in China, by Intel’s reckoning, grew 15 percent, and as yet have only achieved a household penetration rate of 35 percent, which says there’s lots of room still to grow. By comparison, the U.S. market is 90 percent penetrated, meaning nearly everyone who wants a PC has one. India grew 22 percent; Indonesia, 37 percent.

Here’s another really interesting metric that should give you some food for thought: In 2012, Intel will spend $12.5 billion on capital expenditures. That’s more than twice what it spent last year. What is it spending so lavishly on? Four new chip factories — in Oregon, Arizona, China and Israel — which, when completed, will turn out chips built on the very latest, edge-of-reality technology, where chips have transistors and other elements on them that are at the 14-nanometer scale.

How small is 14 nanometers? About one-fifth the size of a typical virus cell, and only slightly bigger than the thickness of the cell wall of a typical germ. Next year, there will be four factories, employing thousands of people, turning out thousands — and later millions — of these miniscule fragments of silicon that arguably constitute some of the most complex implements mankind has ever built.

And Intel does this profitably, which is so difficult and requires such financial scale that most companies that make other kinds of chips long ago gave up running their own factories and farmed the work of actually building them to other companies. Intel is so good at it that its gross margins in 2011 were 62.5 percent. Its full profit for the year was nearly $13 billion on $54 billion in sales.

Yes, we beat on Intel for not having conquered the smartphone industry or the tablet industry as readily as it spent the 1990s bending the PC industry to its will. There is a school of thought that says Intel is less relevant today than it was, say, five years ago, and that its anemic presence in the future of personal computing — smartphones and tablets — is all the evidence one needs to render that judgement. In fairness, smartphones and tablets are still on the rise, and Intel is starting to show some promising progress, though its competition and an industry-wide preference for chips based on the ARM architecture will be difficult to dislodge.

Still, it’s a little hard to find much fault with Intel, when the numbers so clearly demonstrate that, despite the conventional wisdom, it is clearly at the height of its powers.

U.S. District Judge Leonard Stark on Friday canceled a Feb. 14 trial in the high-profile case filed by New York’s attorney general, who charged Intel with monopolistic tactics in the market for microprocessor chips.

The order followed a letter to the judge from Attorney General Eric Schneiderman, who proposed dropping the federal case in view of recent developments that reduced the amount of damages that New York could seek. Mr. Schneiderman said his office would instead pursue damages in New York state court to address “Intel’s egregious and illegal conduct.”

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That, said Intel CEO Paul Otellini, is one of three myths he aimed to bust today in a speech at a Credit Suisse technology conference in Phoenix.

First off, he pointed to the emerging markets. Intel is seeing significant growth in countries like Argentina, where the market for PCs grew 38 percent in 2011; Venezuela, where it grew 34 percent; and Russia, which grew 26 percent. “This emerging market trend is real,” Otellini said. And it’s not likely to end anytime soon: In 2010, the top five PC markets by country were the U.S., China, Germany, Japan and Brazil. In 2015, Intel forecasts suggest, the top five will be China, the U.S., Brazil, Russia and Germany.

With all the attention on phones and tablets, especially Apple’s iPad and various Android devices, the PC has gotten a little stale, Otellini conceded, so it’s time to make it exciting again. Intel’s answer is the Ultrabook. Thinner, sleeker notebooks that boot up fast and have touch-enabled screens and long battery lives will get consumers excited again, he said.

And don’t forget the part that Intel plays in the cloud: Most of the servers running cloud services have Intel chips inside them. And Intel’s data center business has doubled over five years and will double again in the next five. “This is where we see more and more of our customers buying from us direct. They’re building custom boards to run the data centers at Facebook, at Amazon, at Google, at Baidu and Alibaba,” he said.

Myth No. 2: Intel chips are too power-hungry for mobile devices.

Moore’s Law is still alive and well, Otellini said. In 1997, Intel built a supercomputer called ASCI Red that could compute one teraflop. It required 2,500 square feet of space and 9,298 chips to get the number crunching done. Earlier this month, Intel announced a chip codenamed Knight’s Corner that can do a teraflop by itself. In the mainstream marketplace, today’s notebooks are 300 times more powerful than notebooks built in 1995.

Intel, Otellini says, has built its own demonstration Android smartphone to show off the upcoming Medfield generation of its Atom processor, due in 2012. When its power consumption during basic phone functions like things like standby, audio and HD video playback is measured, Intel isn’t the best, but it’s not the worst, either. It usually comes in second or third place when compared against smartphones already in the market, but ahead of others, though Otellini didn’t say which phones it beat and which ones it didn’t.

And on three computing performance benchmarks it beats the others hands down: When using a browser on a phone, the Intel chip smokes the others. It also wins on GLBench, a graphics metric, and SunSpider, a Java test.

Myth No. 3: Intel can’t compete with ARM.

Yes, it’s true that ARM-based chips are everywhere that Intel would like its Atom chips to be and are showing no signs of giving ground.

But, noted Otellini, despite the growth of newer platforms, Intel and its x86 instruction set still command the largest army of software developers — north of 14 million — and the largest body of software created so far — more than 6 million applications. “As we come into these markets we’re bringing an incredible legacy of people that know Intel and know the Intel architecture.”

Then there’s Windows 8. Otellini called it “one of the best things that has ever happened to our company.” It will allow tablets to gain mainstream acceptance, especially in the enterprise that they don’t have today. “A lot of IT managers are worried about security and about porting their legacy applications to an Android tablet or an iPad. What Microsoft is doing is making that seamless for them.”

Finally, he said, Intel has a history of entering markets dominated by someone else and dominating them over time. In the early 1980s as the first Intel chips went into PCs, the dominant machines on the market were the VIC-20 and the Apple II. In the early 1990s, when Intel first went after servers, the dominant chips came from Sun Microsystems and IBM. Now Intel rules both markets. And the same thing has happened in supercomputing. (See the slide from Otellini’s presentation below, though someone needs to check the first field at left because the VIC-20 appears twice.)

Did his mythbusting work? Intel shares rose a bit today, closing up 12 cents to $23.58, and the shares are up 12 percent so far this year. We’ll see how right he was in 2012.

Update: Intel has corrected Otellini’s slide. No longer does it show the VIC-20 occupying two market segments. Well, it was kinda popular.

Fusion-io shares closed at $38.10 — up 9.17 percent — during the regular session, and continued to climb by an additional 1 percent in after-hours trading. The shares have increased by more than 100 percent since they debuted on the New York Stock Exchange at $19 early this summer.

The main news came in the form of a new product, and the publication of news that Fusion-io technology was used in a high-performance computing project at the Lawrence Livermore National Lab.

People tend to think of Fusion-io as building traditional storage, but its main mission is to get data closer to the processor in a server, so that that processor doesn’t have to sit around waiting. Processors are super speedy and super impatient. Think of the processor as the impatient Miranda Priestly — played by Meryl Streep in “The Devil Wears Prada” — and how Anne Hathaway’s character, Andy Sachs, is never fast enough for Priestly about handing her something she needs right away. Microprocessors hate nothing more than waiting for a hard drive to serve up the data they need.

Fusion-io’s drives try to speed that process up — and make microprocessors happier — by using flash memory built into an insert card and installing it close to the processor in a system. The news, announced at the Supercomputing conference in Seattle today, is that Fusion-io debuted a 10 terabyte version of its high-end ioDrive Octal product. You can now pack four of these into a single server, and have 40 terabytes of data right up close to those impatient processors. Companies like Hewlett-Packard, IBM, Dell and Supermicro build Fusion-io’s products into their own products.

The other news also had a supercomputing wrinkle to it. A machine that Lawrence Livermore called “Leviathan,” packed with Fusion-io cards and Intel processors, broke a record in processing a graph with more than 68 billion nodes. Well, it didn’t just break the record, it shattered it, as that number of nodes in a graph is four times the prior record. What that means, in English, is that the computer plotted a mathematical graph with more than 68 billion points of data.

Apparently — and I’m just learning this now — there’s a separate version of the Top 500 list called the Graph 500 which focuses on simulating 3-D problems.

It’s a lot to take in, but the main point is that Fusion-io seems to be showing that it has a going business. Critics of the company have argued that it relies too heavily upon its biggest data-center customers like Facebook and Apple, and that it will be vulnerable to slowing sales when those companies are through building their infrastructure. The problem with that argument is that there’s always another impatient processor throwing an impatient diva fit while waiting for data.

Also, I should note that today’s 9 percent move comes after Fusion shares fell about the same amount on word last week that the company is planning a $350 million secondary offering. When investors heard about that last week, they sent the shares plunging by more than 8 percent, territory it has since reclaimed. It has been a bumpy, volatile ride for Fusion-io, no doubt. In the five months since the debut, the stock has traded as low as $15, and almost as high as $40. That’s IPO investing for you.

And while it was Fujitsu, using SPARC chips, that made the top of the list, you couldn’t help noticing how many machines used chips from Intel. Of the 500 supercomputers on the list, 384 of them use chips from the semiconductor giant.

At the SC11 Supercomputing conference in Seattle today, Intel is making some important disclosures about what it is doing to maintain its role as the chip vendor of choice, and also offering its competitive response to a potential threat from the graphics chip specialist Nvidia.

As I’ve explained a few times before, the graphics chips, or GPUs, that Nvidia makes are starting to make some inroads into supercomputing and high-performance computing environments, thanks to their ability to handle floating point computations at a high rate of speed. Sometime next year, at the Oak Ridge National Laboratory in Tennessee, a machine called Titan, using a combination of chips from Advanced Micro Devices and Nvidia, is expected to break the 20 petaflop barrier when it begins operation.

The narrative that has emerged recently is that GPUs are generally better at the floating point operations that are increasingly used in supercomputing — better in many cases than traditional x86 chips from Intel and AMD. Even so, if you add up the number of systems on the Top 500 list using Intel and AMD chips, you’d hit a percentage that’s just shy of 90.

In a presentation today (on what just happens to be the 40th birthday of the Intel microprocessor — hence the two people I saw today outside the “Today” show at Rockefeller Center on my way to work), Rajeeb Hazra, Intel’s general manager of Technical Computing, detailed Intel’s response. First off, Intel is supporting a new technology, called PCI Express 3.0, that will speed up the ability of chips inside a supercomputer to share data. In systems this big, and working on such large amounts of data at once, the processors spend a lot of time tapping their feet and waiting for data to work on. Engineers call this latency, and the point of the new interconnect technology is to cut latency by doubling the bandwidth available. The result is an improvement in the raw FLOPS (floating point operations) available by 2.1 times in lab tests, and a 70 percent improvement in real-world workload tests. In supercomputing terms, that’s real progress, and it effectively means getting answers to big questions faster.

Another advance that Intel talked about today is a chip bearing the codename “Knight’s Corner.” It’s a coprocessor, meaning it’s an additional chip that would be added to a computer to boost its performance. Intel says it can do a full teraflop — a trillion floating point operations a second — and that’s just the result of demonstrations from the first silicon. When in full production, it will probably do even better.

And not only will it do a teraflop on a single chip, it will perform those calculations to what engineers call “double precision,” which is a fancy way of saying the result of each operation will be accurate to a higher level of granularity. As John Hengeveld, Intel’s director of technical computer marketing, told me last week, the rule of thumb in these matters says that moving from single to double precision boosts the amount of time you have to wait by four times.

Why is that important, when an off-the-shelf GPU from Nvidia can do 2 teraflops — though only at the single-point precision? Programming. If you’re a scientist who 10 years ago wrote a program to simulate weather patterns or nuclear explosions or some other classic supercomputing problem to run on systems running Intel chips, there’s nothing new to learn in terms of programming. While the GPUs are great, there are new programming rules to learn.

Finally, Intel is reiterating its plan to keep working on the exascale problem, which is the next great summit in supercomputing. Right now the world’s top supercomputer maxes out at 10.51 petaflops, and a candidate to top the list next year will go north of 20 petaflops, or quadrillions of floating point operations. Sometime this decade — say, about 2018 or so — the hope is that supercomputers will break the exaflop barrier, where machines will run quintillions of FLOPs.

The fundamental problem there isn’t the computing so much as it is power, as in electrical power. Already some of these machines consume as much power as a small city. Getting to exascale will require chips and other components that can run full out at speeds we can as yet only imagine, but doing it consuming a lot less power than they would otherwise be expected to. Think in terms of a Prius that could win the Indy 500 — and not just by a hair, but by a long mile — and do it day after day without really using much more gas than the other cars. It’s kind of like that.

Anyhow, Intel has said that it plans to enable exascale supercomputing that will require only a doubling of the power needed, rather than, say, 10 times as much. To that end, it said today it will open its fourth research lab in Europe. This one is in Barcelona and joins one in Paris; another in Juelich, Germany; and a third in Lueven, Belgium. They’ll all have a lot of work to do between now and 2018.

Patrick Moorhead, AMD’s corporate VP for strategy and an AMD Corporate Fellow, is leaving the company, and according to people familiar with his plans, will be launching a consumer-focused technology analyst and consulting firm around the time of the International Consumer Electronics Show in Las Vegas in January.

Moorhead is the last remaining VP been hired by AMD’s legendary founder and former CEO, Jerry Sanders. Over 11 years at AMD he led the company’s marketing efforts around its Athlon PC and Opteron server chips that led to a bit of a renaissance at AMD from about 2005 to 2007, when the chips won a lot of business away from Intel and thus gave the bigger company a major migraine headache.

To place Moorhead (pictured from his Twitter feed) appropriately in AMD’s history, it was during these years that AMD put into products a concept called x86-64, which essentially extended the x86 instruction set — the underlying code that chips from Intel and AMD share — into what was then the bright new world of 64-bit computing, thus paving the way for machines that could contain more than two four gigabytes of memory and could handle more complex computing tasks.

AMD first put forth its approach at a chip industry event in 1999 — one that I happened to cover for a now-defunct outlet called Electronic News — at a time when Intel was championing a different approach to 64-bit computing by starting from scratch with an entirely new design. Its technology was called EPIC, for “explicitly parallel instruction set computing.” The product that eventually resulted was the exotic Itanium chip, which is today the subject of a legal dispute between software giant Oracle and Hewlett-Packard, which is for all intents and purposes the only company selling hardware that runs on Itanium.

AMD ultimately won that argument and Intel embraced its own implementation of AMD’s x86-64, now common in their mainstream desktop, notebook and server chips, but only after giving Intel and its investors fits over lost market share during 2005 and 2006.

Moorhead joined AMD in 2000 from Compaq and had also worked at the not entirely forgotten search engine outfit AltaVista, which had been launched at Digital Equipment Company, then acquired by Compaq, and is now part of Yahoo.

In more recent years he had been known primarily for being an outspoken advocate for the opportunities in mobile computing. One suspects he’ll have more to say on that topic in the coming months.

Inside, the phone is similar too, but there have been some strategic changes from one generation to the next that have important implications for Apple’s many suppliers. According to a teardown analysis conducted by the research firm IHS iSuppli, chipmaker Intel, which last year acquired the wireless operations of the German chip concern Infineon, has been almost entirely bounced out of the 4S in favor of a set of chips from Qualcomm. The shift to Qualcomm had been rumored as far back as last September.

Before Intel acquired its wireless unit, Infineon had previously supplied Apple with a chip known as a baseband processor that Apple had used in combination with chips from Skyworks and Triquint to work with wireless phone networks. “Qualcomm is the big winner here,” says Andrew Rassweiler, an analyst with IHS iSuppli who conducted the teardown. “It is selling Apple a whole suite of chips that adds up to about $14 to $15 per iPhone.”

Intel spent $1.4 billion to acquire Infineon’s wireless chip operations last year in a move seen as meant to shore up its presence in the wireless phone industry overall. It has struggled to win business for its Atom line of microprocessors, which are aimed at mobile devices like smartphones and tablets.

Infineon still has a small chip in the iPhone, but Rassweiler says it’s far less significant and a lot less costly than the one it supplied Apple before. “It’s almost like Apple threw them a bone with a 50-cent part after they lost a much more high profile chip that cost about $10,” he says. Intel had no comment.

ISuppli regularly conducts teardown studies of wireless phones and other consumer electronics devices in order to find out who a manufacturer’s vendors are — like most manufacturers, Apple prevents its suppliers from identifying themselves, much as they’d love to — but also to determine what each part costs. The combined cost of components — analysts check on the list prices of each part — is known as a bill-of-materials (BOM) estimate that gives a fair idea how much a manufacturer, in this case Apple, makes in gross margin on each device sold. Apple doesn’t disclose its gross margin on a per-product basis but when it reported its quarterly results yesterday it said its overall gross margin was 40.3 percent.

In the case of the iPhone 4S, Rassweiler estimates that the BOM cost ranges from $188 for the 16 gigabyte version of the iPhone 4S to $207 for the 32GB version and $245 for the 64GB version. Apple and its carrier partners sell the phones for $199, $299 and $399 respectively, typically with a two-year contract for wireless service that carriers use to subsidize the cost they pay Apple.

The costliest components are the ones that determine the price: Memory chips. Apple has been known in the past to rely mostly upon South Korea’s Samsung Electronics, the world’s largest supplier of memory, and from Japan’s Toshiba. In the phone that Rassweiler’s team tore down, the memory chips came from Samsung rival Hynix Semiconductor. “That struck us as a bit of a surprise,” Rassweiler says. It’s hard not to wonder if adding Hynix to the stable of iPhone memory suppliers is a partial response by Apple to the complicated patent fight it is waging with Samsung in courtrooms around the world.

Even so, Samsung appears to be have maintained its role as the manufacturer of the Apple-designed A5 processor that provides the iPhone 4S, and also the iPad 2, with most of its computing horsepower. Some published reports in recent months had suggested that because of the patent fight, Apple might end a relationship that dates back to the original iPhone and move its chip manufacturing contract to Taiwan Semiconductor Manufacturing Co., the huge chip manufacturing foundry. Rassweiler says there’s no sign on the latest A5 chips that that has occurred. “The markings are the same as what we saw in the iPad 2,” he says. The estimated cost for the A5 chip is $15 each, he says.

Apple started designing its own chips for the iPhone and iPad products beginning in 2010 with the release of the first iPad. The chip is thought to have been designed by teams from PA Semi and Intrinsity, two privately held chip design firms that Apple acquired in 2008 and 2010 respectively.

However, it’s also clear that the A5 chip is taking on more of the heavy computing lifting inside the device than the previous A4 chip, Rassweiler says. For example: The iPhone 4 contains a chip from privately held Audience Semiconductor, based in Mountain View, Calif., that handled noise cancellation. There’s no such chip inside the iPhone 4S, Rassweiler says, so it appears that noise-cancellation duties may have been moved to the beefier A5 chip itself.

Triquint Semiconductor provided a set of chips that make up a wireless transmit module that works with the wireless phone networks. Triquint has traditionally been an iPhone supplier, Rassweiler says, but the value of what it supplies to Apple appears to have dropped. One wireless chip company that has seen the value of what it supplies to Apple increase is Avago Technologies. Like Triquint, it too has been an iPhone supplier, but the overall value of the chips it supplies has gone up in the 4S.

STMicroelectronics, the European chipmaker, maintained its role as the supplier of gyroscope chips that help determine the phone’s position and rotate the screen for playing games and displaying pictures and videos. AKM Semiconductor again supplied the compass chip. Texas Instruments continued in its role supplying the chip that controls the iPhone’s display, and an audio chip.

One vendor could not be identified. Rassweiler says that Apple appears to have taken pains to hide the identity of the company that supplies the parts that power the iPhone 4S’s highly regarded 8 megapixel camera. This is not new, and the candidates include Largan Precision Co., a Taiwanese supplier of camera modules to wireless phone companies, and Omnivision. “We don’t know exactly who makes it,” Rassweiler told me. Whoever the supplier is, Rassweiler estimates the camera added $17.60 to the cost to build the iPhone. And they’re likely to make a lot on the deal. IHS iSuppli is forecasting that Apple will sell 81 million iPhone 4Ss around the world next year.

Update: A few of you have written in saying that it was Sony who supplied the camera. Maybe. The folks at Chipworks dissected the camera module and found a Sony-made CMOS image sensor inside it. That doesn’t make the whole module a Sony’s however. It could be a Sony camera or it could be that whoever made the camera used a Sony sensor. And last week Barron’s reported on some debate among analysts over whether or not Apple has split the camera supply contract 50-50 between Omnivision and Sony.

Doug Freedman, an analyst who covers the chip sector for Gleacher & Co. in San Francisco, trimmed his estimates on both Intel and on its smaller rival Advanced Micro Devices amid a weakened PC market that is running well behind the typical seasonal patterns. Last week, market researcher Gartner reported that worldwide PC shipments grew less than three percent over the year-ago period, as consumers remain focused on tablets and smartphones and hold off on upgrading their desktops and notebooks.

At a high level, that’s not good news for Intel and AMD, both of which have yet to penetrate the tablet market in any meaningful way. And both are grappling with the impending entrance of competing chips — based on designs from ARM, from vendors like Nvidia and Qualcomm — burrowing their way into new consumer notebooks.

In a July 15 note to clients, Freedman cut his estimates on both Intel and AMD for the quarter ending in June and the quarter ending in September. He expects Intel to report sales of $12.7 billion, which is about $100 million below the street consensus of $12.8 billion. He also expects Intel to report per-share earnings of 53 cents, which would amount to a two-cent improvement over the year-ago quarter.

The quarter being reported today isn’t the story, however: It’s September. Typically it’s a seasonally strong quarter, as college students head back to school with new notebooks under their arms. This year Freedman thinks PC sales will lag behind historical patterns. He trimmed his September quarter revenue forecast to $13.16 billion, down from $13.43 billion — or $300 million below the street view — and knocked it down by two cents to 59 cents, a penny above the street.

Intel has, in recent quarters, taken a fairly aggressive stance on the state of the PC market, and has criticized analysts for fanning investor fears. “Management should offer more subdued PC unit growth expectations thereby alleviating investor fear that Intel is setting its bar too high,” Freedman wrote. One other thing Intel has in its favor is that the average selling price of chips is edging upward, which should give it a slight hedge against the weaker market. This should help keep gross margins — a key metric for Intel — in the higher end of the 59 to 63 percent range the company said to expect. He also says that Intel could deliver a surprise with better-than-expected results from other parts of its operations, namely its flash memory unit, which makes solid-state hard drives.

For AMD, which reports its results tomorrow, the picture is a mixed bag. The search for a new CEO is now in its sixth month, with no sign of being resolved anytime soon. Freedman doesn’t expect a CEO to be named today nor in the near term. Finding an external candidate is proving harder than expected. (Note to Freedman: You don’t say.) Pressure on its share price, thanks to short-sellers, has created a buying opportunity in the near term.

Even so, Freedman trimmed his estimates for AMD’s June and September quarters. He expects AMD to report sales of $1.55 billion, down from $1.6 billion previously, which would amount to a four percent decline in year-on-year sales. He also shaved a penny off his EPS estimate to nine cents from 10. For September, he expects AMD to report sales of $1.63 billion, down from $1.7 billion before, and cut his EPS estimate to 16 cents from 20.

I’ll be back later today to cover Intel earnings live. See you then.

I’ve interviewed him a few times over the years, and grown to like him mainly because he’s a straight shooter, and tells you exactly what he’s thinking, even if he annoys his PR handlers by wandering off message a bit to get his point across. His most recent job was executive vice president of Intel’s Architecture Group.

When he suffered a stroke early last year and went on medical leave to recover, I naturally thought he might be out of contention. Handicapping the CEO succession question is one of the perennial and more cynical subjects occupying the minds of reporters who cover Intel. People who have strokes often recover physically but struggle with speech the rest of their lives, and being CEO of Intel requires a great deal of public speaking. I hoped my assumptions were wrong.

On a visit to Intel late last year, over lunch I asked around informally about Maloney. Naturally the folks there were careful to guard his privacy, but I came away with one key clue: Sean is rowing again. I didn’t know Sean so well as to be aware of his passion for rowing, but once I knew the backstory, I made note of it for later. It seemed pretty important.

Yesterday Intel named Maloney to a new position, chairman of Intel China. The creation of such a position says a lot about Intel’s belief in that country as an overwhelmingly important market not only for PCs and servers but for the smartphones and mobile devices for which Intel badly wants to sell chips. It also says a lot about how far Maloney has come back.

Yet I didn’t see any evidence in yesterday’s coverage that anyone had interviewed Maloney. Intel spokesman Chuck Mulloy described him to The Wall Street Journal’s Don Clark as “mentally and physically back to normal and doing very well.” I wanted to hear it from Maloney himself.

Remembering the tip about rowing, I thought there might be some gossip or anecdotes about him on the water, or evidence that he’s been competing in rowing events. What I found was the video below, shot in February of this year. In it, Maloney talks about how a doctor said he’d never row again. Determined to prove him wrong, and at that point unable to speak well enough to argue the point, he got someone to take him down to the docks and just started rowing, in circles at first because he had no use of his right arm. It was a start, but what a start. Maloney went on to compete in October in the Head of the Charles Regatta, a major rowing event in Boston. (You can see his finish here.) He didn’t win the race, but he sure won that argument with the doctor.

So if you were looking for any evidence of how well Maloney is doing since his stroke, look no further than this video where he speaks for himself. It’s pretty inspiring.

As usual, the idea behind the teardown is not only to figure out who Nintendo’s component suppliers are and what parts are being used, but to estimate how much all the components cost to help guess how much of a profit margin Nintendo is making on each unit. And it looks like a decent margin. ISuppli says the cost of all the parts in the device itself plus what’s in the box amount to $103.25 for a device that’s selling at retail for $249. The cost works out to an increase of about $25 over the Nintendo DSi, the most recent Nintendo handheld, released in 2009, which cost about $78, when iSuppli tore it apart that year.

While most of the components come from Japan, it’s not entirely clear if the supply of any of the parts used come from areas affected by the earthquake and tsunami, says Andrew Rassweiler, an iSuppli analyst who supervised the teardown. “Many of these component should have a greater risk exposure to supply chain problems, though we don’t know about any specific disruptions at this point,” he said.

The most expensive component, as is often the case with consumer electronics, is the displays. The 3DS uses two Sharp displays that cost a combined $33.80. The headliner is the top screen 3D. It’s a 3.5-inch 800-by-240 pixel display that uses an LCD-based parallax barrier panel sandwiched to the back of the color LCD which alternates between the left and right images at a high rate of speed to produce the 3D effect. “It looks like a conventional LCD from the outside, but when you open the display you see that on one side of the glass is essentially the conventional color element, and on the other side of the glass is a monochrome element,” Rassweiler told me. “It’s a clever bit of display engineering.”

The handheld’s main chip is an applications processor. It’s a custom ARM-based chip manufactured by Sharp, that at a cost of $10.02 is only slightly more expensive than the chip in the previous Nintendo DSi. However, Nintendo has quadrupled the amount of flash memory in the 3DS versus the DSi to 16 gigabytes, and Samsung, the world’s largest manufacturer of flash, supplied it. Fujitsu supplied another type of memory known as fast-cycle RAM. Rassweiler says for this particular type of memory, Nintendo has used a type of chip that’s only made by Fujitsu, which is odd because FCRAM is widely available, and its unusual for consumer electronics manufacturers to “single source”–that is, rely upon a single supplier for an important component. The combined cost of memory on the 3DS worked out to $8.36, more than twice the cost of the memory found on the DSi.

Three chips related to the user interface cost a combined $6.81: an accelerometer from STMicroelectroncis, a gyroscope from Invensense, and an audio chip from Texas Instruments. Atheros, the Wi-Fi chipmaker that’s being acquired by Qualcomm, supplied a $5 Wi-Fi chip. TI and NEC supplied power management chips that cost $3.63. The 3DS contains three cameras, and though it’s not clear who supplied them–camera suppliers have gone to great lengths to hide their identities in recent years–iSuppli reckons their combined cost at $4.70.

Since I often get asked this question, let me say that iSuppli’s analysis focuses strictly on the materials used and doesn’t account for the cost to develop software or to license any patents. Nor does it account for the cost of any shipping or distribution or marketing. It’s just the raw cost of the hardware.

Qualcomm, for instance, used the Mobile World Congress to describe what may be a high water mark for gigahertz ratings among chips based on the widely used designs from ARM Holdings. But power consumption of future chips–including one discussed in a sneak preview by Intel–may be at least as important in the battle to supply future smartphones and tablet PCs.

Clock speed, measured in gigahertz–billions of cycles per second–is a bit like revolutions per minute, or RPM, in a car; it shows the speed of internal timing pulses in a chip rather than how much computing work gets done.

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First, the departure has jarred the confidence of investors who have pushed the value AMD stock up by more than 57 percent since September. Shares are down by more than 8 percent today.

Second there’s the problem of hiring a replacement for Meyer, who had been on the job only a little more than two years. I’ve been talking to people both inside AMD and longtime AMD watchers outside of the company and practically all of them have been having trouble coming up with a short list of potential candidates.

For one thing, I’m hearing from people familiar with the thinking of those involved in the hiring process that there’s a strong preference for an external candidate.

Among the criteria are someone with a proven record of running large technology companies, and one with some charisma who can get the marketplace excited about AMD again. While Meyer deserves credit for getting AMD back on relatively stable footing following the divestiture of its manufacturing operations–now GlobalFoundries — and his predecessor, Hector Ruiz, gets the credit for doing the heavy lifting of getting the complicated transaction related to that split, neither could be described as charismatic.

Historically, AMD knows what it’s like to have a charismatic CEO. Jerry Sanders who founded the company and ran it from 1969 until 2002, possessed plenty of it, and some of the more colorful anecdotes about Silicon Valley history concern him. The board wants someone who’s both capable and cool at the same time. Someone who can represent the company well to the outside world, bring an air of stability and competence and elaborate a vision that will move the company forward. That’s a tall order for a company like AMD, whose fundamental strategic problem can be summed up in a single phrase: Competing with Intel is brutal, no matter what you do.

The list of potential candidates isn’t obvious by any stretch. Still in my conversations today, a few names came up, some more idealistic than realistic. One internal candidate who will probably get courtesy consideration I’m told is Rick Bergman, senior vice president and general manager for AMD’s products group. He oversees both the graphics and microprocessor operations and came to AMD in 2006 as a senior executive at ATI, the graphics chip company that AMD acquired for $5.4 billion in 2006. His résumé includes time at Texas Instruments and IBM. He’s described by those who know him as hard-driven and competitive and a capable well-respected manager, though at the end of the day not likely to get the nod.

Another name that has come up is that of Pat Gelsinger, not necessarily because he’d be a candidate for the job, but more as an example of the kind of person AMD would like to hire. Gelsinger was Intel’s CTO from 2001 to 2005 and was senior corporate vice president for the Digital Enterprise Group until 2009, when he suddenly jumped to EMC as president, COO and apparent successor-in-waiting to CEO Joe Tucci.

Finally there’s Michael Capellas, whose name invariably comes up whenever a significant CEO slot comes open. He’s currently running Acadia, a private cloud computing joint venture between Cisco Systems and EMC with investments from Intel and VMWare. Capellas was the CEO of Compaq Computer when Hewlett-Packard acquired it in 2002, then went on to helm MCI and engineered its turnaround and sale to Verizon in 2006. His next stop was the payment giant First Data after it was taken private in a leveraged buyout by the private equity fund Kohlberg Kravis Roberts. He was considered for the CEO job at Hewlett-Packard, before Léo Apotheker was named, but was said not to be interested. He’s got the tech and management chops and has a proven record for getting troubled companies on solid footing. It’s unclear if he would be interested.

Whoever they pick, they may want to do it quickly. AMD has a tough road ahead of it, and uncertainty at the top certainly isn’t going to help.

Intel will pay Nvidia in five annual installments beginning Jan. 18, and in return will receive full access to Nvidia’s full range of patents, which had been part of the dispute. Nvidia will retain use of certain Intel patents that had also been in dispute.

“This agreement ends the legal dispute between the companies, preserves patent peace and provides protections that allow for continued freedom in product design,” said Doug Melamed, Intel senior vice president and general counsel, in a statement.

The fight had been over the terms of a 2004 agreement under which Intel granted Nvidia access to some of Intel’s technology for use in its chipsets, the chips that sit between the microprocessor and the graphics chip like connecting tissue. The cross-licensing agreement allowed Nvidia to make chipsets that were compatible with Intel microprocessors.

The trouble began in 2008, when Intel released its Nehalem generation of PC chips. The two companies disagreed over whether the 2004 agreement allowed Nvidia to make chipsets that would work with Nehalem chips and generations of chips that would follow. They filed dueling lawsuits in the Delaware Court of Chancery in early 2009. Intel asked a judge to rule that the agreement didn’t cover Nehalem and future generations of chips, while Nvidia sued for breach of contract, and sought to terminate Intel’s right to use some Nvidia patents that had been part of the agreement.

As I reported last December for Businessweek, the dispute caught the attention of the Federal Trade Commission, which added it to an antitrust complaint that was later settled.

The larger backdrop here is the growing threat Nvidia’s chips, known as graphics processing units (or GPUs), pose to Intel’s chips in servers and supercomputers. Engineers often refer to this as the CPU-GPU debate, where Intel’s chips are referred to as CPUs.

GPUs are common in most PCs, and usually handle the processing required to make games look good and run smoothly, working in concert with the CPU.

Since GPU chips do certain kind of math known as a floating point operation a lot faster than a CPU, they’re increasingly being used in systems that Intel has traditionally considered its primary domain: Heavy-duty financial modeling (oil and gas exploration is a good example). They’re also making a huge splash in the rarefied world of supercomputing: Nvidia GPU chips are being used in three of the top five systems on the elite Top 500 list of the world’s most powerful supercomputers. And as we all saw at CES last week, they’re starting to show up in tablet and other PC-like devices running Windows with the full support of Microsoft.

The dispute between them, which effectively put Nvidia out of the business of making chipsets that were compatible with Intel chips, certainly hurt. Though for Intel’s part, losing the Nvidia patents in question could have conceivably hurt its new Sandy Bridge chips, which combine a GPU and a CPU into one single component. Intel formally launched Sandy Bridge at CES last week.

And as recently as last week, sources familiar with the matter were saying that a new trial date was scheduled for February. Nvidia CEO Jen-Hsun Huang was careful not to directly answer a question about that from Mobilized’s Ina Fried in an interview at our D@CES event last week:

Intel and Nvidia had mysteriously withdrawn the case from the court’s calendar days before opening arguments were set to get underway on Dec. 6. Bloomberg News then reported that settlement talks were underway, though by mid-December there were signs that those talks had stalled, and sources said that a new trial date had been agreed to. That was until today, when sources at both companies started to drop hints that news was imminent.

]]> http://allthingsd.com/20110110/intel-will-pay-nvidia-1-5-billion-to-maintain-patent-peace/feed/ 0 http://allthingsd.com/20101215/intel-gains-chip-share-hard-drive-sales-surge-isuppli-says/ http://allthingsd.com/20101215/intel-gains-chip-share-hard-drive-sales-surge-isuppli-says/#comments Wed, 15 Dec 2010 17:35:46 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=602 The market for microprocessors has reached what market research firm iSuppli is describing as a stalemate in its quarterly survey of market share statistics. Shifts in share are being measured in tenths of a percent between Intel, Advanced Micro Devices and assorted others. Intel gained slightly in the third quarter from the same period last year to 80.1 percent, while Advanced Micro Devices lost a little less than a full percentage point with 11.3 percent. Good news for all concerned: Revenues are up 23 percent overall.

Note that iSuppli counts microprocessors differently than some of the other research firms. Its “other” category includes not only PC chip also-rans like Via Technologies, but also general purpose RISC chips like IBM’s Power chips that go into servers.

There’s better news, however, for the beaten-down hard-drive industry. After seeing shipments decline through the first half of the year, fourth-quarter shipments are up, as are revenues, iSuppli says. It’s clearly the result of the holiday-season demand, but welcome news, especially in light of all the worries that tablets–like Apple’s iPad–which use flash memory for storage, would whack hard-drive sales. (Though, as Digital Daily’s John Paczkowski noted this morning, the hard-drive guys still have lots to fear from tablets.)

Western Digital is holding on to its top spot as the world’s leading supplier, edging out Seagate, which has seen its share of troubles lately.

Seagate failed to come to terms with TPG Capital last month on a plan that would have taken the company private, and also spurned a takeover offer from Western Digital. Last week it moved to refinance more than $2 billion in debt, more than $500 million of which is due before the end of the year, with a combination of bonds and bank loans.

]]> http://allthingsd.com/20101215/intel-gains-chip-share-hard-drive-sales-surge-isuppli-says/feed/ 0 http://allthingsd.com/20101123/intel-offers-silicon-with-new-packages-deals/ http://allthingsd.com/20101123/intel-offers-silicon-with-new-packages-deals/#comments Tue, 23 Nov 2010 08:00:02 +0000 Don Clark http://voices.allthingsd.com/?p=33006 Most personal computer makers buy chips the way Intel wants to offer them. But the technology giant has learned it needs to be more flexible in other markets, as an unusual arrangement with another Silicon Valley company shows.

Intel on Monday detailed plans to begin offering a version of its Atom microprocessor–best known as the calculating engine inside millions of low-end portables called netbooks–that the company is packaging along with a different sort of a chip supplied by Altera. The combination is designed for what industry executives call “embedded” applications, a loose term that refers to office equipment, cars, medical devices, industrial machines and just about anything that is not a computer.

Companies designing such products are a key focus for Intel as it tries to diversify beyond PCs. They often need special circuitry to handle chores that aren’t easily carried out by general-purpose microprocessors, like Atom.

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]]> http://allthingsd.com/20101123/intel-offers-silicon-with-new-packages-deals/feed/ 0 http://allthingsd.com/20100209/intels-itanium-again-marches-to-different-drummer/ http://allthingsd.com/20100209/intels-itanium-again-marches-to-different-drummer/#comments Tue, 09 Feb 2010 12:55:45 +0000 Don Clark http://voices.allthingsd.com/?p=21126 Intel (INTC) loves to talk about Moore’s Law, its co-founder’s famed maxim about how rapidly miniaturization improves semiconductors. The company also prides itself on setting the pace, underscoring the strategy recently by deploying its most tiny circuitry in microprocessors for mainstream PCs.

Then there’s Itanium. The high-end microprocessor line, originally developed with help from Hewlett-Packard (HPQ), uses an entirely different technology than the x86 chips that Intel popularized in desktop and laptop PCs and low-end servers. Itanium models have tended to lag the production processes used to manufacture other Intel chips, but the disparity seems particularly stark with the latest version.

Tukwila, the code name for a long-delayed Itanium model introduced Monday, is being built using manufacturing technology that creates lines of circuitry with features rated at 65 nanometers, or billionths of meter. That’s two technology generations behind the 32-nanometer process used in Intel’s latest x86 chips; the company earlier this year announced a $7 billion plan to accelerate the conversion of its U.S. factories to 32-nanometer technology.

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]]> http://allthingsd.com/20100209/intels-itanium-again-marches-to-different-drummer/feed/ 0 http://allthingsd.com/20100114/intel-beats-bust%e2%80%8e/ http://allthingsd.com/20100114/intel-beats-bust%e2%80%8e/#comments Thu, 14 Jan 2010 21:18:23 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=32735 When Intel last reported earnings, it surpassed Wall Street’s expectations and issued a strong outlook for the rest of 2009. So investors had high hopes for its latest quarterly report. And Intel (INTC) appears to have met them.

Reporting fourth-quarter earnings after market close Thursday, the company posted a profit of $2.3 billion, or 40 cents a share, compared with a profit of $234 million, or four cents a share, for the year-earlier period. Revenue was $10.6 billion, up from $8.2 billion for the same quarter in the year-earlier period.

A strong showing for Intel and one that blows the doors off consensus estimates that called for 30 cents a share in profit on revenue of $10.17 billion. And don’t forget that these results include a European Commission fine of $1.45 billion and a $1.25 billion settlement agreement with AMD (AMD).

“Curb your enthusiasm [for Intel]” Bank of America (BAC) analyst Sumit Dhanda told clients in a research note issued Wednesday that warned of a revenue miss from the chip behemoth. Curb your enthusiasm? Not likely after today’s results.

“Intel’s strong 2009 results reflect our investment in industry-leading manufacturing and product innovation,” Intel CEO Paul Otellini said in an earnings release. “This strategy has enabled us to generate unprecedented operating efficiencies while growing our traditional businesses and creating exciting new market opportunities, even in difficult economic times.”

Taking a wide view, Otellini adds, “Our ability to weather this business cycle demonstrates that microprocessors are indispensable in our modern world. Looking forward, we plan to deliver the benefits of computing to an expanding set of products, markets and customers.”

Looking ahead to the first quarter of 2010, Intel expects revenue of $9.7 billion, plus or minus $400 million. Evidently, the PC market is back.

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