New chips value cost over speed

National Semiconductor is the latest and most well-known company to say it is developing slower but cheaper chips that refute the axiom that faster is always better.

National and a handful of others are developing new processors that they hope will result in truly cheap PCs and clear away what more and more industry observers are calling a widespread but myopic preoccupation with speed.

"For the last ten years, the industry has been totally focused on one parameter--performance. PCs are fast enough," said Dean McCarron, an analyst at Mercury Research.

National is developing a Pentium-class, Intel-compatible processor dubbed "N7" that is expected to run as fast as 133 MHz and will cost no more than $30. That means that network computers and possibly NetPCs based on the chip could sell for less than $500, according to National officials.

Compare this to Intel's mainstream processors for business PCs, which cost from $300 to $400 and force manufacturers to design PCs that cost more than $2,000.

At first glance, National and companies like Cyrix are simply catering to a market ignored by Intel. But their strategy also casts doubts on the message that Intel has been pushing for ten years, that the most important measure of technological advancement for PCs is speed. National and many business analysts are saying that for most business software, users don't really need to upgrade to a yet-faster generation of PCs.

The message of National and others, if it takes root, could cause a sea change in the business PC market by introducing a class of computers with reasonable performance at prices unheard of to date.

Intel faces a growing list competitors and proponents of the less-is-better philosophy. Yesterday, Centaur Technology, a wholly owned subsidiary of Integrated Device Technology (IDT), announced its C6 processor, a Pentium-class MMX microprocessor designed for sub-$1,500 PCs that is expected to reach speeds of 200 MHz.

Cyrix (CYRX) is also part of this crowd and is already supplying its low-cost MediaGX processor to Compaq Computer for use in its $999 PCs.

Furthermore, Gateway 2000 announced today a stripped-down, low-end business PC that departs from the trend for increasingly faster and pricey business PCs.

These new boxes reflect a growing belief that PCs, at least those for most every-day business applications, are now plenty fast enough. "If you're just running business apps, faster and faster PCs are not necessary," said Michael Slater, publisher of the Microprocessor Report.

"We have more power than we need right now [for business applications]," adds Nathan Brookwood, an analyst at Dataquest.

This sentiment flies in the face of the market philosophy that Intel and Microsoft(MSFT) have evangelized for the last decade.

To maintain its record-breaking financial performance, Intel is dependent on users regularly upgrading to new chips, chips that always come out at a fairly high price. To prompt them to keep upgrading, the company tries to demonstrate that business users need applications that require increased processing power.

"The key issue here is what Intel is pushing for visual computing. Will that be enough to absorb the power?" Brookwood asked, referring to Intel's push to drive the market to a 3D computing environment that is much more visually rich than today's software and requires powerful Intel processors like the Pentium II.

"In the past, they have brought up graphics art applications and media content creation [as examples of visual computing], but those are only very narrow, niche market applications," Brookwood added.

Even long-time disciples of the Microsoft-Intel school are starting to question this. "Innovation for the sake of innovation isn't progress, make products that actually do what people want them to do," Ted Waitt, CEO of Gateway, said yesterday at an industry event, expressing his frustration with a Microsoft-Intel dominated industry that constantly prompts users to upgrade for the sake of new processing power.

McCarron adds that chip manufacturers like National are also challenging some assumptions about chip design. Both the National and Cyrix chips, for example, integrate many of the computer's core functions onto one Pentium-class processor, allowing for relatively high performance at low cost.

"The [Intel] processor could be free and [Cyrix's] MediaGX [processor] still has a cost advantage" because it integrates so many functions into the chip, he said. "It's difficult [for Intel] to compete with a traditional processor. They're going to have to compete with something besides their $400 processors," he added.

Intel is an investor in CNET: The Computer Network.