GaAs supercomputer vendors hit hard

Electronic News, Jan 31, 1994 by Reinhardt Krause

COLORADO SPRINGS, COLO.--Gallium arsenide may be on the rise for wireless communications but supercomputer vendors with GaAs-based technology are experiencing troubles--evidenced by Cray Computer Corp. and Convex Computer Corp.

Cray Computer Corp. reported a net loss of $47.9 million, or $1.50 per share, for the year ended Dec. 31, 1993. The company also lost more than $50 million in 1992. In 4Q93, Cray Computer said its net loss was more than $12.8 million.

Convex, meanwhile, said it anticipates reporting a loss of approximately $13 million, or 50 cents per share, for the quarter ending Dec. 31, 1993. Revenues for the quarter are expected to be approximately $46 million. Convex said the estimates are preliminary and that final results are scheduled to be announced on Feb. 4.

According to some industry observers, supercomputer vendors are facing a crisis in determining the next generation for logic; ECL has not made strides and GaAs is no longer as glamorous. MOS circuitry is growing faster and denser, meanwhile. Convex, for example, is planning a migration to Hewlett-Packard's RISC processors; however, it is still committed to a followup GaAs design, with circuits from Vitesse Semiconductor.

Lloyd Thorndike, president of supercomputer research/consulting firm DataMax, Minneapolis, said that the unit-cost of GaAs-based computers is becoming inherently uncompetitive with the volume production of CMOS processors. In addition, the scalability of CMOS processors is becoming a big factor; 16-processor CMOS designs are providing performance comparable to two- processor GaAs designs at lower cost, said Mr. Thorndike, former president of Control Data Corp.'s supercomputer subsidiary.

"How much of gallium arsenide is produced in memory," asked Mr. Thorndike rhetorically. "People are no longer willing to pay $50 million for a one-of-a-kind. The name of this game is level of integration, the more you integrate the less problems you got. If you want to play with the big boys and get out of this niche (GaAs) area, you better figure out how you have a CMOS design."

Mr. Thorndike suggested that GaAs supercomputer vendors need to provide more "upward commonality" with systems that plug together as opposed to requiring customers to upgrade with newly installed machines. He said that Cray Computer will likely stick to its GaAs strategy, but perhaps produce more units in an MPP-like structure. "Through (Seymour Cray's) architectural innovations he can still sell a few machines," he said.

How Convex's problems impact Vitesse, which is its supplier of GaAs circuits, remains to be seen, according to industry observers. In 1992, Vitesse stumbled by expanding to serve Convex just as the supercomputer market fell apart, according to Prudential Securities.

Convex and Vitesse are collaborating on the C4 family, a follow-on to the existing C3800 models which use GaAs devices. In an attempt to branch out its offerings, however, Convex is also developing its first massively parallel processing machines based on Hewlett-Packard's PA-RISC architecture.

The alliance with HP comes as some of Convex's problems can be traced to the encroachment of clustered RISC-based workstations. Other problems the company has faced are reduced military budgets and the world's economy, said analysts at CS First Boston.

Curt Rohrman, an analyst with First Boston, said, "Although we are optimistic on Convex's prospects for the second half of 1994, we also believe the only Convex story is SPP (Scalable Parallel Processor). While the C3800 was essentially the product cycle that never happened, the C4 series threatens to be the product that never really happens as workstations and parallel technology close the gap on traditional vector processing technology."

According to First Boston, Convex could still capture 20 percent of the MPP market by 1996, with SPP revenues exceeding $125 million. Convex's SPP will use HP's RISC processors with price points expected to start at below $500,000; initial configurations will scale from 4 to 128 CPUs, with performance up to 25 GFLOPs, according to the company.

Robert J. Paluck, Convex chairman and CEO, said, "We are making solid progress on our new Exemplar scalable parallel processing (SPP) system which will be introduced in the first half of 1994. Significantly, we have received commitments from a number of key independent software vendors to make their applications available on the Exemplar system which will provide our customers with unprecedented applications availability. In addition, we ended the year with over $70 million in cash resources to support our new product introductions."

Meanwhile, Cray Computer is also having difficulties. Cray Computer rolled out its long-awaited Cray-3 GaAs supercomputer last year and recent four-processor demonstration model at the National Center for Atmospheric Research (NCAR). However, at the recent Supercomputing '93 conference, Cray Computer was said to be evaluating whether to build a hybrid machine that combines traditional vector and MPP technologies. Another possibility, company officials said, is an alliance with an MPP vendor, such as Thinking Machines Corp.