Hi Barry, Article...Intel Pushes The Envelope With A 3-D Graphics Chip...
Date: 1/26/98
Author: Reinhardt Krause
When Intel Corp. rolls out its high-end graphics chip, its manufacturing strategy will take a new twist.
Santa Clara, Calif.-based Intel plans to make the chip in the advanced factories usually reserved for its bread- and-butter products -microprocessors.
Intel will maintain plenty of room for its high-profit-margin microprocessors -the brains of a computer. But it's also making room for the new line, even though graphics chips -which create dazzling computer effects - have much lower profit margins.
To better compete on performance and price in this new market, Intel must ante up its best manufacturing lines, says Jon Peddie, president of Jon Peddie Associates Inc. in Tiburon, Calif.
''They have no choice,'' Peddie said.
Intel expects to unveil the graphics chip in February, after a several-month delay.
The product will face rivals that also have access to leading-edge factories that can produce high quality at lower costs, analysts say.
That's one reason those in the industry have speculated on Intel's manufacturing plans. Intel developed the new chip with Real 3D Inc., spun off as an independent company in January by Bethesda, Md.-based Lockheed Martin Corp.
Intel will make the 3-D graphics chip using ''0.35-micron process technology and below,'' said Gerald Stanley, Real 3D's president. The industry's cutting edge today is 0.35 and 0.25 micron. Intel declined comment.
At the heart of chip manufacturing is process technology. This determines the thickness of electrical pathways in chips. The pathways are measured in microns. One micron is 1/100 the width of a human hair.
Squeezing electronic circuitry boosts the speed of chips and reduces their size. It also yields more chips per wafer. Thin silicon wafers are sliced into hundreds of thumbnail-sized chips.
Intel's most advanced factories are churning out processors on 0.25-micron manufacturing lines. Analysts expect that process technology to be allotted soon for the new graphics chip.
''I expect them to push to 0.25 micron as soon as they can afford to,'' said Peter Glaskowsky, an analyst at Micro Design Resources Inc. in Sunnyvale, Calif.
Seldom if ever has Intel used its top manufacturing for nonprocessors. In other markets, Intel has used older factories. Two examples are logic chipsets and flash memory, analysts say. Flash memory chips retain data even when power is cut off. Logic chipsets provide electrical signals between microprocessors and computer peripherals such as hard-disk drives.
The older factories didn't slow Intel in either logic chipsets or flash memory. It's now the top supplier of chips in both markets, says market researcher Dataquest Inc. of San Jose, Calif.
The graphics competition looks tougher, though. Intel will need more than older manufacturing lines, analysts say.
''That model doesn't work anymore for graphics chips,'' said Glaskowsky.
In this market, Intel will take on S3 Inc., ATI Technologies Inc., Nvidia Corp. , Rendition Inc. , 3Dlabs Inc. and others.
Intel's graphics rivals design and market chips. But most don't own manufacturing plants, called fabs. They contract out production to outside firms, mostly in Asia.
Most fabless chip firms, however, have access to more advanced manufacturing lines than they did a few years ago. Overcapacity in the chip industry has opened the door, analysts say.
So, many graphics chip suppliers already are selling devices produced at 0.35-micron factories. This year, most will move to 0.25-micron production.
At first, Intel might lag some rivals in process technology for graphics chips, says Dean McCarron, industry analyst at Mercury Research Inc. in Scottsdale, Ariz. ''At the end of '98, 0.35 micron will be old,'' he said.
Intel's rivals say they'll compete by quickly designing new products. Santa Clara, Calif.- based S3 expects to roll out two new high-end graphics chips in '98.
''We don't believe the advantage is with (manufacturing) size and scale,'' said Ron Yara, S3's senior vice president of strategic marketing. ''Not in this market, where product life cycles are nine months.''
Even before Intel's entry, S3 is struggling. The company this month says it will cut its work force by 15%, about 100 employees.
Other graphics chipmakers also are coping with lower profit margins because of oversupply.
How much market share Intel will grab remains to be seen.
''In the market it fits into - the desktop space of $1,500 to $3,000 personal computers -(the graphics chip) will have superior performance at a very competitive price,'' said Real 3D's Stanley.
Intel bought a 20% stake in Real 3D this month. Terms weren't disclosed. The 180-employee company is valued at about $200 million, Real 3D says.
Intel also is buying Chips and Technologies Inc. for $420 million. The San Jose- based firm makes graphics chips for notebook computers.
The Federal Trade Commission recently OK'd the acquisition. Intel also owns a small stake in 3Dlabs.
More powerful graphics chips are expected to boost demand for personal computers. The chips let PCs mimic the fast-paced graphics and visual effects found in arcade games.
But 3-D chips are underutilized because most PC software depicts scenery in two dimensions, says Peddie.
''Of 40 million graphics chips sold in '97, only 3 million to 5 million were seriously used for 3-D applications,'' Peddie said. ''The rest were doing 2-D work. But that will change at the end of '98.''
Better PC graphics also will boost electronic commerce on the Internet, says Ron Smith, general manager of Intel's computing enhancement group.
''The visual computing experience is a key part of the PC platform going forward,'' he said. ''We want to make sure it moves along fast enough.''
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Michael |
