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Intel (NASDAQ:INTC) is being forced to reinvent itself in order to maintain its leading position in the semiconductor industry. Intel is the king of serial computing. A paradigm shift is taking place, however, and parallel computing is the new game in town. Parallel processing has to do with the practice of writing programming instructions that are divided among multiple processors. Parallel processing on a single chip across multiple cores is faster and uses less power than its legacy serial counterpart.

There is a David and Goliath struggle taking place today between the incumbent chip giant and upstart Nvidia (NASDAQ:NVDA), the leading maker of computer graphics cards. A graphics processing unit or GPU uses parallel processing. The expertise that Nvidia has developed designing the GPU has put it in the enviable position of now being able to challenge Intel's CPU domain. To be fair, Advanced Micro Devices' (NYSE:AMD) ATI unit also makes graphics cards. However, it does not have the deep pockets to produce premium graphics cards, which require heavy capital expenditures. It will fare no better in this battle with Intel than it has in the past. It continues to hemorrhage red ink, which, despite a respected brain trust, was its Achilles' heel in the past.

One of Intel's key longterm battles in preserving its kingdom involves capturing the nascent market for 3D film. Last summer, Intel delivered a huge blow to AMD when it formed a partnership with Dreamworks Animation SKG, the leading promoter of 3D movies. After a three-year contract with AMD ended, Dreamworks picked Intel to supply chips and 3D technology for its computer animation operation. The deal is expected to replace the studio's computing hardware, including 1,500 Hewlett-Packard servers and 1,000 workstations that use AMD microprocessors, with new HP systems that use Intel chips, according to a Wall Street Journal report. The alliance comes as Dreamworks looks for 3D animation to bolster dwindling theater attendance.

The partnership makes its debut March 27 with Monsters and Aliens. Intel and Dreamworks showed off the fruits of their labor with an expensive Super Bowl commercial promoting the 3D movie. InTru3D is the brand name Intel has given its 3D technology. According to Chief Executive Officer Jeffrey Katzenberg, Dreamworks plans to make all of its feature films from now on using InTru3D technology. Katzenberg is helping to promote Intel's future graphics chip, which it calls Larrabee. "We are well on our way to upgrading our software to really take advantage of Larrabee," said Katzenberg. "Larrabee raises the bar of what we can do not just by 2x or 3x but by 20x," he said. The Dreamworks CEO says that InTru3D is the third major innovation in film, with talkies and the transition from black-and-white to color being the first two.

When it is unfurled, Larrabee will compete directly with Nvidia and ATI and take Intel into unchartered technological waters. Larrabee will be a stand alone chip. Currently Intel uses low-end integrated graphics as part of a chipset. The new chip will be based on the ubquitous x86 architecture. Dreamworks used the Xeon processor to render Monsters. In the future, Nehalem chips will be used pending Larrabee's arrival, probably sometime in 2010. Monsters will be the first animated movie to be made in real 3D, instead of converting the film to 3D after it is finished.

Big Hollywood directors, including Steven Spielberg and James Cameron, are working on 3D projects. Following Dreamworks' lead, Disney's Pixar has announced that all future animation films, starting with Up, will be in 3D. Monsters was released earlier than planned in order not to compete with Cameron's much anticipated Avatar, a 3D movie that is scheduled to open in December.

Despite its size, Nvidia is proving to be a worthy opponent for Intel. It recently hired Bill Dally, one of Stanford University's top computer science professors, as its new chief scientist. The move will bolster Nvidia's shift from gaming to what it calls visual computing. Dally was hired not long after Nvidia CEO Jen-Huang announced that the company would increase research spending in 2009 as it continues to challenge its Silicon Valley rivals. Dally was chairman of Stanford's computer science department. He and his team are credited with developing the technology that is used in most large parallel computers today. "I am thrilled to welcome Bill to Nvidia at such a pivotal time for our company," said Huang. "His pioneering work in stream processors at Stanford greatly influenced the work we are doing at Nvidia today. As one of the world's founding visionaries in parallel computing, he shares our passion for the GPU's evolution into a general purpose parallel processor and how it is increasingly becoming the soul of the new PC. His reputation as an innovator in our industry is unrivaled."

Disclosure: Long NVDA at time of writing.

Source: Intel's Battle with NVIDIA Takes Shape