P4 breaks down old ties: Intel processor unshackled from pricier PC systems - Outlook 2002 Balancing Act - Product Announcement

Electronic News, Jan 1, 2002 by Tom Murphy

Is 2002 the year Intel Corp. opens up the high-performance PC market to other memory makers?

Perhaps only time will tell with that one, but two trends will help define the state of the Pentium 4-Rambus DRAM (RDRAM) union in 2002.

First of all, 2002 will be the year when double data rate (DDR) SDRAM memory achieves price parity with plain, old PC-133 SDRAM as the former memory type ramped up into volume production.

Secondly, Intel will release the 845 chipset, which will allow P4s and DDR SDRAM to work together in a meaningful relationship. That translates roughly into high volume with no legal entanglements.

This last calendar year was supposed to be the year for RDRAM as Intel accelerated the volume production of its P4 processor line behind a tremendous marketing and price-cutting effort. But Intel also released its first version of the 845 chipset at midyear, which supported SDRAM memory for the P4. The chipset gained huge market acceptance quickly, due mainly to corporate buyers who wanted PCs with familiar technology instead of the nascent RDRAM memory technology.

P4 processors coupled with SDRAM resulted in performance bottlenecks. As one analyst put it, "It's like putting bicycle wheels on a Porsche." In keeping with the car analogy, Rambus President Dave Mooring called RDRAM "the Cadillac of memory."

But even though price-points for PCs with P4 processors and SDRAM memory were less expensive compared to their RDRAM brethren, the market acceptance of the 845 was telling. Only Intel holds the hard and fast figures for how many 845 chipsets were sold in 2001 versus the 850 chipset that supports Rambus. But Mercury Research of Scottsdale, Ariz., figures 845s outsold 850s on the order of 10-to-1 to 5-to-1.

"Intel started aggressively ramping the P4 in the second quarter, but that ramp didn't kick in until the fourth quarter, which is concurrent with the release of the 845," said Dean McCarron, analyst for Mercury Research. "There are many reasons, but a lot of the reasons are because of SDRAM and the price of the solution. What was holding back the P4 was not the 850 per sec. It was the cost of the entire [PC], which was significantly higher than the SDRAM [PC]."

McCarron expects the release of the 845 for DDR to be the dominant chipset in shipments again in 2002 and with a significant margin over the 850 chipsets.

Intel also is continuing to back slowly away from the RDRAM technology. Intel reportedly will not come out with a chipset supporting a four-bank RDRAM architecture. The chipset could have brought system cost down from the existing 16-bank architecture, which could have positioned RDRAM systems in more mainstream $1,000-PC market segments.

"I don't see where Rambus is anything but a niche supplier for 2002," said Kevin Krewell, analyst for Micro Design Resources, San Jose. "For Intel, I don't see any rationale behind their support of Rambus, and I see them slowly backing away. That will leave RDRAM to drift into oblivion. The market will actually let that happen for Intel. OEMs will choose evolutionary technology, and they will eventually choose DDR."

As of the end of November, all economic indications pointed to a recovery of an overall semiconductor market, which contracted, by some estimates, 31 percent from the high-watermark year of 2000.

"It looks like we're returning to normal cycles," Krewell said.

As far as the overall PC microprocessor market, McCarron expects a growth rate of 13 percent with shipments of 173.2 million units, up from a expected 153.3 million units this year. Preliminary figures from Mercury Research show that MPU unit shipments shrank 6.2 percent from the 2000 figure of 163.5 million units.

"This is the first negative year since we started recording this figure," McCarron said. "There is some sort of recovery next year. We've seen a very depressed industry, but that goes away next year and returns to conventional buying habits."

One of the large drivers of PC microprocessor growth in 2002 will be the return of the corporate buyer, according to Nathan Brookwood, analyst for Insight 64, Saratoga, Calif. This year represents the end of the cycle, which began in 1999 when corporate enterprises invested heavily in information technology to avoid the much-publicized Y2K glitch. Now those machines are starting to get outdated, and corporations will return to the market after a two-year hiatus.

Brookwood believes the impact of Microsoft Corp.'s latest operating system, Windows XP, will start to make an impact on consumer buying trends in 2002. Once word gets out from the early adopters about the benefits of XP, consumers will have the justification they need to go out and buy a new system.

Krewell sees the lack of applications as a bottleneck for MPU shipments. Intel might just start shipping 3GHz Pentium 4s by the end of 2002, but as of yet, there are no new applications that justify all of that processing power, and Krewell says a there is a downside risk in that scenario.

The concerns for higher-performing micro-processors are coming down to cost issues, Krewell said. Although Intel has officially backed off the 3GHz processor milestone, other processors with clock cycles in that range start getting expensive not only from a chip standpoint, but from a system perspective. Those processors start burning 70W to 75W of power and start requiring relatively expensive heat sinks, fans and power supplies.