At least, it does for now. Monopolies, however approximate, after all, are made to be broken. Judging from the buzz around Silicon Valley, lots of people hope Intel’s will be, too, sooner rather than later. For the first time, new competitors are pushing into its markets. The biggest and boldest, like Apple, are going head to head with Intel, backed by radically new technologies. Smaller clone-makers are nipping at its heels, garnering big contracts with some of the industry’s biggest buyers. Intel has responded by aggressively launching new generations of chips and a raft of new products, from networking software to video teleconferencing gear. The strategy: to grow new markets quickly, offsetting possible losses elsewhere, If it works, the company could emerge from the chip wars even stronger than before. If it doesn’t, warns Mark Macgillivray, a Silicon Valley consultant, “Intel will be just another chip company,” dominant but no longer dominating.
That said, would-be rivals should remember this: Intel has an uncanny knack for defying skeptics. Not long ago it was almost accepted wisdom that Japan would grab the microprocessor market, just as surely as it had memory chips. But then along came Intel. After inventing the microprocessor in the early ’70s, it began churning out a series of so-called X86 chips, each faster (and eventually cheaper) than the last. Intel chips went into every IBM-compatible computer; Microsoft built its software around them. Apart from Apple’s Macintosh, whose chips come from Motorola, they became the industry standard-and a powerful one. intel’s fourth-generation 486 put a mini-mainframe on every desktop. Now there’s the fifth-generation Pentium, five times speedier than its predecessor and in stores now. By the end of next year, half of all PCs sold will have Pentium inside. The company’s financials reflect its success. Sales last year grew by half, to $8.8 billion; earnings doubled to $2.3 billion. That hefty profit margin ranks Intel among the very richest U.S. companies. Analysts expect more of the same in ‘94.
If Intel is moving fast, that’s perhaps because its hard-driving chief executive, Andrew Grove, has peeped over his shoulder. He can’t much like what he sees. For starters, rivals are homing in on its traditional X86 market. Foremost among them is a small Silicon Valley chipmaker, Advanced Micro Devices. Three years ago it began selling Intel 386-compatible chips at bargain prices; Intel went to court, claiming patent infringement, but couldn’t stop AMD from grabbing two thirds of the market. Driven partly by that competition, 386 prices have dropped from more than $200 to roughly $28. Now AMD is targeting 486 chips. Its inroads have so far been slight, less than 2 percent, but perhaps not for long. Last month it scored with a deal to supply chips to Compaq Computer, one of Intel’s biggest customers. Later this year AMD will introduce the K86, its answer to Pentium. “No monopoly can exist forever,” says one company executive.
A potentially bigger threat comes from another quarter. Next month Apple will introduce the first computers driven by its much-heralded new chip, the PowerPC. jointly developed with IBM and Motorola, it could be a formidable rival. The reason: computers are shifting away from data processing to multimedia – the manipulation of sound, graphics and video. Because that takes more power than memory, electronics designers have begun exploring alternatives to the comparatively unwieldy X86. Apple’s solution is a RISC chip, supposedly twice as fast as Intel’s Pentium and only half as expensive (box). Other manufacturers are also pushing RISC designs. Among them: Digital Equipment Corp. and Sun Microsystems.
Apple and AMD talk confidently of busting Intel’s dominion. But will they? Not for a long time, at best. Cloners like AMD could well erode the 486 market. But that won’t necessarily hurt Intel, because it is such a voracious innovator. “We eat our young,” says Paul Otellini, head of the company’s chip group. By the time 486 sales be in to slump, Intel will already have jumped a generation or two ahead.
At the same time Intel’s market is exploding. Consumers are upgrading to more powerful computers and buying more of them; portables and palmtops are taking off. Then there’s intel’s foray into things like teleconferencing. Its new ProShare software lets someone in California, say, meet face to face with a colleague in New York. They can swap data, edit reports or make presentations, as if each were in the same room. Innovations such as these, especially for business, promise to boost Intel’s sales. “Even if intel’s traditional market shrinks a bit,” says Richard Shaffer at Technologic partners in New York, “it will be getting a slice of a much bigger pie.”
Apple’s challenge may be more serious, but perhaps not directly. “In its wildest dreams, Apple hopes for no more than 20 percent of the market,” says Macgillivray. Most likely, it will get around 8 percent, roughly what it enjoys today. To grow beyond that, Apple would have to persuade Windows users to shift en masse to Macintosh, most experts say, and that’s not likely to happen quickly, if ever.
It certainly won’t if Intel has its way. Yes, the PowerPC is fast, especially in “native mode.” (That is, when running software designed specifically for it.) Trouble is, as Grove points out, no such software has yet been written. And in handling existing software, the chip is far less speedy-no faster, in fact, than the present Pentium, which Intel will upgrade in April anyway. Those are all critical flaws in the fast-changing PC market, at least as Grove sees it. The PowerPC, he sniffs, represents “positively zero” threat to Intel. “We can’t lose.”
That’s not to say it won’t have an effect. If the PowerPC prompts Intel to cut the price of its Pentium, consumers everywhere will immediately benefit. The rivalry may also accelerate the pace of innovation. As designers and engineers learn to use the PowerPC, and appreciate the potential of its RISC architecture, Intel may be forced to follow Apple’s lead and introduce a similar chip of its own. What’s more, big software manufacturers like Microsoft are beginning to write more and more of their applications for both Intel and Mac. In time, that, too, could push Intel to match the potentially speedier and more flexible PowerPC. It may be years away. But that’s when the real chip war begins.
THEY’RE CALLING IT THE BATTLE OF the Chips. For the computer industry, it has all the ringside appeal of the Thrilla in Manila. In this corner: Intel’s Pentium. Over here: the PowerPC, from the team of Apple, IBM and Motorola. At stake is something more important than a mere world-heavyweight championship – many millions of dollars and control of the next generation of computers and software. Here’s a primer on what to expect after the opening bell.
That would be Intel, which makes chips for the majority of personal computers currently in use. Machines with Pentium chips put much more processing speed behind all the programs created for Microsoft’s DOS or Windows operating systems, a big advantage since that represents more than 75 percent of the software on the market. The first machines equipped with Pentium chips were shipped last year. There aren’t enough Pentium computers out there to say whether large numbers of consumers really notice the difference; that may change as Intel introduces new versions of the Pentium and more and more software developers come up with products that take advantage of the chips power.
Its backers say that by spring, there will be PowerPC machines on the market that can run Macintosh software and a form of Windows and DOS Programs faster than the Pentiurn for $2,500 or less. PowerPC costs half as much to make as the Pentium because its internal structure is different. It’s a RISC chip while the Pentium is a CISC chip. (RISC stands for “reduced instruction-set computing”; CISC is “complex instruction computing.”) RISC chips are cheaper to make because their function is simpler. They break problems down into smaller tasks while CISC chips struggle to handle the entire process at once. The PowerPC is most likely to appeal to people who use computers for multimedia, since RISC chips are more efficient for combining video, audio and text.
The critical arena is the business market, where users need lots of power for things like sophisticated calculations: the average consumer can get by with much less, at least for now. But PC makers are cutting prices on Pentium the way for home user, ing what to do, keep in of Computing: by the time you figure out what to buy, it will probably be obsolete.
