We view both of Intel's new products--the Tualatin mobile Pentium III chips, to be introduced in July, and the "Internet chip," which integrates a processor core, flash memory, and DSP--as positive developments for users.
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Intel counters AMD with "Tualatin" chips
The new Tualatin 0.13-micron chip is designed to leapfrog both Advanced Micro Devices and Transmeta, delivering at least as much processing speed--up to 1.13GHz--at equivalent low power without any concerns about platform consistency, product availability, reliability and support. Many computer manufacturers see Intel as the safer bet, given their existing long-term relationships, while they view other suppliers as more questionable in the long-term.
The announcements are especially significant for Transmeta, which uses a hardware-based emulator to run Intel-targeted system and application software. This hardware-emulation approach means that Transmeta delivers lower performance when compared with Intel or AMD chips.
Transmeta has been winning some new customers in the "ultralight" laptop marketplace with its chip, which provides high performance at low power consumption. However, Transmeta has so far achieved success only with Japanese-produced, fairly expensive niche products (from companies such as Sony, NEC and Hitachi) targeted at consumers seeking multimedia-rich experience. Some major manufacturers have already told us that, given Intel's roadmap, they see no reason to go to Transmeta for high-end laptop processors.
AMD has been making some headway in the low-end consumer laptop market. AMD's offering is completely Windows-compatible, but manufacturers committed to AMD still need to be concerned about future chip sets. With the launch of Tualatin and further enhancements expected in the next two years--we expect Intel to be particularly aggressive in lowering power demands during 2002--most large enterprise-class laptop manufacturers will have little reason to go with an alternative chip. Depending on the ultimate price and availability of the low-end Tualatin chips, Intel could reassert its dominance of this market.
Opportunities in the server market
Tualatin may also find a market among server companies attempting to create high-density server environments. One of their biggest design problems is heat dissipation, which determines how densely they can pack rows of processors, which in turn determines the power of their products. Several of these manufacturers have been experimenting with Transmeta's processor because lower power consumption also means lower heat. They may find the idea of replacing their present Intel chips with Tualatin attractive, as a way of achieving similar processing power per chip and lower heat. These high-density servers could find a place in large Web server farms as a means of alleviating the high energy consumption of these facilities.
Intel has yet to announce a price for Tualatin, but we presume it will be competitive with AMD and Transmeta. Indeed, the shift to the 0.13-micron manufacturing process will enable Intel to produce greater numbers of chips at lower cost, enabling them to be even more aggressive on price. This is important, as Intel has chosen to aggressively invest through the current economic downturn.
Not only is Intel pushing rapidly to 0.13, it is also moving forward with converting its plants to 300mm wafers. This will be a longer transition--likely two years--but it will enable Intel to more than double the number of processors it produces on a single wafer. As long as the process does not prove buggy--a slight but real possibility--this will give Intel a strong cost advantage over every other chip manufacturer.
Intel not alone
Intel's "Internet chip," which is expected to ship in systems next year, is its first to combine processor, flash memory and wireless DSP on a single unit. Although this is an important advance for Intel, it is not alone in integrating core processor, DSP and other functions on a single chip. TI, the largest supplier of DSPs, is also following this path and has been shipping samples of its RISC-based Open Multimedia Application Platform (OMAP) to manufacturers.
The new Internet chip from Intel will not by itself drive the promised data and communications, or, for example, PDA and cell phone, convergence on handheld systems, but it may help Intel find opportunities with companies bringing out new devices and should help lower the cost and decrease the size of those systems.
While Tualatin will enter a market already dominated by Intel, namely in notebooks, the Internet chip is a new direction for Intel--the PDA and smart communicator market. In particular, we think this chip will face an uphill battle in the cell phone market. The three big cell phone companies--Nokia, Ericsson and Motorola (which makes its own components)--are already committed to chip sets from other suppliers and would need to redesign their phones to move to this new Intel entry.
On the PDA side, unlike some of its rivals that can run both PocketPC and Palm, this chip would be useful only for PocketPC. While this limits its market, the capabilities will prove very attractive to companies combining PDAs with communicators and built with Microsoft's Stinger technology.
Companies designing new high-end cell phones or Windows CE devices could use Intel's Internet chip to create a thinner device that uses less power and should cost less to manufacture. Therefore, Intel's best initial market is with companies designing new units.
This chip is evidence that Intel is looking beyond the PC to ensure that its semiconductor expertise and capacity can be applied even if the PC market continues to be soft. Cost advantages will be even more important here because the price of these chips is far lower than that of typical PC microprocessors. However, lack of existing relationships in this area will require Intel to invest a great deal in market-building to ensure a long-term market for its chips.
Both of these chip announcements from Intel are good news for customers. Tualatin should provide them with power at least equivalent to that of today's laptops while extending battery life 20 percent and generating less heat, which will make the units more comfortable to actually use in a lap. Although Intel's Internet chip will have little immediate impact on users, in the long term it will help drive the data/communications convergence in high-end cell phones and PDAs.
Meta Group analysts Jack Gold, David Cearley, Val Sribar, Steve Kleynhans, David Folger and William Zachmann contributed to this article.
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