COMPRESSING THE CHIP IBM, Intel form joint venture to make new microprocessor


FORT LAUDERDALE, Fla. -- When IBM, Apple Computer and Motorola last year joined forces to develop a new microprocessor called PowerPC, many analysts figured the power structure of the personal computer industry had shifted forever.

By aligning with Apple and Motorola, Big Blue appeared to finally have moved against its partners Microsoft Corp. and Intel Corp. Now it seems IBM was merely hedging its technological bets.

While the company is clearly at war with Microsoft over the direction of personal computing software, Intel and IBM have been snuggling ever closer in Boca Raton. Fla.

About 70 top designers and engineers from IBM and Intel are working together in the Noyce Development Center, just across from IBM's sprawling personal computer lab.

Their mission: to compress circuitry that now covers nearly 60 percent of the printed circuit boards in IBM's most advanced personal computers into a single, thumbnail-sized chip.

The PowerPC and Noyce ventures have made IBM the envy of the industry. They give IBM a lead role in developing standards for both engineering workstations and personal computers. Analysts said either type of machine could end up dislodging the other to dominate desktop computing.

The Noyce Center also demonstrates how IBM and Intel need each other as much in 1992 as they did in 1980. Had the two companies been unable to agree on the technical directions being taken at Noyce, many personal computer users would have been thrown into yet another quandary over standards. Such quandaries typically cause large companies to postpone buying decisions.

"Clearly IBM or Intel could have done this on their own," said James Thomas, who heads the Noyce Center. "The question is what do you integrate. You can do three or four implementations and fragment the marketplace or you can do it together, accelerate time to market and leverage resources."

Compressing a computer onto a chip is nothing new. Chips & Technologies of San Jose, Calif., and Advanced Micro Devices of Sunnyvale, Calif., have already integrated mid-1980s vintage microprocessor, graphics and logic chips into a single 1.5-by-1.5-inch package.

What makes Noyce different is its intention to do the same thing with state-of-the-art technology. Noyce's chip will be based on versions of the i486 microprocessor Intel only began shipping early this year. It could include IBM's most advanced graphics and data transfer technology.

While Chips & Technologies hopes its PC/Chip will sell well to makers of portable, consumer-oriented products, the Noyce Center is concerned more with lowering the cost and expanding the market for advanced personal computers, Thomas said.

By integrating dozens of logic chips into a single package, Noyce designers plan to lower materials costs, simplify design, increase reliability and reduce overall manufacturing costs.

"To the degree I reduce that logic, I free up space for the next generation of computers," said Mr. Thomas.

That space will be used for circuitry computers will need to read optical disks, display video and recognize voice and handwriting commands. IBM already sells "multimedia" machines with some of these features, but at $6,000 apiece, they are about six times too expensive for the mass market, said Kimball Brown, a market researcher with International Data Corp. in Mountain View, Calif.

IBM is counting on developing a low-cost multimedia machine to unlock vast new markets by melding the best of television and personal computing. Mr. Thomas' mission is to speed up the process by melding the best of Intel and IBM.

The Noyce venture also allows Intel to leverage its relationship with IBM to get a head start on a growing number of competitors.

In the last year alone, Chips & Technologies, Advanced Micro Devices and Cyrix Corp. of Richardson, Texas, have begun selling chips that are compatible with Intel's popular 386 microprocessor.

The Noyce venture has given Intel a big advantage over both companies because it removes much of the guesswork that makes circuit integration such risky business, said Scott Allen, a spokesman with Advanced Micro.

If chip makers design too much capability into a chip, they risk limiting computer makers' options. "The key to this is getting as close to the customer as you possibly can," Mr. Allen said.

But Noyce will fail if it produces chips that only IBM can use, Mr. Thomas said. As large as IBM is, it cannot single-handedly create a market for the personal computers it wants to build. Only when all companies have access to the chips Noyce and the PowerPC venture seeks to invent, can multimedia succeed.

"We must impart this technology to the rest of the industry," Mr. Thomas said. "To the degree that you stop doing this, you make [computers] a commodity, and we all go out of business."

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