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Intel to rivals: innovate

The chipmaking giant will become an aggressive player in the graphics chips market and has no misgivings about its Pentium II strategy.

Intel (INTC) will become an aggressive player in the graphics chips market and has no misgivings about its Pentium II strategy, which could freeze out rivals Advanced Micro Devices and Cyrix, according to an Intel vice president.

What should AMD and Cyrix do to combat Intel?s aggressive Pentium II push? The short answer is "Innovate," according to Pat Gelsinger, vice president and general manager of the desktop products group at Intel.

However, this may become increasingly difficult for AMD and Cyrix as the PC industry moves in force to Intel's Pentium II chip over the next 18 months. The two rival chipmakers are currently stuck trying to breathe life into the older Intel Pentium architecture.

The Pentium II processor is a complex, proprietary design Intel under scrutiny protected by trade secrets and therefore very difficult to copy by competitors AMD and Cyrix.

This chip is expected to propel Intel into an even more dominant position in the processor market, starting in the latter half of 1998, when the Pentium II begins to replace the Pentium in all market segments.

"It is a more sophisticated...aggressive design," Gelsinger said, speaking to the technical challenges any would-be clone chip vendor faces. Gelsinger added that it is also protected by intellectual property.

Confounding conventional wisdom, he quipped "It can be reverse engineered," meaning that the Pentium II architecture can be copied if a vendor chooses to attempt this formidable challenge.

Intel?s market dominance has precipitated two Federal Trade Commission (FTC) investigations. The first was triggered by Intel?s announcement of its intention to buy out graphics chip maker Chips and Technologies. The second is a broader scrutiny that extends to Intel?s reign over the processor market, of which it holds well over 80 percent of the world market and over 90 percent of the Intel-compatible market.

Regarding the latter investigation, Gelsinger expressed no concern : "We have a clean bill of health and we have processes in place [to keep the company clean]."

Nor does Intel appear to be fazed by the FTC's study of Intel's foray into the graphics chip business. Gelsinger said that Intel will be very aggressive when it enters the graphics chip market with the Intel 740--which was demonstrated today in a prototype machine at the Intel Developer's Conference.

He added that Intel is seeing resistance from graphics chip vendors who fear Intel?s entry into the market. "Yes, sure we?ll be feeling push-back. But we think it [the 740] will accelerate the industry to AGP--and we hope to make some money along the way," he added. AGP, or Accelerated Graphic Port, is a next-generation Intel 3D graphics technology just beginning to ship from vendors such as Compaq and Dell Computer.

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