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