The delay, from the second half of this year until the first quarter of 2001, is related to problems with a component known as a memory translation hub (MTH) that allows Intel processors designed for specialized Rambus memory to instead use traditional synchronous memory.
Rambus shares were down
Last month, Intel recalled nearly 1 million motherboards that used an MTH and Intel's 820 chipset because signal problems with the MTH could cause systems to crash and potentially lead to data loss.
Intel said it found it could not rework the MTH in time to launch Timna as scheduled in the second half of this year. Instead, the company will wait for a redesigned memory interface and launch Timna in the first quarter of next year.
Timna is Intel's first integrated chip, combining the processor, memory controller and graphics functions onto a single piece of silicon.
"What we've now determined is the MTH product will not meet Intel's standards for quality and reliability," said Intel spokesman Seth Walker.
The chip giant had originally designed the chip to use specialized Rambus-based memory but decided the cost of the memory would be too high. To allow the chip to use standard memory, Intel had planned to use an MTH chip similar to the one used with the 820.
Analyst Peter Glaskowsky of MicroDesign Resources said the woes with the MTH appear to reflect deep flaws in the physical design of that component. Reworking the physical design of a chip typically takes four or five months, he said, adding that Intel may have already begun that process.
"I'm just amazed by the amount of trouble they are having with this chip," Glaskowsky said, noting that the work done by the MTH is relatively straightforward. "These are the sorts of problems that you don't expect Intel to have, because they do so many chips."
The delay also could put additional pricing pressure on Intel. The chips needed for, say, a 600-MHz Timna-based computer were expected to cost $7 to $10 less than if PC makers used a 600-MHz Celeron with a chipset containing integrated graphics. Such a discount could reduce the retail price of PCs by $30, noted one analyst.
Intel may need to price the chip even more attractively, depending on its performance and when it actually gets to market.
"I think Intel is going to have to make the savings really significant anyway," Glaskowsky said. "Having a several-month delay is only going to hurt."
Intel also has decided not to resume selling the 820 chipset with standard memory, making it and a workstation chipset, the 840, available for use only with Rambus-based memory. As recently as May 24, Intel was saying a replacement MTH was being tested and would be available in the third quarter.
Intel said neither decision announced today will have a material impact on its financials, although it has restated its first-quarter earnings and is expected to take an additional charge to cover the recall.
One possible silver lining for Intel is that it will be able to use the manufacturing capacity originally slated this year for Timna to crank out more Celerons and Pentium III chips. Because those chips are smaller than Timna, Intel may actually be able to crank out more CPUs, Glaskowsky said.
Lehman Brothers analyst Dan Niles said the impact of the Timna delay is probably not that significant given the current demand for Intel's mainstream processors. "Intel's big problem is not about manufacturing Timna this year, but can they manufacture, period," Niles said.
Intel has been struggling to keep up with strong demand for Celeron and Pentium III processors since last year's holiday season. The Timna delay could free up enough capacity to help Intel avoid a similar crunch this year.
"The fourth quarter is the period you want to make sure you have plenty of product," said Niles. "This actually is to some extent a blessing in disguise for PC makers."