Paul and all,
IBD article re. Pentium II's packaging--"dressed" to kill.
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Processor Haute Couture:Pentium II Struts Runway
Date: 6/30/97
Author: Reinhardt Krause
Like a clothing designer, this spring Intel Corp. created atotally new look for its processors with the Pentium II. For Intel's rivals, the latest chip fashion is yet another competitive challenge.
A sleek cartridge, about the size of a microcassette recorder, houses Intel's new Pentium II and a speedy memory chip. Intel calls the design Slot 1. The cartridge design also sports a new high-speed, proprietary bus, which moves data between memory and the processor.
The new cartridge and bus help boost PC processing speeds and system performance, Intel says.
But Slot 1 is incompatible with earlier processor packaging. Also, older chips from Intel and its rivals plugged into motherboards the same way. Now Intel's Pentium II packaging poses a wardrobe dilemma for PC makers. If they plan to build machines with the Pentium II
and non-Intel processors, they must design and use two different motherboards, which boosts costs.
Long range, Intel processor rivals Advanced Micro Devices Inc. and Cyrix Corp. need to counter Intel's strategy, analysts say.
''As Slot 1 becomes mainstream, (AMD and Cyrix) are going to have to come up with an alternative method of competing at the high end,'' said Linley Gwennap, editor of the Microprocessor Report newsletter, based in Sebastopol, Calif.
''Eventually Slot 1 comes down to the low end,'' he added.
Both AMD and Cyrix struggled last year. Meantime, Intel's market share rose to roughly 85%. But Sunnyvale, Calif.-based AMD and Richardson, Texas-based Cyrix are now back in the hunt with new processors.
AMD is not panicking, says Atiq Raza, senior vice president and chief technical officer. He says the market for current Socket 7 motherboards, with the old-style processor packaging, will be strong through '98.
''By the time '98 closes, it's our expectation that Intel will ship as many as 60 million units of Pentium II, or Slot1-based solutions,'' Raza said. ''There will be close to 40 million units of Socket 7-based motherboards shipped. That's still substantial volume.''
Raza's estimates jibe well with Intel's statements. Intel says its processor shipment mix will be half Pentium IIs by mid-'98.
''I think there is plenty of opportunity for firms aiming at Socket 7 to take share - if they have reasonable prices and quantities,'' said Michael Gumport, a financial analyst at Lehman Brothers in New York. ''It's more up to AMD and Cyrix to perform.''
Still, by mid-'99 the pressure will be on AMD on Cyrix to cook up an answer to Pentium II's packaging.
''For them to remain competitive, they're going to have to depart from the Socket 7 architecture,'' said Richard Dracott, Intel's marketing director for the Pentium II.
How much support AMD and Cyrix can expect from PC makers is a big question. ''It's clever on Intel's part to do this,'' said Drew Peck, an analyst with Cowen & Co. in Boston. ''They can't stop (AMD and Cyrix) from cloning (their processor) functionality. But they can force them to get motherboard producers to support a separate
(board design).''
Peck thinks there's a chance that anti-Intel forces could rally around an alternative to the Slot 1 approach over the next 12 months.
Older Pentium and Pentium Pro systems are not upgradeable to the Pentium II because of the new cartridge. So Intel has left the processor upgrade market to its rivals.
Due to Intel's patents, which include electrical interfaces, most industry analysts say AMD can't legally copy the Slot 1 design. But Raza says AMD has options.
He says AMD could still create processor packaging that connects in a way that's compatible with the Pentium II cartridge. And Raza says AMD can improve the performance of current motherboards with its own new
bus design.
Intel is pushing ahead. It makes 15% to 20% of the motherboards used worldwide. And it says more than 50 firms in the Far East already are making Pentium II-based motherboards. Intel is the sole supplier of the Pentium II cartridge.
''(The cartridge) makes it easier for Intel to have better control over the box,'' said Will Strauss, president of market research firm Forward Concepts Inc. in Tempe, Ariz. Until the Pentium II, Intel was ''using conventional packaging that anyone could get from (Japan's) Kyocera Corp.''
Still, the new packaging adds a twist to how fast Intel can ramp up production of the Pentium II.
''When you move to a completely new scheme like this, there is always a possibility for start-up problems,'' says Gwennap at Microprocessor Report. ''They may have had some glitches, but I don't think any of it is insurmountable.''
Intel is building new facilities for assembling and testing the cartridges, says Intel's Dracott. ''We've made sure that we have adequate capacity in place to support an exceptionally strong ramp,'' he said.
Lehman's Gumport estimates that Intel will ship between 1.6 million and 2.5 million Pentium IIs in the third quarter. Other analysts think Intel could ship even more of the new chips.
At rival AMD, Raza says he thinks Intel will ship 10 million Pentium IIs in '97. ''Best case, 20 million,'' he said.
Intel told financial analysts in June that the new packaging could play a role in lowering gross margins, at first. But Intel thinks the cartridge approach will pay off in the long run.
The packaging is an efficient way to deliver a wide range of processors that scale in performance, Intel says.Cartridges will ship with flexible amounts of memory to target different markets. Intel also may put other chips into the cartridge in the future.
So far, the Pentium II cartridges are being built into business machines. In the fall, Intel will ship cartridges designed for servers. Pentium II-based consumer models will be available by year's end.
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Ibexx
PS: Please note that the quoted Lehman Brother's analyst, Michael Gumport, is a long-time Intel adversary. I had alluded to this point numerous times in my previous posts on this thread. |
