The chipmaker, as expected, has begun efforts to phase out subsidies for PC makers using RDRAM, high-speed memory based on designs by struggling chip company Rambus.
Intel says the subsidies, which include a rebate for PC makers and a Pentium 4/RDRAM bundle, are no longer necessary to lower prices and increase availability of RDRAM, which initially was the only memory supported by the Pentium 4.
But analysts see the move as a not-so-subtle sign that Intel's support of Rambus is weakening. Within a few weeks, the chip giant is scheduled to release a new chipset that will connect the Pentium 4 with standard, less-expensive SDRAM memory, ending the company's exclusive reliance on Rambus to support its fastest processors.
Most analysts believe the new chipset, dubbed 845, will become the basis for the majority of Pentium 4 PCs sold, with later versions supporting faster double data rate (DDR) DRAM.
"I think that Intel is slowly but surely backing away" from RDRAM, said Kevin Krewell, senior analyst with Instat/MDR (formerly MicroDesign Resources). "When they do finally introduce the DDR version of the 845, they'll get good performance--not as good as RDRAM...but everybody, overall, will be happier."
Intel said the decision to drop the subsidy was prompted by changes in the RDRAM market. RDRAM availability has increased and prices have fallen significantly since the subsidies were started in conjunction with the launch of the Pentium 4 last November.
As a result, subsidies are no longer necessary, said Intel spokesman George Alfs.
Starting last November, Intel offered PC makers a rebate of $70 for each PC manufactured with a Pentium 4 processor and RDRAM memory. It lowered the rebate to $60 in the first quarter of 2001 and later extended the program through the end of the second quarter, when it was to be phased out.
Intel also packaged "boxed" Pentium 4 processors for sale at retail and to system integrators with RDRAM. The idea of this program, which included a Pentium 4 processor with two RDRAM chips, was to bundle the chip and memory for a price that was lower than purchasing them separately, thus subsidizing the cost of the memory and helping PC makers ensure adequate supplies of the memory chips.
"We also will be phasing out the bundling program, since RDRAM is widely available in the market," Alfs said.
The move comes at a delicate time for Rambus. Though the company has announced plans for much faster versions of RDRAM, analysts question the technology's relevance as anything other than a niche product at the high end of the market.
Rambus' business prospects are also being questioned as the company works through a string of lawsuits over Rambus' attempts to claim royalties not just on RDRAM but on nearly every current form of PC memory. If Rambus' claims are upheld, it stands to gain billions.
But a Virginia court issued a stinging verdict against Rambus in the first case to go to trial, possibly setting a precedent for other cases. Rambus' stock has sunk accordingly, dropping more than 90 percent in the past year to currently trade around $8 a share.
Intel's support has been seen as one of the key factors in keeping Rambus' prospects alive. Though it won't subsidize RDRAM anymore, Intel says it will continue to support the technology indefinitely.
"We will have (RDRAM) chipsets for the foreseeable future for Pentium 4," Alfs said.
But while it will support RDRAM, it's uncertain how much emphasis Intel will really put on the memory technology.
Intel is likely to only support RDRAM for high-end Pentium 4 PCs, analysts say. People seeking the maximum performance out of the chip will use RDRAM, Krewell said. "The RDRAM stuff will only be a niche product for the really high-end guy," he said.