Internet Appliances Trigger New Processor War

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October 03, 2000 (10:20 AM EDT)

Internet Appliances Trigger New Processor War

By Mark Lapedus,

SAN JOSE, Calif. -- The Embedded Systems Conference here last week proved a major launching pad for new microprocessor products and strategies aimed at the fledging Internet appliance (IA) market. In fact, the battle for IA sockets is beginning to look like the RISC vs. CISC microprocessor wars of a decade ago.

On the x86-compatible front, for instance, Advanced Micro Devices (stock: AMD), National Semiconductor, and Rise Technology rolled out new IA products or strategies. RISC-processor offerings came from LinkUp Systems, IBM (stock: IBM), Mips Technologies, and Sun Microsystems (stock: SUNW), among others.

All have their eyes on a market projected to hit 55.7 million units shipped by 2002, according to IDC, Framingham, Mass. -- although the current market remains a disappointment. "The IA market has not taken off," said Max Baron, of Cahners In-Stat Group, Scottsdale, Ariz. "Products like Microsoft's WebTV have not been very successful thus far."

One of the major problems is that the IA market is still cloudy in terms of standards, specifications, and product definition. In fact, according to chip makers at the Embedded Systems Conference, an IA system product could include anything that can access the Internet, such as a PDA, set-top box, smart phone, WebPad, or even a low-end PC.

Because the IA market is so fragmented right now, the business is still up for grabs among OEMs and chip makers alike, said David Lin, chief executive of Rise Technology Co., San Jose. "The IA market is much different than the PC market," Lin said. "It's going to be impossible for larger companies like Intel to dominate the IA market."

Still, Intel Corp. (stock: INTC) is moving full-speed ahead. Last June, the company rolled out the DotStation, a systems-level IA product designed for the end-user markets. "We use a Celeron chip in the DotStation," said a spokeswoman for Intel, Santa Clara, Calif. "The DotStation is not a chip product. It's a systems-level product that is sold under the Intel brand."

It's unclear if Intel will pursue the IA chip market in the future, especially after announcing last week that it would drop its low-end Timna project.

But other processor suppliers are pressing ahead. Advanced Micro Devices Inc. last week announced a new low-end, x86-based chip line for these markets. It said the chip was being used in the IPAQ family of IA products from Compaq Computer Corp. (stock: CPQ); it includes 32 Mbytes of SDRAM, a 56-kbit/s modem, a 10.1-inch screen, and a wireless keyboard.

But even AMD acknowledged the IA market still has a long way to go. "The market is taking off slower than most people had expected," said Paul Smith, division marketing manager for the Embedded Processor Division at AMD, Sunnyvale, Calif. "Part of the problem is cost," Smith said.

To drive down system costs, some x86-based chip makers are forming partnerships with low-cost contract manufacturers and OEMs in Asia.

Last week, for example, National Semiconductor Corp. (stock: NSM) announced a deal to co-develop a line of low-cost set-top boxes with Legend Holdings Ltd., China's largest PC maker.

Other chip makers also are forging alliances. Microsoft (stock: MSFT) and Rise Technology, for example, will develop a low-end set-top box called Venus, to be sold under the Microsoft logo in China. It is based on Rise's 200/250-MHz x86-based MP6. By year's end, it will be available in China for about $300.

Future set-top boxes from Microsoft will use Rise's newly introduced, x86-based system-on-a-chip products, which were rolled out last week.

"Eventually, in their set-top box products, Microsoft will move to our system-on-a-chip devices," Rise's Lin said. "It's even considering a move to change WebTV from Mips RISC to an x86-based chip.

"Traditionally, the set-top box market has been dominated by RISC-based chip solutions," Lin said. "But OEMs are finding it difficult to port the latest software to these devices."

Still, the RISC chip camp is not sitting still. And some new vendors are entering the fray.

For example, LinkUp Systems Corp. is lining up OEM partners in Asia to develop a set-top box for the China and India markets that would sell for less than $200, according to Ravi Bhatnagar, president and chief executive of LinkUp, Santa Clara, Calif.

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