Intel Isn't Yet On Inside In Small-Device Markets
Date: 8/17/98
Author: Matt Krantz
It's a safe bet that wherever Microsoft Corp.'s Windows lurks, an Intel Corp. processor isn't far
behind.
There's one glaring exception to that rule, though, in hand-held personal computers. Many
hand-held PCs, used mostly to track phone numbers, addresses and other simple items, run a
stripped-down version of Windows. But there's no ''Intel Inside'' those machines, to quote the
Santa Clara, Calif.- based chipmaker's marketing slogan.
Dozens of other companies such as Motorola Inc., Hitachi Ltd. and MIPS Technologies Inc.
make processors for hand-held PCs. Some hand-held PC makers even craft their own
processors, few of which work with each other.
''Hand-held PC makers are all doing their own thing, using whatever processors work for them at
the time,'' said Tony Massimini, chief of technology for Semico Research Corp., a market
research firm in Phoenix. ''It's the new emerging market.''
That's why Intel, which makes processors for 80% of the world's desktop and portable PCs, is
looking for the same dominant position in hand-held PCs and cellular phones.
Mark Casey, Intel's marketing director for StrongArm, a portable chip the company purchased
from Compaq Computer Corp.'s Digital Equipment unit in June, says he is gearing up for a fight.
''Our effort in this market is fully staffed and funded,'' Casey said. ''That's a bold statement on
what our intention is.''
Intel is producing two StrongArm processors designed for hand-held devices. They haven't been
adopted by any hand- held PC makers yet. But two flavors of StrongArm chips already are
found in portable phones made by Lucent Technologies Inc., among others.
And StrongArm could power more than just hand-held PCs. It also works in set-top boxes. The
company has a team of Intel and ex-Digital engineers working on a second generation
StrongArm
processor, Casey says.
Microsoft's also lending a helping hand. In April, Microsoft released a version of its Windows CE
software that runs on a StrongArm chip. Hand- held PCs using the chip could show up as soon
as next year, a Microsoft spokeswoman says.
If all this sounds familiar, it is. Before IBM Corp. made the deal to use Intel chips and Microsoft
software in the late '70s, there was no microprocessing standard for desktop PCs. Without a
standard processor, the embryonic industry was Balkanized.
It's now up to Intel to repeat history by taking over again, analysts say.
''If Intel can bring the same marketing and manufacturing efficiencies to hand-helds that it has
brought to the desktop, it can create a widespread standard,'' said Greg Blatnik, analyst with
Zona Research Inc. in Redwood City, Calif.
But Intel is a relative latecomer facing some entrenched players, especially Motorola.
Just as it did in the '70s, Motorola is squaring off with Intel to create a chip standard. Now Intel's
StrongArm faces Motorola's Dragonball processor, which powers devices like 3Com Corp.'s
popular PalmPilot.
Motorola, a longtime maker of processors for Apple Computer Corp., has had trouble
competing against Intel's standard-making skills before. But Motorola promises a battle.
''Motorola has been the leader in the embedded microprocessor market since there was a market
titled embedded,'' said Rhonda Dirvin, director of marketing for Motorola's wireless unit. ''Now
that we're market-focused, we believe Intel will have a tough time entering into our targeted
markets, although they're never to be ruled out.''
Sega Enterprises Ltd. is releasing a video game console called Dreamcast this year in Japan. It
runs Windows CE, but it uses a processor from Hitachi.
And most hand-held PC makers already have deals with processor makers.
Philips Electronics NV's two top hand-held PCs, Velo and Nino, both use processors made by
its sister firm, Philips Semiconductor. Everex Systems Inc.'s palm-sized computer uses a
processor made by NEC Corp.
Hand-held PC makers don't want to give Intel the brand recognition that it now has through
desktops.
''They don't want to get into the situation where customers ask for a certain processor,'' said
Semico's Massimini. ''The hand-held makers want to be able to switch between processor
makers.''
But this too is familiar territory to Intel. IBM wouldn't buy Intel's 386 chip in '85 because it
wanted to develop its own. That opened the door for Compaq, which rushed Intel-based 386
systems to market.
If large hand-held makers resist StrongArm, up-and-coming device makers could use the Intel
chip to leapfrog the established players, Massimini said.
And Intel is making headway. Symbian, a joint venture between Nokia Corp., LM Ericsson
Telephone Co., and hand-held PC maker Psion PLC, has made an operating system that runs on
Intel's StrongArm.
Why has Intel waited so long to enter the hand-held PC business?
For years the company tried to miniaturize its regular line of chips, known as x86 or the ''Intel
class,'' to run on small devices, Massimini says. It didn't work because Pentium chips demand
more power than can be delivered from AA batteries, he says. So instead of scaling down the
Pentium, Intel bought Digital Equipment's semiconductor unit.
Intel also saw the hand-held PC market as insignificant until recently, says Randy Giusto, analyst
at market researcher International Data Corp. in Framingham, Mass.
''Up until now, the number of hand-held PCs old) was so small, it didn't make sense for Intel to
go down there,'' Giusto said. ''That's changing.''
Roughly 5.1 million ''smart'' hand-held devices, including PCs and advanced mobile phones,
were
shipped worldwide in '97, according to IDC. That's tiny when you consider more than 80.6
million PCs were shipped in '97. But more than 8.2 million hand-held devices will be shipped in
'98, up 61% from '97, IDC says.
''The market for hand-held devices is maturing to a point where it warrants a business objective
from Intel,'' Intel's Casey said. ''The operating systems and hardware are evolving.''
(C) Copyright 1998 Investors Business Daily, Inc.
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