Nat Semi, Cyrix plan $500 PC strategy

The companies will focus on chips that meld processing, audio, video, network, and other functions onto a single piece of silicon.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
4 min read
National Semiconductor (NSM) and Cyrix (CYRK) told investors today that they will focus on chips for sub-$500 home computers, NetPCs, and entertainment devices like TVs with new "system on a chip" processors that will meld microprocessors, audio, video, network cards, and other functions onto a single piece of silicon.

National Semiconductor also indicated that it would de-emphasize Cyrix's high-end M2 design, also referred to as the 6x86--an indication that this line of processors for more pricey computers may be increasingly less viable. National Semiconductor bought Cyrix for $550 million on Monday.

"Let Intel and Advanced Micro Devices (AMD) pound the crap out of each other in the workstation market. We will go after the low end," said Brian Halla, chief executive officer at National Semiconductor.

"The low-end strategy makes sense," said Eric Dubin, managing editor of Infrastructure, an industry newsletter. "I don't think National wants to go head-to-head against Intel."

The first steps of the plan will come out in late 1997 and early 1998 when the combined companies release new versions of Cyrix's MediaGX chips with faster clock speeds, multimedia extensions, and other enhancements.

The focus seems to not only give Cyrix a more viable strategy in the semiconductor market, said analysts, but it could change the balance of power in the desktop arena if a booming demand for low-cost devices can wean manufacturers away from Intel (INTC).

The strategy will essentially revolve around new families of Cyrix's MediaGX, a chip that, in its current manifestation, fuses a microprocessor with some graphics and audio functions, said Halla. Intel chips do not incorporate additional graphics acceleration capabilities.

The MediaGX is an Intel-compatible processor that allows computer or device makers to incorporate the core electronics of a computer at relatively low prices, which this year proved to be a big market, Halla said. "The sub-$1,000 PC market didn't exist last year. [Now it's] 22 percent of the market," he said. The MediaGX is currently used in certain Compaq Presario consumer PC models.

PCs and devices driven by Intel-compatible processors will drop to $500 and even $250, he said, while demand for semiconductors will increase as NetPCs come on the market and Intel-compatible chips become affordable to install in other devices like game players.

To keep up with this demand, the MediaGX's design will increase in speed and expand in function. In the fourth quarter, the company will release a 200-MHz version of the MediaGX, followed by a 233-MHz version, said Jay Swent, chief executive officer for Cyrix. Along with that, Cyrix will release in late 1997 new low-power MediaGXi chips running at 150 MHz, 166 MHz, and 180 MHz.

In the first half of 1998, the MediaGXM family, with multimedia extensions, will be introduced.

The MediaGX chip will top out at around 250 MHz, said Swent, but by that time the company will have adopted new technology for a new generation of chips.

While clock speeds ramp up, the capabilities of the MediaGX will expand as well. In January, the company will release a MediaGX that incorporates the "media access controller," a networking function currently handled on separate silicon. In 1998, the chip will include more audio and video functions, Ethernet networking technology, and additional functions typically handled by separate chips, said Douglas Macleod, senior vice president at National Semiconductor. In the end, the LAN functionality and modems will be transferred to the chip, which will also include functions for wireless computing, said Halla.

The company hopes to achieve a six month time to market for its chips, Halla added. All of this activity would be fueled by capital spending approaching $650 million.

Interestingly, both National Semiconductor and Cyrix said that though they would continue to develop the M2 (6x86), the two companies talked of it almost as an R&D project rather than a commercially viable product in its own right. The M2's function, said Halla, will be to "make sure we have a high-performance core for Internet appliances" that will run the GX.

Halla also speculated that the proliferation of low-cost devices will likely loosen Intel's grip. Demand will simply be too large for one company to fulfill. Also, as processors become more pervasive, their perceived intrinsic value drops. How many people, he asked, know the brand name of the motor in their household appliances?

While noting that fusing more and more capabilities onto a single piece of silicon will be no easy technological feat, he said the strategy seemed coherent.

"Cyrix has good technology. It can be optimized for the low-end market," said Dan Niles, an analyst at Robertson, Stephens & Co.