Memory, the Rambus way
If you won’t go along quietly, this little company will RAM its
memory down your throat
By Tam Harbert, illustration by Michael WitteThey tried asking nicely, at first. Gently cajoling. Politely persuading.
Even enthusiastically investing. Rambus, Inc., along with Intel Corp.,
which made a high-stakes bet on Rambus technology, tried just about
every way possible to get DRAM makers to produce its memory
technology.
Now, Mountain View, CA-based Rambus has taken the gloves off. If it can't convince chip
companies to make its memory and the corresponding chipsets, then it's going to make them pay for
the memory they are making. That's the message that reverberated throughout the industry in June
after Rambus announced that two DRAM vendors had agreed to new patent license agreements
that included royalties on synchronous DRAM ( SDRAM ) double-data-rate SDRAM ( DDR
SDRAM ) and memory controller chips. The agreements stunned other DRAM vendors because
the patents appear to cover commonly used technology that some believe is included in the Joint
Electronic Device Engineering Council (JEDEC) standards for these parts.
The one-two punch came over the course of a week. First, Rambus announced that Toshiba Corp.,
Tokyo, which manufactures much of the Rambus memory used in Sony Corp.'s Playstation II game
console, had signed a new license agreement. It covered "patents for fundamental aspects of
high-speed memory interfaces invented by Rambus, which are currently being implemented in
SDRAM, DDR SDRAM ... memory and controllers which directly interface with these types of
memory." A week later, Rambus announced that Hitachi Ltd., Tokyo, had settled a patent lawsuit
Rambus had brought against it by agreeing to terms similar to the Toshiba deal. Then in late July,
Rambus struck another agreement with Oki Electric Industry Co. Ltd., Tokyo.
Although the Rambus memory interface remains its
top priority, “we are willing to license our IP for
other memory interface solutions as well,” said
Rambus CEO Geoff Tate in press releases.
The company pointedly noted that it will charge a
higher royalty rate for DDR SDRAM than for
Rambus, making it clear that its actions are at least
symbolicly aimed at increasing the cost of the DDR
SDRAM that is threatening to overtake the PC main
memory market Rambus covets. Industry observers estimate royalty rates for Rambus parts range
from 1% to 2%. “Since DDR is competing with Rambus [parts], we felt justified in charging a higher
rate,” says Avo Kanadjian, Rambus vice president of worldwide marketing.
Some say this is just a desperate attempt by a company that has failed to get its memory technology
adopted by the mainstream. Others think Rambus may indeed have the bite to back up its bark. In
any event, Rambus is getting increasingly aggressive in pushing its technology into the market. And
at least some in the industry intend to push back. Several major DRAM vendors were reportedly
planning to file an antitrust complaint against Rambus with the U.S. Federal Trade Commission.
However, as of August 3, no complaint had been filed.
A solution in search of a problem?
OEM and DRAM maker acceptance of Rambus technology has been lukewarm so far. Most
DRAM vendors hold Rambus licenses, but only two—Samsung Electronics Co. Ltd., Seoul,
Korea and Toshiba—are producing significant volumes of the memory, say analysts. (Hyundai
Electronics Industry Co. Ltd., Seoul, and Infineon Technologies AG, Munich, have also begun
manufacturing Rambus.) Claiming it had more than 80% marketshare of Rambus parts, an
enthusiastic Samsung announced in June that it had shipped its 10 millionth 128-megabit Rambus
part, since introducing the line last fall. It predicted that Rambus would represent more than 20% of
its DRAM production by the end of 2000, and exceed 40% by the end of 2001. As for Rambus
chipsets, the only provider is Intel.
On the other hand, most of the major DRAM vendors, including
the top three—Samsung, Hyundai, and Micron Technology
Inc., Boise, ID, which combined make up 60% of the
market—are ramping up DDR production. And DDR chipsets
are expected this year from several vendors, including Via
Technologies Inc., Acer Labs Inc. (ALI, a unit of Acer
Group) and Advanced Micro Devices Inc. Although it holds a
Rambus license, AMD of Sunnyvale, CA, plans to bring out a
DDR chipset in the second half of this year. The chip maker’s
customers overwhelmingly favor DDR because it is much lower
cost than Rambus, says Byran Longmire, a marketing manager
for the Athlon and Duron processors at AMD. “Should our
customers require that we develop a Rambus chipset, we will,” he
adds.
ALI of Taipei also is developing a DDR chipset.
Rambus is still too expensive for the value segment
of the PC market, says Nancy Hartsoch, ALI’s vice
president of marketing and sales and chief operating
officer. “Everyone thought Rambus would solve its
cost problems faster than it has,” she says. “We
think DDR carries us well into 2001.”
Despite its formerly staunch support of Rambus,
Intel has been forced to accept the fact that many
DRAM vendors and OEMs want DDR today. In late July, Intel announced that it would develop a
chipset to support 133-MHz SDRAM for the Pentium 4. It even said it was investigating building a
DDR chipset as well. In fact, Intel recently started sending representatives to the JEDEC DDR
standards meetings, according to Andrew Ross, principal engineer at Dense-Pac Microsystems
Inc., a chip-packaging company in Garden Grove, CA. “It was very telling that they were there,
trying to influence these standards,” he says.
“You are hearing a lot about DDR because DRAM manufacturers greatly detest Rambus,” says
Jim Handy, memory analyst at Dataquest Inc. in San Jose, CA. Rambus has a larger die size, a
lower yield and is more expensive to manufacture and test, “and for the luxury of all that, [DRAM
makers] get to pay a royalty” to Rambus, he quips.
Some claim that Rambus cannot overcome its cost limitations. “It all comes down to cost per bit,”
says Ross. “The system guys want the best memory at the lowest cost.” DDR is the natural
evolution of SDRAM, says Ross. In fact, both can be manufactured on the same die, he says. “That
means that there is no cost differential for DDR,” he notes. In addition, benchmarks show that DDR
outperforms Rambus in many applications, he claims.
The cost difference between DDR and Rambus is substantial. DDR can use much of the same
infrastructure as SDRAM parts, say DDR proponents. Indeed, DDR is simply an SDRAM that
carries data on both edges of the clock cycle rather than just one. This increases the speed while
retaining the inherent low-cost of SDRAM, they say.
Rambus parts cost anywhere from two to five times the cost of SDRAM, depending on who’s
talking. As of mid-July, a 128-megabyte Rambus module cost about $230, compared to about $150
and $125 for comparable DDR and SDRAM modules, respectively, says Farhad Tabrizi, vice
president of strategic marketing for Hyundai. Micron, on the other hand, will produce DDR at the
same price as SDRAM, says Jeff Mailloux, Micron’s director of DRAM marketing. As for Rambus,
he expects it to initially cost three to five times that, and doesn’t see the cost ever dropping to less
than a 50% premium over SDRAM. However, “market pricing does not always reflect our cost, as
we DRAM guys are painfully aware,” he adds.
Between a Rambus and a hard place
Intel initially backed Rambus because the DRAM industry was not moving quickly enough to
higher-speed memory, says Greg Mischou, senior analyst at investment bank UBS Warburg LLC,
San Francisco. Rather than move to 133-MHz SDRAM—the next speed up from the 100-MHz
SDRAM that had been the standard in previous PCs—Intel announced in 1998 that it would skip
133-MHz and go directly to Rambus. It provided a chipset for the Pentium 3 that only worked with
Rambus memory, and designed both its Pentium 4 processor and the Timna to work only with
600-MHz to 800-MHz Rambus parts.
But it became increasingly apparent that OEMs wanted to continue to use SDRAM, including the
higher speed 133-MHz version. Although DRAM makers had initially asked Intel to skip 133 MHz,
“the reality was that as they went and shrunk their parts, they found that the extra speed came for
free,” and typical packaging configurations changed which made it easier to use 133-MHz SDRAM,
says Pete MacWilliams, an Intel fellow and director of platform architecture initiatives in the desktop
platforms group of Intel Architecture Labs. By betting heavily on Rambus, and foregoing a PC-133
chipset, Intel lost significant market share in chipsets this year, says Bob Merritt, director of
emerging markets at market researcher Semico Research Corp., Phoenix. Last fall, Intel changed its
mind about 133 MHz and announced that it would support 133-MHz SDRAM for the Pentium 3. It
still insisted as recently as February, however, that the Pentium 4 would use only Rambus.
Meanwhile, Intel introduced a part called a memory translator hub (MTH), which was designed to
allow OEMs to use either Rambus memory or SDRAM. But the MTH part has been plagued with
bugs. The net result is that it only works with Rambus memory, says Steve Cullen, director of
semiconductor research and principal analyst, Cahners In-Stat Group.
To fulfill its promise to support 133-MHz, Intel introduced in June the 815 chipset. This introduction
takes the pressure off of OEMs to use Rambus, according to Cullen. “So it will probably have the
effect of slowing the adoption of Rambus a little bit.”
Intel’s MacWilliams disagrees. “The adoption of
Rambus is strictly pricing and availability
dependent,” he says. “We want to give our
customers the choice [of SDRAM] during this
transition.”
MacWilliams also maintains that, although Intel
designed the Timna to use Rambus memory, “from
day one we [also] designed it to work with the
memory translator hub because we knew some
people would want different price-performance
points,” he says. Now that Timna and the memory
translator hub have been delayed, he won’t say
whether Timna will be redesigned to include an
integrated SDRAM interface.
And now Intel has opened the door for the Pentium
4 to use memory other than Rambus as well. Not
only is it going to build SDRAM chipsets, but it also
seems less likely to try to prevent other companies, such as Via Technologies, Taipei, Taiwan, from
making such chipsets as well. “The Pentium 4, with the appropriate chipset, can use any memory
technology you want,” acknowledges MacWilliams.
Dangerous backtracking?
In fact, MacWilliams says that Intel supports
DDR and SDRAM memory for servers, and
that the company’s current strategy is to
support Rambus and SDRAM for PCs “and let
it play out in the market—we obviously aren’t
in a position that we can control the transition
completely.”
Intel’s latest backtracking has some in the
industry wondering whether it’s violating its
1997 contract with Rambus. Under that
contract, Intel is prohibited from
communicating “to any of the current top 10
DRAM manufacturers that Intel has plans to
support, as the primary DRAM for PC main
memory applications for the years 2000, 2001
and 2002, any new interface other than the
Rambus-D Interface Technology.”
The key here may be whether DDR can be considered a “new interface.”
Still, Intel has invested a lot of time, energy and money in Rambus, and will probably continue to try
to support it, while trying to cover its bets with DDR. In fact, Intel has invested in several DRAM
companies in an effort to promote Rambus technology. In 1998, it invested $500 million in Micron
Technology. In January 1999, it invested $100 million in Samsung. Most recently, in February it
invested $250 million in Infineon.
That kind of backing has led some market research firms, including Dataquest and Cahners In-Stat
Group, to maintain that Rambus will eventually win over the market. While Rambus still makes up
less than 10% of total megabytes in the DRAM market this year, Dataquest predicts that figure to
rise to more than 50% by 2002 while DDR attains only 17%. “The reason we think Rambus will win
has nothing to do with its technical merit and everything to do with Intel’s clout in the marketplace,”
says Handy.
But whether Intel’s market clout, combined with
Rambus’ big legal stick, is enough to secure Rambus
a place in the PC main memory market is still a
subject of great debate. Semico, for example, thinks
Rambus will remain a niche product that is used
primarily in game consoles, says Sherry Garber,
Semico’s senior vice president. Instead, the less
expensive DDR will migrate from the server level
down through PCs and notebooks, she says. The day
of final reckoning is coming, she predicts. “If
Rambus doesn’t take off in the 2000 Christmas
season, then we don’t see it taking off at all,” she
says.
But what about Rambus’ patent position? Industry experts have mixed interpretations of that as well.
Semico analysts don’t place too much importance on the fact that Rambus has wrung license fees
from Hitachi and Toshiba. Toshiba had previously announced that it was de-emphasizing memory
and Hitachi plans to merge its memory operations with NEC Corp., Tokyo, this year. “So what
Rambus has achieved so far is an agreement with a company that’s de-emphasizing the business
and one that’s out of the business,” says Semico’s Merritt. “We don’t think this is indicative of
industry acceptance of Rambus IP claims.”
Moreover, once Hitachi merges its memory with NEC, it will no longer have to pay royalties on its
memory chips. That will require a new license agreement with Hitachi, Rambus’ Kanadjian
confirms. And Oki, which is not even among the top 10 DRAM makers, concentrates more on
application-specific memory than on commodity memory.
DRAM industry pushes back
While Cullen admits that both Hitachi and Toshiba are second-tier memory makers (ranking sixth
and seventh, respectively), he still believes that “if their technical people have looked at these patents
and decided to settle, then that may mean that Rambus has something substantial.”
Indeed, Rambus’ Kanadjian claims to be puzzled by the reports of a possible antitrust filing against
the company. He notes that Hitachi tried to get five other DRAM makers to join it during its legal
fight with Rambus. “Why, if they had such a thing in mind, did they not join Hitachi when they had
the opportunity?” he asks.
Others believe that both the Toshiba and the Hitachi agreements were sweetheart deals, giving both
companies especially low licensing fees in return for being the first to sign up. In doing these deals,
most analysts agree, Rambus’ strategy is probably to pick off the minor DRAM players first, then
try to create a domino effect that will create pressure on the big DRAM makers to acquiesce.
Also in Rambus’ sights are the chipset manufacturers supporting DDR memory, which could be
accused of infringing on Rambus memory interface patents. Chief among them is Via Technologies.
Rambus could try to file a petition with the International Trade Commission to bar imports of any
equipment that uses Via chipsets that allegedly infringe on Rambus patents. Rambus has a history
here. When it accused Hitachi of infringing on its intellectual property, it filed a petition with the ITC
to not only bar the Hitachi memory from import to the United States, but also to bar the Sega
Dreamcast game console that uses the Hitachi memory.
When Rambus did that, “it took [the issue] out of the realm of a family feud among DRAM
companies,” and threatened the shipment of OEM systems for the first time, says Semico’s Merritt.
No one knows whether Rambus will try the same strategy with chipsets. “It’s an unknown risk
that’s going to have to be quantified,” says Merritt. And it’s one of the reasons that DRAM vendors
may adamantly push back on Rambus’ patent claims.
Cullen speculates that Rambus wouldn’t go so far as to try to bar imports by OEMs using unlicensed
memory. “They don’t want to piss off potential customers,” he says. Rambus is more likely to go
after Taiwanese motherboard manufacturers, says Cullen.
Via Technologies plans to fight Rambus aggressively, says Richard Brown, Via’s director of
marketing. “Essentially, what Rambus is trying to do is levy an unjustified tax on every memory
module purchased by consumers,” he says. “Their actions would not only increase the overall prices
of PCs, but also stifle innovation in the industry.” He vows that Rambus’ actions will not slow Via’s
plan to introduce DDR chipsets into the market.
At least some analysts believe that Rambus has a strong patent position. The lawsuit against Hitachi
involved four patents and included more than 130 claims, says Mischou. Even if the DRAM industry
can invalidate some of these claims, “if at the end of the day one claim on one patent stands, then
it’s a valid patent,” says Mischou.
The royalties that Rambus is seeking are not unusual, he says, noting that chip behemoth Texas
Instruments Inc., Dallas, generates $125 million a quarter from intellectual property licensing.
Mischou also cautions that DDR’s potential has yet to be tested in the real market. DDR parts
aren’t expected to ship until Q4 of this year, he notes, and as these high-speed parts are ramped into
production “the laws of physics are going to come to bear on DDR as well.” While Rambus seems
more expensive today, “I think people who are concentrating on Rambus...will probably be able to
get that cost premium down, as volumes go up.”
This fight over patents is nothing new in the memory industry, notes Desi Rhoden, president and
CEO of Advanced Memory International Inc., San Jose, CA, a non-profit group that is working
to support DDR. Every few years, some company tries to enforce some type of broad patent in
order to collect royalties on DRAMs, he says. A few years ago, for example, Wang Laboratories
Inc., Billerica, MA, claimed it held a patent on memory modules. It extracted royalty payments from
several DRAM vendors before one of them challenged the patent in court and got it overturned. The
U.S. Patent and Trademark Office is so overloaded, says Rhoden, that it “will grant a patent on
virtually anything.”
It remains to be seen whether the Rambus patents will hold up to challenges. But few in the industry
doubt that this issue is going to end up in court. “We think there needs to be some judicial ruling,”
says Semico’s Merritt.
If Rambus patents are upheld, it would be the height of irony. “If their patent situation is as good as
they say it is, then Rambus stands to make more money on DDR than on Rambus,” notes Cullen.
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