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Intel to chip away at Itanium prices

The chipmaker wants to remove price as a barrier to the acceptance of Itanium servers, a goal that could allow it to become the company's primary server chip by 2007.

Intel wants to remove price as a barrier to the acceptance of Itanium servers, a goal that could allow the processor to become the company's primary server chip in the second half of the decade.

The Santa Clara, Calif.-based chipmaker is working on chipsets and other products and technologies that will make an Itanium-based server no more expensive than a similar machine powered by its Xeon chip by 2007, said Mike Fister, senior vice president of the server products group at Intel.

Because Itanium can provide more performance than Xeon, the elimination of the current, often substantial, price discrepancy could then permit Itanium to become Intel's principal server offering. If successful, the strategy could allow Intel to begin to phase out Xeon after 2006.

"There is a projection that says that Itanium and our 64-bit technology is so powerful that someday it could kind of obfuscate Xeon" in the second half of the decade, Fister said. "It allows companies who have (Itanium) at the high end of the line to use it on lower-end applications."

He added that Xeon will remain "robust through the middle of the decade" and live alongside Itanium.

The emphasis on cost could help dispel some of the skepticism that tends to surround the Itanium line. Itanium is a 64-bit chip, which means that it can pull data from far more memory than 32-bit chips such as Xeon or the Pentium line. Itanium, however, primarily runs software specially designed for it, and there's comparatively little of that.

To date, Itanium mostly has been used in servers with four or more processors--one of a number of factors that have kept sales relatively low. Although these boxes sell for $10,000 and up, unit shipments are limited. In 2003, Intel shipped 100,000 Itanium 2 chips compared with millions of Xeons.

Research firm IDC in 2000 predicted that Itanium server sales would hit $28 billion by 2004. In 2001, IDC predicted sales of $15 billion by 2005, and lowered its forecast later that year to about $12.5 billion. Now, the forecast is for $7.5 billion in 2007.

The vast majority of servers sold, in terms of unit shipments, contain one or two processors. Most of those servers rely on Intel Xeon chips, but IBM, Sun Microsystems and others are promoting the Opteron chip from Advanced Micro Devices for that market.

Intel's price strategy helps "eliminate the barriers to move applications across," said Martin Reynolds, an analyst at research firm Gartner. Itanium "is too expensive to put it in everything. They have to get Itanium into the Xeon space."

Intel will cut Itanium costs in a number of ways. The company, for instance, is tinkering with chipsets, similar to IBM's Summit chipsets, and other parts that can be used in both Itanium and Xeon servers. That way, hardware manufacturers will be able to cut design costs. Overall, Itanium chips sell for only a little more than Xeon chips, but the overall cost of building an Itanium server is higher.

Cheaper versions of the chip also will be introduced. Last year, Intel debuted the Deerfield Itanium, which is priced similarly to Xeon chips.

"We are going to evolve the line for breadth," Fister said. "There is no reason it has to be constrained" in the four-processor and more server market, he added.

High-end Itaniums also will drop in price. Current top-end Itaniums can cost more than $4,200 because of extraordinarily large caches, pools of memory located on the processor. Top-end Itaniums now have 6MB of cache, and Montecito, a version coming in 2005, will have 24MB. Chips with large caches take up a lot of surface area and are expensive to make.

Tukwila, formerly Tanglewood, a version of the Itanium that will be released after 2005, will feature a number of chip cores on the same piece of silicon. Although Tukwila will have a large cache, the chip cores will be smaller than Xeon cores, making the chip somewhat comparable in price.

Software also will become more prevalent, which should help lower the price. Intel has already persuaded Oracle and others to port software to Itanium. Now the company is trying to get large corporate computer users to do the same.

"There are corporations that have 2,000 total developers writing economic regression software," Fister said.

On other Itanium notes, the company released software, called the IA-32 execution layer, that will let Itanium servers run standard Windows code with better performance than earlier emulation technologies. A version for Red Hat will come out later this year, Intel said.

Also, speculation continues to swirl around whether Intel will release in the near future a version of Xeon or its Pentium chip that can handle 64-bit software, similar to what the Opteron and Athlon 64 lines at AMD do. Reynolds, among other analysts, asserted that Intel is almost certainly working on such a chip, but it's uncertain whether the release will occur in 2004, 2005 or later.

Fister declined to comment on the chip. Other executives have said it could be released in the next three to five years.