Intel’s (INTC) New Chip: When Is Enough Enough?

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Intel’s (INTC) new Intel Core i7 chip is a miracle of modern science. It is much faster than all of the company’s older multi-core chips. And it uses less energy than some but not all of them. Over time, in volume, it will probably cost less than past products.

The continuing advance of chip capacity does raise the issue of when PC and server users come to the point where the additional computing power does not make much difference.

According to The Wall Street Journal, "Performance gains were particularly impressive for tasks such as video encoding and rendering three-dimensional images." Those features are not ones that the great majority of PC and server customers need.

While Intel is not putting itself out of business by making better and faster products, it probably is moving toward a future when its best chips are so good that the market for them is modest. Part of the solution to that is that Intel is making small and cheap processors for "netbooks", a way to build a new channel for sales. But the revenue and margins on these are not spectacular.

Intel’s future may have more innovation, but it is also likely to have slower growth and worse net income. the firm created a world that makes those things inevitable.

Douglas A. McIntyre