The Hot Chips of Summer

Intel and other chipmakers plan a spate of new semiconductors, but snapping this year's summer doldrums will be no small task

The summer is turning out to be an especially long one for some chipmakers. Prices are under pressure and demand is slumping, as computer makers and other buyers work off stockpiles of unsold goods.

But even as the dog days drag on, a slew of important new chips is hitting the market. The most notable is Intel's (INTC) newest Itanium chip, aimed at high-end servers, the computers that run Web sites and corporate networks. The chip, long known under the name Montecito, is being officially announced on July 18. Like many new chips in Intel's product lineup, this Itanium sports two cores—a core is a chip's central brain—giving it the ability to do more computing work more efficiently.

The chip is also designed to be sparing in power consumption—playing a key role in Intel's effort to win back share lost to archrival Advanced Micro Devices (AMD) (see, 6/27/06 "Intel Starts to Push Back"). Companies like Hewlett-Packard (HPQ), Fujitsu, Hitachi (HIT), and NEC sell high-end corporate computing systems that use the Itanium chip.


 In many cases, those boxes may contain several Itanium chips, making energy costs just to operate them an important factor in making the purchase decision. "This chip has roughly twice the performance, and its performance per watt is better by roughly a factor of two," says Nathan Brookwood, head of Insight64, a Saratoga (Calif.) consultancy. "It is eagerly awaited."

But not so eagerly that Intel is selling as many Itanium chips as it had initially expected. Given the manufacturing costs and the billions of dollars spent on developing the Itanium line in the first place, that makes it hard for the Itanium business unit to turn a profit. This has led to speculation that Intel might spin the unit off or sell it entirely, as it did with the wireless chip unit, sold last month to Marvell (MRVL).

Yet Brookwood doesn't think this latest release constitutes Itanium's last stand. "Itanium has gathered enough critical mass that I don't think it will go away," he says. "The customers who bought these chips have a lot invested in it. Still, the market segment Intel serves here doesn't command the volume to make the business profitable for Intel, and so it's stuck between a rock and a hard place."


  Down the road, Intel might move away from the specially designed Itanium chip, which uses a proprietary instruction set called IA-64. That's in contrast to the standard instruction set known as x86 used on Intel's PC Core and Core Duo chips for desktop and notebook PCs and on its Xeon line of server chips. AMD also bases its chips on the x86 instruction set. Analyst Jim McGregor of Instat/MDR says that could happen within a few years. "Give it another year or two and Itanium will exist as a brand name only," he says. "This is probably the last major revision to the Itanium."

Meanwhile other server-chip vendors aren't sitting still. Sun Microsystems (SUNW) is pressing ahead with plans for the next major chip in its SPARC family of processors, currently code-named Niagara II. The chip isn't expected to be released until early 2007, but Sun recently booted a server running its Solaris operating system with a prototype Niagara II chip inside. The chip has eight cores, and each core can work simultaneously on eight individual computing tasks, or threads, at once.

Sun has staked its hopes on rebuilding its server business on both the Niagara generation of chips and on selling servers running chips from Intel rival AMD.


  Outside the server business, Freescale Semiconductor (FSL) has placed a big bet on the future of a new type of memory chip known as magnetoresistive random access memory, or MRAM. This type of memory brings the best two other types of widely used memory chips, dynamic random access memory—or DRAM—typical in PCs, and NAND-type flash memory common in digital cameras and digital music players, and combines their best attributes into a single chip.

NAND flash is great for storing data over the long term, because it retains that data when the power is cut off. But when saving and retrieving data, it's slow. For its part, DRAM is fast at reading and writing data, but it loses everything when power is cut off. Freescale's MRAM chip represents what Forward Concepts analyst Will Strauss describes as "the perfect memory chip."

The only problem with MRAM chips? They don't hold much data yet. Freescale's chip holds only 4 megabits. "We'll see 16- and 64-megabit capacity out there two or three years in the future," Strauss says. He says MRAM chips will most likely be paired with other chips inside wireless phones in the coming years. As prices come down and data density rises, MRAM chips will become competitive with flash memory chips offered by companies such as Samsung and SanDisk (SNDK), but not for several years.

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