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Semiconductor industry

The End of the 18-Month Cycle of Planned Obsolescence?

Strategic Insights

— 1 min read

Microsoft and Intel's dominance of the computing industry has been fueled by a cycle of planned obsolescence, where new technology was released every 18 months to keep users buying new computers and software. However, with Intel's recent announcement of a "thermal wall" and Microsoft's delay of the Longhorn operating system, this cycle may be coming to an end. The industry's reliance on software upgrades, such as Microsoft Office and Windows Server 2003, has stabilized Microsoft's stock, but the company's market share has not grown in five years. Meanwhile, Intel has been forced to switch directions for its next-generation Pentium chip line due to heat and performance issues.

Key Takeaways:

  • Microsoft's stock has stagnated since 1998, despite 17 percent revenue growth in the most recent quarter.
  • The company's market share has not grown in five years, except to reflect population growth.
  • Intel's Pentium chip line has been delayed due to "thermal wall" issues, forcing the company to adopt dual processing and toggle its direction for the first time in almost 30 years.
  • The planned obsolescence cycle, fueled by Microsoft and Intel's dominance, may be coming to an end as current equipment is sufficient for most users' needs.
  • Microsoft has delayed the release of Windows Longhorn until 2006, a once-unthinkable five-year delay between XP and its successor.
  • Gates has announced the Longhorn project will not be ready to ship until 2006, marking a significant delay in the company's innovation cycle.

Statistics:

  • 60 percent of Windows users still run older versions of the operating system, such as Windows NT, Windows 98, or Windows ME.
  • Microsoft's market share has remained at over 90 percent for five years.
  • Intel's Pentium chip line has been delayed, forcing Intel to adopt dual processing.
  • Microsoft's cash reserves exceed $56 billion.
  • The company expects yearly revenue growth of at least 5 percent.
  • The industry has reached a point where current equipment is sufficient for most users' needs.

Sources:

  • Gates, Bill. CEO of Microsoft Corp.
  • Otellini, Paul. President of Intel Corp.
  • Moore, Gordon. Co-designer of the Intel 8088 chip and prophet of Moore's law.
  • Chicago Tribune. "Microsoft's Late Love Letter to Longhorn." 2004.
  • Knight Ridder/Tribune Information Services. Distributed by Knight Ridder/Tribune Information Services.

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