IBM at work on clone of Intel chip Microprocessor used in 80% of PCs

August 24, 1993|By New York Times News Service

In a move that could put new profit pressure on Intel Corp., IBM has been quietly developing a clone of the Intel microprocessors used in most personal computers, industry analysts said yesterday.

The effort by International Business Machines Corp. could generate badly needed sales and ease its dependence on a key supplier for the chips that act as the "brains" for IBM personal computers.

Still, most industry consultants and analysts do not expect the IBM effort to represent a big challenge to Intel's hold on the microprocessor market.

They regard it more as the creation of another, and formidable, producer of chips that mimic the Intel microprocessors that control roughly 80 percent of all personal computers.

"This would eat into the Intel world, but it is unlikely to cause a big shift in the microprocessor market," said Michael Slater, publisher of The Microprocessor Report, a newsletter in Sebastopol, Calif.

The main Intel clone makers today are far smaller than IBM -- Advanced Micro Devices of Sunnyvale, Calif., and Cyrix Corp. of Richardson, Texas.

Neither IBM nor Intel would comment on the report of IBM's effort, which first appeared in a Reuters dispatch yesterday. But industry consultants and analysts say the IBM chips, under development at the company's technology products unit in Vermont, would not reach the market for a year or so.

IBM has not yet produced its first silicon prototypes, according to Mr. Slater. And production of commercial volumes of chips typically follows the prototypes by six to nine months.

IBM helped give Intel, of Santa Clara, Calif., its commanding position in the chip market when IBM entered the personal computer business in 1981, and chose to buy its microprocessors from Intel, setting an industrywide standard.

Since the mid-1980s, IBM and Intel have had an arrangement thatallows IBM to make chips based on Intel's designs. As part of the agreements, there are restrictions on the number of Intel-based chips IBM can make and how they are sold.

The terms of the IBM-Intel pact have never been made public. But one stricture is that IBM can only sell the Intel-based chips it makes to outside customers as components in circuit boards rather than as chips alone. That stipulation severely curtails IBM's ability to market these chips to other companies.

IBM has long been a major producer of semiconductors, but until recently those were only for its own use rather than the so-called merchant market.

IBM's most ambitious drive to free itself from the Intel chip architecture and sell microprocessors to the rest of the computer industry is its PC Power chip joint-venture program based in Austin, Texas.

The PC Power chip uses a chip design known as RISC, or reduced instruction set computing. Along with its partners, Apple Computer and Motorola, IBM is working on a family of chips that it hopes will eventually be used in everything from hand-held machines to the largest computers.

The clone effort is seen as a second front in IBM's drive to sidestep Intel and sell chips to outsiders.

"IBM wants to become more and more a merchant supplier," said Daniel Klesken, an analyst at Robertson Stephens & Co. in San Francisco. "The company is developing these clone chips, but the business strategy is not fully defined yet."

The key technical challenge in making an Intel-compatible chip is writing the microcode, the software instructions that allow a clone to perform exactly like an Intel chip. Most analysts say that that effort is more an investment than a gamble for a company with IBM's technological capabilities.

Clones of the Intel 486-series and perhaps Intel's new Pentium chip would also be a tactic to keep IBM's semiconductor factories working, especially if demand for its Power PC products takes a few years to attract customers beyond Apple and IBM.

"IBM has some world-class production capability on its hands, and this could be a way to use it," said Michael Feibus, editor of Microsystems Report, a newsletter. "It makes a lot of sense."

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