Demand picks up but low end still
drives x86
By Will Wade and J. Robert Lineback
SANTA CLARA, Calif. -- The sluggish PC microprocessor
business got its first good news in months in September,
but nothing that would suggest any change in recent
market trends.
Bearer of good news was Intel Corp., which reported
third-quarter revenues were being re-energized by
stronger-than-expected demand for chips in North
America and Europe. This goes along with what the MPU
giant had been predicting earlier: a stronger second half
after the growth in x86 MPUs slipped significantly
because of falling average selling prices and rising chip
inventories at PC makers.
Analysts tracking the PC processor segment now believe
that the inventory problem has been cleared up and
orders for new x86 MPUs will run at about the same rate
as PC shipments. But few market observers anticipated
any near-term changes in what has been driving PC sales in
recent months: models selling for less than $1,000.
"Other than consumers playing 3-D games, there isn't any
software on the immediate horizon that is going to make
PC users care about [buying] dramatically faster
systems," commented analyst Michael Slater of
MicroDesign Resources in Sebastopol, Calif. "All of the
easy things have been done [in today's software
applications]," he added, "and what lies ahead are
problems that are orders of magnitude greater to
program.
"It's taking longer and longer for developers to create a
whole new class of software," Slater continued. "There's
no Moore's law for software development."
Other analysts agreed that PC buying trends will continue
to place more emphasis on price, and that was likely to
continue putting heavy pressure on chip ASPs. Dataquest,
for one, predicted that microprocessor shipments for
sub-$1,000 PCs will grow 51% annually to hit 21 million
units in 2002. But x86-compatible chip shipments for PCs
priced above $1,500 will drop 7% a year to 28.6 million
units in 2002, the market researcher forecast.
A rising performance curve will no longer drive PC sales,
predicted many analysts. Most PC users don't need
400-MHz processors to send e-mail, noted Dataquest
analyst Nathan Brookwood in San Jose. As a result, he
expected to see strong growth in demand for low-end
MPUs such as Intel's new Celeron processors. They were
re-engineered with level-2 cache for improved
performance after the series debuted in June.
Brookwood also expected to see strong demand for
competing products from Advanced Micro Devices Inc.
and other x86 cloners. As market growth resumes, he
predicted that competition will heat up even faster. "If
the microprocessor companies thought the past six months
were rough, then wait until the next six months."
The shift in PC pricing models has changed Intel's
unwillingness to move into lower-margin x86 applications.
The Santa Clara chip giant is not ruling out any market
segment, said Carl Larson, marketing manager for Intel's
microprocessor division, based in Hillsboro, Ore. That
could even include integrated x86 cores with other
functional blocks to address consumer and entertainment
markets, he added.
That would be bad news indeed for those x86 suppliers
that have built their MPU strategy on avoiding Intel.
"What worries me is what Intel does next," admitted
Tony Taylor, product marketing manager for x86-based
STPC systems-on-chip products from STMicroelectronics
in St. Genis, France.
For more than a year, ST (formerly SGS-Thomson) has
marketed single-chip PCs for a range of applications. It
has been using a souped up 486 core originally developed
by Cyrix Corp. of Richardson, Tex., before that company
was acquired by National Semiconductor Corp. in Santa
Clara.
National, too, is focusing on x86-based system-on-a-chip
designs aimed at information appliances. Its Cyrix Group
also is trying to sell its parts for entry-level PCs.
"The only answer to competing [with Intel] is to
differentiate ourselves, and we will do that by offering
more integrated solutions," promised Steve Tobak, vice
president for corporate marketing at National.
This market is still attracting startups. A new Silicon
Valley firm called Rise Technology Co. is taking aim at
what it hopes will be a void in Intel's low-cost MPU
market coverage. The Santa Clara startup plans to launch
its first x86-compatible processor at October's
Microprocessor Forum in San Jose.
Rise Technology's MP6 will be aimed at desktop PCs
selling between $400 to $1,200 and notebook computers
priced under $1,500, according to David Lin, chief
executive officer of the startup. Rise was financed, he
said, by a major chip maker, a large Asian silicon foundry,
and a top-tier PC maker.
Others are also hoping to take advantage of other soft
spots in Intel's PC market coverage. Integrated Device
Technology Inc. of Santa Clara is aiming its WinChip
series at PCs selling at retail for $1,000 and below. IDT
already has shipped more than 200,000 MPUs since
introducing the product last fall, said Dave Cote, vice
president of marketing.
"There is an element to our strategy of going where Intel
isn't," Cote acknowledged.
About the only x86 supplier willing to take Intel head on
now is AMD. "Intel has always been our competition,"
said Michael Steel, product manager for the K6
microprocessor series at AMD in Sunnyvale, Calif. "We
are going to move more seriously into the [high-end]
commercial segments, and our strength in the consumer
market will offer us an increased market share because
more users are starting to recognize our name."
AMD kept up its drive in late August by launching its new
K6-2, which is aimed at more powerful PCs and the center
of Intel's Pentium II strategy. During that same week in
late August, Intel rolled out its new Celeron to compete
with AMD and other vendors in the burgeoning
entry-level PC market segment.
But so far, Intel has not reached all the way down to the
lowest levels of PC pricing with its x86 processor line.
"They do face a dilemma in how low they go," commented
analyst Slater of MicroDesign Resources. "Today, Intel
processors sell for as low as $80, while IDT and National
are selling [MPUs] as low as $50. It's a simple case of
needing to keep Intel fabs full," Slater said. "As long as
the market grows faster than Intel's manufacturing
capacity, it will leave the low end to the other
competitors." |
