Bringin’ Sexy Back
“Bringin’ Sexy Back” – a cartoon that illustrates how hardware is now becoming in the vogue again among traditionally software technology companies.
Silicon Valley fell out of love with hardware due to the high upfront development cost and low margins.
Famously Marc Andreessen, founder of VC fund a16z, said “it’s called hardware for a reason — it is hard.”
For example, the average gross margin for system and application software is 72%, while for consumer electronics hardware it is 36%.
The primary reasons for this appear to be around optimizing performance in the face of AI advancements and having more control over the full technology stack, which has the benefit of better managing price.
For example, by designing custom hardware, OpenAI can ensure that its AI models run more efficiently, aligning hardware capabilities closely with software requirements (e.g. TinyML models for edge-based computing).
In the words of Arm’s CEO, Rene Haas, “[AI] models and their capabilities are advancing very fast, which is advancing how you manage the balance between what runs locally, what runs in the cloud… It’s moving at an incredible pace.”
