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7/96 Reviews: Cover Story

Listing of July 1996 Reviews

Who Wins in the Chip Wars?

By Diganta Majumder

It's not really a war. Even at its most competitive, the microprocessor market can best be described as Intel vs. everyone else. More often than not, it's just Intel vs. itself.

Intel rules the CPU arena with a dominance that would be the envy of any company accused of monopolistic practices. Depending on whom you listen to, its overall share of the desktop market approaches, and perhaps exceeds, 80 percent. (According to Dataquest, of 64 million x86 PCs sold in 1995, at least 52 million had "Intel inside.") Even though Intel allocates huge amounts of money for R&D and fabrication capacity, it's estimated that within the next three years it will be the world's most profitable company. To build awareness of its brand, Intel spends more on its marketing than its rivals derive in overall revenue. All this for a product that virtually no one buys off the shelf. But it's not just the sales volume and bottom line that set Intel apart. The company drives the technology at a pace that leaves everyone-not just its chip rivals-panting. The steady drumbeat of advancement, from the 8086 to the most recent Pentium Pro, has marked an inexorable march up the performance ladder.

For example, the first x86 chips performed only a few hundred thousand instructions per second-that is, fewer than 1MIPS. But our own low-level testing shows that Pentium 166 PCs running Windows 95 typically performed at about 300MIPS. And the new machines running Windows NT have been rated at 400MIPS. That's a performance improvement of better than 30 percent in less than six months.

Not surprisingly, some of Intel's partners can't keep up. For instance, during the hype over Windows 95 last year, some observers noted that Intel had wanted a mass-market 32-bit OS since releasing its own 32-bit-capable microprocessor, the 386, fully a decade earlier. For its part, Intel can't hide its impatience with OEMs and software developers who lag behind its blazing pace. That's the main reason why, for the past few years, the company has been pushing motherboards on its OEM partners; it's the fastest way to embed the latest chip technology.

There have been occasional discordant notes. A few years ago, Compaq rebelled at Intel's prominence and began a very public search for alternative chip suppliers, but it has since quietly returned to the fold. Without the mass marketing, the Pentium flaw of late 1994 surely would not have received the attention that it did. And in the notebook field, there have been reports that hardware manufacturers have been unhappy with Intel for showing a Pentium 150MHz chip before machines carrying the Pentium 133MHz had even reached retail outlets. But these have all been minor obstacles at most.

So where does that leave manufacturers, or even users, who want something else? There have always been alternatives to Intel, of course, but for a long time these perennial also-rans were little more than clonemakers, though they bristle at the term. Their sole advantage was price-they offered big discounts while Intel, despite its high production costs, maintained fat profit margins. But things may slowly be changing.

Leading the pack is Cyrix, which insists that it will now compete against Intel on performance rather than just price. To that end, the company is pursuing an intriguing strategy: In partnership with systems integration giant EDS, it's gone into the PC manufacturing business.

The company's claims of superior performance aren't entirely without merit. Our low-level testing shows the Cyrix-based PCs lagging the Pentiums somewhat. But in our Excel and Word benchmarks, the Cyrix chip and an equivalent Pentium run neck and neck. (Beware of the labels; the Cyrix 6x86-P166+ is actually more in line with the Pentium 133.)

Still, Cyrix insists that its new line of PCs (see Cyrix 6x86-P166 review) does not signal a major move into OEM territory. The machines, it says, are primarily a showcase for 6x86 technology. And at the time of the launch, Cyrix insisted that it wouldn't run a mass-marketing campaign like Intel's or do anything to alienate potential hardware partners. Since then, however, it has taken out full-page advertisements that poke fun at PC maker Gateway 2000. Of all the big OEMs, Gateway has been the most content to stay within Intel's herd.

According to market analyst Martin Reynolds of research house Dataquest, Cyrix could conceivably hit all of its sales goals without making a dent in Intel's volume. "If Cyrix can ship just a few million" of those 6x86 microprocessors, he notes, "they'll double their revenue." But that still doesn't add up to a blip on Intel's screen.

The pickings get even slimmer with the other alternatives. Advanced Micro Devices (AMD) garnered considerable attention last year with its acquisition of NexGen Computers (the chipmaker that got some of its seed money from Compaq) and its promise to build a different form factor. But by late last year, AMD was already reaching for pin compatibility, and its last release, the K5, was a virtual non-starter. Analysts say they're waiting to see how the forthcoming K6 turns out, but the fact that its release has been pushed back to 1997 is surely not a good sign.

Finally, there's the PowerPC. The most newsworthy thing about it may be that it's generated so little news. Given its blue-blood origin-IBM, Motorola, Apple-and the splashy launch of the PowerPC 600 series in 1994, the line was expected to have a much bigger impact than it has had so far. But with the licensing agreements IBM signed recently, this may yet be a product to watch.

All of which helps explain why Intel is betting on the future in a very big way. This year alone, the company will spend some $4 billion on fab capacity. The returns on that investment won't be seen for at least another two years, and at that point Intel will need to sell every chip it can ship. This in turn means that the overall PC market needs to maintain its growth rate. To that end, Intel just keeps raising the stakes, with ever-faster clock speeds, multimedia extensions aimed at the consumer market (currently the fastest-growing market segment) and ever-lower prices.

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