Intel's new Itanium 2 fit and trimmer

The final version of the chip, which goes on sale in a few weeks, will have a surface area of 421 square millimeters--approximately 10 percent smaller than originally planned. The reduction in size comes because of subsequent manufacturing improvements, an Intel representative said.

Although it remains a relatively large processor, the slimmed-down chip will give Intel a little extra breathing room on costs and manufacturing. In February, Intel representatives said the chip would measure 464 square millimeters, which would have made it one of the largest chips in years.

Large chips cost more to make because fewer can be carved out of a single silicon wafer. Yields--the number of good chips produced from a wafer--also typically decline as chip size increases because of a greater potential for defects, according to analysts.

"Dropping a few additional square millimeters will up yields in both die size and defect density," said Dean McCarron, principal analyst at consulting firm Mercury Research.

Itanium 2, which once went by the code-name McKinley, is perhaps Intel's most crucial product release this year. The chip processes data in 64-bit chunks, like IBM's Power4 and Sun Microsystems' UltraSparc III. Other Intel chips, including the Xeon processor line for servers, consume data in 32-bit chunks.

Among other performance benefits, 64-bit chips let server manufacturers incorporate far more memory into their machines, which is crucial for running large databases. Naturally, 64-bit chips and servers sell for far more than their 32-bit counterparts.

The first Itanium chip, though, has been a commercial dud. Delayed several times, the processor found few takers among computer manufacturers or corporate buyers. Middling performance, a lack of software and a declining economy also hurt Itanium, according to executives and analysts.

Intel and others, though, assert that the experience with Itanium 2 will be different. The chip will provide twice the performance of the first Itanium, according to Intel. IBM, Hewlett-Packard, NEC and other manufacturers have also invested heavily to develop servers, chipsets and other technology for Itanium 2 servers. A greater number of operating systems and databases will also be appearing around the time the Itanium 2 comes out.

Demand "has been picking up, but we're still talking tens of thousands of units," or substantially less than the Xeon line, said McCarron.

The chip, originally due in 2001, will likely debut shortly after July 14. HP is coming out with a version of Unix for the chip in the third week of July, which begins on that day. Intel has said the chip is due midyear.

If the chip finds buyers, Intel, in tandem with server makers, will be able to snatch customers away from Sun and possibly grab the lead position in every segment of the processor market.

But Intel also faces competition from Advanced Micro Devices in the server field. Intel's cross-freeway rival is coming out with a server chip called Opteron next year that can handle both 32-bit and 64-bit software, and will cost less to manufacture, according to AMD. Until recently, AMD did not participate in the server market.

Sizing it up
The size of the Itanium 2 is the result of a number of factors. The chip, which is made on the 180-nanometer manufacturing process, contains a substantial amount of cache--data reservoirs near the processor for rapid access. Intel is integrating a 3MB Level 3 cache, a 256KB Level 2 cache and a 32KB Level 1 cache.

The original Itanium features a 4MB Level 3 cache, although it's located on separate chips, and a 96KB Level 2 cache. Itanium 2 also contains more internal subsystems than its predecessor. In all, the chip contains 221 million transistors.

The chip will run at 1GHz when it debuts.

Although it is only coming to market now, successors are already in the works. In 2003, the company will unveil Madison, a "shrink" of the Itanium 2 made on the more advanced 130-nanometer manufacturing process. Though smaller, Madison will be based on the same design as the Itanium 2. Deerfield, a low-power, cheaper Itanium chip, is also on the horizon.

In 2004, Intel expects to come out with Montecito, the successor to Madison, and follow it in the 2005 to 2006 time frame with Chivano, Montecito's successor, according to sources.