Intel: Far Beyond The Pentium

How fast can an $11.5 billion company run? Just watch Intel Corp. A year ago, with Advanced Micro Devices, Cyrix, and others nipping at the market for Intel's microprocessors--the brains for millions of IBM-style personal computers--Intel broke into a gallop. The world's biggest chipmaker cranked up production of its new Pentium chip, spent $150 million on a TV advertising blitz, and chopped prices by as much as 35% per quarter. The latest cut came on Feb. 1, when Intel pruned Pentium prices by up to 40% and fixed the cheapest model at $273. The result: Pentium sales are growing eight times faster than did sales of the 486 when it was young.

So much for the warmup. The main event is coming on Feb. 16, when Intel will unwrap its sixth-generation chip, code-named P6. By all accounts, this microprocessor is Intel's biggest technical advance since the third-generation 386 was unveiled in 1985. And the P6 is heading to market at an all-out sprint, with small-volume shipments starting this fall. So the P6 will succeed the Pentium as Intel's most powerful chip in just over two years--a year less than the gap between the 486 and the Pentium.

Can Intel keep up this breakneck pace? Maybe. But from here on, it gets a lot tougher. The P6 is enormously complex. It sports 5.5 million transistors, or nearly twice as many as the Pentium. That poses unprecedented manufacturing and testing challenges, raising the specter of a repeat of the infamous Pentium bug that cropped up last year.

TRAILBLAZING. Intel also must help develop new PC applications that need the power of a P6, such as voice recognition and videoconferencing--plus new top-end systems, from engineering workstations to so-called computer servers. This trailblazing must also pave the way for the P7, which may make its debut as early as 1997 (table). Otherwise, Intel could have trouble persuading PC makers and buyers to upgrade so frequently. Some PC companies are already dragging their heels. Last year, Compaq Computer Corp. Chief Executive Eckhard Pfeiffer blasted Intel's ads for implying that the 486 is nearly obsolete.

For its part, Intel doesn't have much choice--because rivals are picking up the pace even faster. Advanced Micro Devices Inc.'s 486 entry trailed Intel's by three years, but AMD will launch its 586-class chip only two years after the Pentium. NexGen Inc. (box) is already selling a Pentium-grade chip, just 18 months behind Intel's. So Intel must prod demand for cutting-edge chips, where there's little competition, to protect its fat, 55% profit margins.

The P6 is the first product of the speedup campaign launched five years ago by Chief Executive Andrew S. Grove in response to growing competition. Intel used to develop microprocessors one after another, every four years. But Grove decided to overlap development cycles and started the P6 project more than 24 months before the Pentium hit the market. Similarly, engineers are now two years into development of the P7. However, the P7's design took an unexpected twist last year: an agreement with Hewlett-Packard Co. to forge a new, superfast "architecture" by melding Intel's traditional data-processing methods with HP's speedier reduced instruction-set computing (RISC) technology.

Consummating this unlikely marriage may push the P7's introduction into 1998. If so, the P6 would remain Intel's prize breadwinner for an extra year--perhaps a bit longer, since the P7's hybrid Intel-HP design may make customers more cautious than usual. All this uncertainty means it's crucial for the P6 to inspire customer loyalty.

TWO IN ONE. Technically, the P6 may do the trick. Intel isn't revealing details yet, but the chip will crunch more than 250 million instructions per second (MIPS). That's almost double the speed of the fastest Pentium. To pull it off, the P6 actually combines two chips--the microprocessor itself and a special memory chip that's ultrafast at handling data. They're bundled in a 2-inch-square ceramic module. Judging from the size of this package, the P6 is going to generate significantly more heat than the Pentium. So, a little refrigerator sitting atop the chip may be mandatory, which could rule out P6 laptops.

To chew through software at its breakneck pace, the P6 borrows several sophisticated techniques from RISC pioneers such as HP, MIPS Technologies, and Sun Microsystems. Like a chess grandmaster, the P6 can look far ahead in the software, predict which instructions will be processed in what order, and parcel them out in advance to keep the chip's four parallel-processing units busy. This "dynamic execution" enables up to four instructions to be processed with every tick of the chip's internal clock--130 million tocks a second in the first P6 model. Still, the P6 will trail the latest RISC chips. But Intel insists the P6 will outrun its RISC cousins when it comes to PC programs.

Intel worked on the P6 for an extra year or so because engineers also developed a total computer system that exploits the chip's power. Why? Intel remembers all too well having to delay the Pentium's launch because companion parts made by outside chipmakers weren't ready. Intel has since ramped up its own production of several key components, including motherboards. In fact, Intel is now among the leading producers of these circuit boards.

"We wanted to make sure we delivered the system performance," says David Perlmutter, head of the P6 project. "We didn't want to give people power that they couldn't use." Observes Linley Gwennap, a former HP engineer who now edits the newsletter Microprocessor Report: "Intel's taken a fast engine and built a sports car around it."

But sports cars can be finicky. Wringing out the bugs in such a complex and innovative chip is a forbidding task--and supercritical in the wake of the Pentium fiasco. "Everybody is going to be looking very closely at the P6," admits Lewis R. Pacely, marketing manager. So Intel has spent extra months on quality testing. But once the design moves to the factory, says Albert Y.C. Yu, senior vice-president in charge of microprocessors, "the P6 manufacturing ramp will be very fast."

FINISHED GOODS. Some executives doubt that PC makers will welcome another new chip, just when sales of Pentium systems are surging and 486 machines are still growing in popularity. "Nobody really wants P6 yet," says Stephen Tobak, marketing director for OPTi Inc., which supplies companion chips to PC companies.

Buyers could balk, too. Consumers drove the Pentium's initial takeoff because of its multimedia dexterity, and they usually keep home electronics longer than two or three years. As for businesses, most are still buying 486 machines. "We're just starting to move up to Pentiums," says Michael Prince, information services director for Burlington Coat Factory Warehouse Inc.

To get buyers on board faster, Intel must expand the puppet-master role it has been cultivating in recent years: encouraging software and PC companies to develop new power-hungry applications, such as multimedia and high-capacity communications, that compel individuals and businesses to buy the fastest chip. Intel has also developed its own videoconferencing products and networking software.

If its missionary efforts don't pan out, Intel stands ready to seed the market right away. Using its own auxiliary parts and motherboards, Intel can provide the guts of complete P6 systems, so computer makers would only need to snap together the components. Intel could even supply finished P6 machines, since it already builds Pentium PCs for a few retail outlets and companies.

Just three weeks after the first P6 chips came off the production line in early December, Intel had a new PC whizzing through Windows programs. Now, it's running animation software--and looking virtually as slick as the workstations from Silicon Graphics Inc. that created Jurassic Park's dinosaurs. Rivals had better lace up their running shoes if they want to avoid turning into digital fossils.

Picking Up The Pace

Intel used to launch development of a new microprocessor every four years. But for the Pentium, the generation gap shrank to three years. And for its P6 and P7 chips, Intel hopes to keep rivals at bay by trimming another year off, despite soaring complexity.

286 386 486 PENTIUM P6 P7 START OF 1978 1982 1986 1989 1990 1993 DESIGN WORK FORMAL FEB. 1982 OCT. 1985 APR. 1989 MAR. 1993 Q3 1995 1997 OR 1998** INTRODUCTION VOLUME 1983 1986 1990 1994 1996 1998 OR 1999** SHIPMENTS NUMBER OF 130,000 275,000 1.2 3.1 5.5 10 MILLION MILLION MILLION MILLION** TRANSISTORS INITIAL SPEED 1 5 20 100 250** 500** IN MIPS * PEAK SALES 1989 1992 1995** 1997** 1999** 2002** YEAR INSTALLED 9.7 MILLION 44.2 MILLION 75 MILLION 4.5 MILLION NONE NONE UNITS

*Millions of instructions per second **Estimated DATA: INTEL CORP., DATAQUEST INC., BUSINESS WEEK ESTIMATES