IBM PC: 'The Defining Product of Our Time'

Electronic News, August 13, 2001 by Tom Murphy

The Industry luminaries reflect as the IBM PC turns 20

The industry luminaries who gathered at San Jose's Tech Museum of Innovation last week saw the potential of the personal computer 20 years ago. However, no one ever imagined the all-encompassing impact that the IBM PC would have on the semiconductor industry when the machine was first introduced Aug. 12, 1981.

While the PC was a well-known commodity that year thanks to Apple Computer, Commodore, Radio Shack and others, the IBM PC marked the beginning of a revolutionary change in an industry that was then dominated by mainframes, defense contracts and the break up of Ma Bell.

Specifically, industry giants such as Microsoft Corp.'s Bill Gates and Intel Corp.'s Andy Grove remarked that the PC's legacy is its use of off-the-shelf parts and an open architecture. It basically opened up the industry to standardization, fostered innovation and pushed the drive for improved processors, memory, buses, displays, storage devices, process technologies and applications.

"It is the defining product of our time," said Intel chairman Grove, a self-described non-techie. "Just at the time it was to ride off into the sunset, it enabled the Internet. Before the (IBM PC), it was destined to be a closet curiosity."

The collaborative effort of companies and technology that surrounded the PC's development was the underpinning of its success, Grove suggested. "But with the combination of the PC and the Internet, it is now the platform of our lives."

One impact of the IBM PC can be put in perspective through earnings reports. For fiscal 1980, Intel (nasdaq: INTC) of Santa Clara, Calif., reported revenues of more than $79 million and counted on its "Ep/ROM" business for generating a large portion of those revenues, according to reports from archived editions of Electronic News. In 2000, Intel reported total sales of $33.7 billion due largely to its emphasis on microprocessors.

IBM (nyse: IBM) of Armonk, N.Y., had expected to sell 240,000 PCs within a year of its introduction. It sold 240,000 units within the first month. An estimated 835 million PCs were sold worldwide between 1981 and 2000, according to an Intel release.

On the technology side, the first PC came equipped with the Intel 8088 processor with a clock speed of 4.77MHz. It had 29,000 transistors that accessed 64Kbytes of RAM. Today, Intel's fastest processor spins at 1.8GHz and packs 42 million transistors into a die the size of a dime.

IBM put the microprocessor's development into perspective with a comparison: If the automotive industry had developed at the same rate as semiconductors in the past 30 years, a RollsRoyce would cost $2.75 and get 3 million miles to the gallon.

While sales of PC units declined sequentially for the first time ever in the second quarter this fiscal year, many of the panelists gathered in San Jose last week believe there is a bright future for the platform known as the personal computer. This optimism surfaced despite what is widely considered the dawn of communications as the driver to semiconductor development. But despite the fortunes accumulated by Intel, Microsoft and several other companies, the first PC, with its use of an 8088 processor, has pushed the semiconductor industry like no other phenomenon before.

"The PC has created such a huge cash flow that it has allowed Intel to push not only the development of microprocessors but also the advancement of semiconductor fabrication materials in general, which have improved lots of other chips as well," said Linley Gwennap, principal analyst with the Linley Group, Mountain View, Calif.

"Without the PC, we wouldn't have MP3 players or digital cameras. Digital video wouldn't make a lot of sense. We wouldn't have such things as Tivo, which was derived from PC technology. Cell phones, which aren't derived specifically from PCs, have benefited from the advances in semiconductor technology, which was funded by the PC phenomenon.

"For a long time, the PC was the major semiconductor application in the world," Gwennap continued. "Most semiconductor progress has been funded by the PC industry. Looking back over the last 20 years, the PC was the engine driving the whole semiconductor industry."

Despite a relative decline in prominence, most panelists agreed that the personal computer would still play a role in driving technology, at least in the next five years. Such optimism seems giddy in the face of one of the worst downturns in the history of the industry.

"Everybody is reporting about doom and gloom," said Intel CEO Craig Barrett, before the panel discussion. "But this industry will recover like it has in the past, and business will be great again."

Even as the PC plays an integral part of unlocking pent-up demand for broadband services, Grove warned that as the personal computer becomes more of a communications device, perhaps the largest threats to Moore's Law are the regulatory environments, governments, the entrenched communications companies and other aspects of the communications industry in general.