FREE ESSAY ON MICROPROCESSORS

MICROPROCESSORS

About Microprocessors:
Myths and Technology.
By
Dwight Moreland
CIS 221/L
Instructor, Mr. John Sharifi
6 June, 1999
Index
About Microprocessors
Page
Myths about Sub-$1000.00 PCs .............................................1
Industry Trends................................................................5
Shift to On-Chip Cache Pays Off............................................6
How Far Can Intel Go?.......................................................9
Intel Seeks Salvation on Internet............................................11
Socket Strategy Challenging for AMD ....................................14
Review..........................................................................17
Work Cited.....................................................................18
About Microprocessors
Myths About the Sub-$1,000 PC
The emergence of the sub-$1,000 PC market reflects an inexorable trend toward
less-expensive systems that will surely doom Intel in the long run. You could easily be
convinced of this argument by the recent stories on low-cost PCs. These stories, however,
are based on myths, not facts, and the emergence of this new market is not likely to
upset the status quo.
Myth: Sub-$1,000 PCs represent up to 40% of the PC market. This gem is based on
misinterpretations of a survey by Computer Intelligence that shows an increasing
percentage of PC sales below $1,000 during the course of 1997. Sales in this category
peaked at nearly 40% in August, but this survey measures only the U.S. retail desktop PC
market, which represents less than 10% of the worldwide PC market and has specific
characteristics that make it unusually receptive to sub-$1,000 PCs.
In particular, it is mainly a consumer channel; two-thirds of all PCs are still bought by
businesses, where the sub-$1,000 concept is far less popular. Many business users seek
faster systems to increase productivity. Others shun low-end systems to avoid rapid
obsolescence. Although low-cost PCs run today's software adequately, firms looking to
upgrade to Windows NT and other advanced software in the future might not be able to
afford the limitations of a sub-$1,000 PC. These systems also lack expansion slots in
some cases, giving new meaning to the term fixed asset.
The survey also doesn't include worldwide demand. While the sub-$1,000 PC is popular in
emerging markets such as China, the large markets such as Europe and Japan have been slow
to change their focus. Finally, the survey excludes mobile systems, which make up more
than 20% of the total PC market but are not available for less than $1,000. We believe
total sales of sub-$1,000 PCs were perhaps 5 million units in 1997 and will approach 10
million units, roughly 10% of the worldwide PC market, in 1998.
Myth: Sub-$1,000 PCs have been enabled by low-cost CPUs from Cyrix and AMD. Sub-$1,000
PCs have been available for years; the problem has been that their capabilities were well
below the needs of contemporary software. The new popularity of low-cost systems has been
driven mainly by two factors: a drop in DRAM and storage prices along with a lack of
performance-hungry software.
DRAM prices have dropped nearly 90% in the past two years. The price of a 1G hard drive
also fell. In years past, PC makers would simply increase the DRAM and hard-disk capacity
in their entry-level systems, keeping prices constant. Component prices fell so fast in
1997, however, that many vendors chose to discount their entry-level configurations
rather than beef them up. This decision was aided by a relative stagnation in software
demands. 
Using a low-end processor from one of Intel's competitors can shave $20 to $40 in cost, a
significant amount in a sub-$1,000 PC. But similar savings can be achieved by adjusting
the memory, storage, or other features of the system, which account for 80% of the total
system cost. Many PC makers have decided the Intel brand name is worth the extra expense.
Both HP and Micron, for example, have chosen a Pentium/MMX-200 for their $799 PCs.
Myth: The trend toward lower prices is irreversible. The factors that made low-cost PCs
popular can easily be halted or even reversed. Since December, DRAM prices have firmed
and even started to rise, as bleeding chip makers finally began to reign in production.
This situation, exacerbated by Asian financial turmoil, could cause shortages as early as
next year. In addition, the unusually fast progress in hard-disk density over the past
two years is likely to return to historical rates.
More important, new software will emerge that demands faster processors, more memory, and
larger hard drives. Windows 98 won't do the trick, but digital photography, video
conferencing, voice recognition, and other muscular applications might. Both Intel and
Microsoft, companies I avoid betting against, are investing heavily to make sure that
today's software doesn't remain good enough. Demand for low-cost PCs will dry up if those
systems can't run the most popular new programs.
These factors won't change immediately, and sub-$1,000 PCs are likely to be popular in
some channels throughout this year and probably beyond. They will remain a relatively
small part of the total PC market, however, particularly when measured in dollars. This
price segment will provide a foothold for Intel's competitors, but to achieve their
market-share goals, AMD and Cyrix must do more than simply sell cheap processors.
Industry Trends 
In February 1999, Intel introduced the Pentium III CPU (code name Katmai). It is a
Pentium II with the new instructions for multimedia, known as Streaming SIMD extensions.
On May 7, 1997 Intel introduced the Pentium II CPU (code named Klamath). It was heralded
as the fastest microprocessor for the server environment. Major system manufacturers also
unveiled their offerings which use the Pentium II processor with MMX technology. Intel
shifted motherboard manufacturers over to this slot 1 configuration from the previous
Zero Insertion Force (ZIF) socket. This Pentium II processor is packaged in a SEC (Single
Edge Cartridge), and this cartridge fits into a slot on the motherboard. The Pentium III
processor is packaged in SECC2 cartridge. The socket 7 (Pentium) and socket 8 (Pentium
Pro) use Zero Insertion Force (ZIF) socket. Slot 2 configuration is Intel's workstation
and server design, based on their Pentium II Xeon processor. A Slot M configurations are
also being developed by Intel. AMD and Cyrix built 6th generation CPUs with the
equivalent packaging as the Intel Pentium family CPUs. Even though they are targeted to
compete with the newer Intel processors with MMX technology, they work in many of the
Pentium based motherboard, ie. socket 7 solutions. AMD, VIA, and SiS are producing or
have plans for producing chipsets capable of handling a 100 MHz external bus for socket 7
motherboards. AMD calls this Super7. According to Intel, the SEC was designed to overcome
many of the inherent limitations of the ZIF socket solution. Many industry observers
state that Intel's Pentium Pro fabrication processes was not efficient. However, Intel
has recently returned to socket processors with the release in Fall '98 of their Celeron
processor in PPGA (Plastic Pin Grid Array) packaging. Again, yield and cost were reasons
for the change in product.
Shift to On-Chip Cache Pays Off
Intel's Slot 1 and Slot 2 Will Give Way to Sockets by 2000 Intel's decision to release
its Mendocino processor without a module in 1Q99 is just the tip of the iceberg. By the
end of next year, Intel will expect to be shipping moduleless processors into all of its
market segments, and by the end of 2000, virtually all of its chips will plug into
sockets instead of slots. This trend will be enabled by a shift to on-die level-two (L2)
cache, which makes today's module structure superfluous.
The initial purpose of the Slot 1 module was to hold the external L2 cache chips required
by the Klamath and Deschutes CPUs. Mendocino doesn't need external cache chips, as it is
Intel's first processor to incorporate the entire cache subsystem. To maintain
compatibility with these earlier processors, Mendocino is currently shipping in a Slot 1
module, despite the fact that, other than the CPU, the module contains no active
components and is nearly empty.
Mendocino will discard this vestigial module early next year, instead appearing in a
370-pin plastic PGA that plugs into a standard socket. Intel will continue to offer the
Slot 1 version as well, but we expect PC makers to convert to the so-called Socket 370
over time, as it is smaller and less expensive than Slot 1. By the end of 1999, the
Celeron segment will be largely converted to Socket 370, and future Celeron parts are
likely to appear only in a socketable form.
Intel will benefit from this transition as well. According to the MDR Cost Model, the
PPGA version of Mendocino will cost about $10 less to manufacture than the current
module. According to our shipment forecast for 1999, that decrease could save Intel up to
$300 million next year.
Not one to let a good idea go to waste, Intel will eliminate modules from its other
product lines as well. On-die L2 cache is very attractive in the mobile market because it
reduces power consumption and physical size as well as cost. Sources indicate that in
early 1999 Intel will deploy a mobile product code-named Dixon that has 256K of L2 cache
on the chip. Given its power and size advantages, Dixon is likely to displace the current
Mobile Deschutes fairly quickly, eliminating the comparatively bulky minicartridge.
Process technology is holding back the other segments. In the current 0.25-micron
technology, even Mendocino's piddling 128K cache takes up about 35 mm2 of die area,
adding $10 to the manufacturing cost of the chip. Dixon's cache is likely to double that
cost overhead, eliminating any cost advantage over a module.
In a 0.18-micron process, however, a 256K cache will fit into that same 35 mm2, making it
less expensive to integrate that amount of cache than to add an external cache. For this
reason, we expect Intel's Coppermine processor, a 0.18-micron version of Katmai, to
incorporate an on-die 256K cache. With on-die cache, Coppermine could plug into the same
Socket 370 as Mendocino, although Intel will probably also offer a Slot 1 version as a
transition vehicle. We expect Coppermine to appear in 2H99, and by mid-2000, it could
largely eliminate Slot 1 from the PC market. 
Even the Slot 2 segment could move away from modules. Intel says that future high-end
processors Cascades, Foster, and McKinley will include on-die L2 caches as large as 2M
(see MPR 10/26/98, p. 16). Like Mendocino, Cascades is likely to appear in both slot and
socket versions, but Foster will probably use only a socket. Because servers and
workstations are less sensitive to the cost and size penalties of the module, the
transition to sockets will take longer in these segments than in the PC segments.
The 0.18-micron process is required in this segment as well: regardless of cost, the
0.25-micron process is simply incapable of building a processor with 2M of on-die cache,
which is required to match the current Xeon line. Again, the cost savings of on-die cache
are considerable: we estimate a 2M Cascades, even at a projected die size of 375 mm2,
will cost 50% less to build than today's 2M Xeon module, given the high cost of the
Xeon's four custom cache chips.
Other vendors are also putting large caches onto their processors. AMD's next K6, known
as Sharptooth, will include a 256K L2 cache. IDT will instead use 128K of primary cache.
These chips will plug into Socket 7 but, like the Socket 370 parts, will not need
external L2 cache, thus reducing system costs. The big exception to this trend will be
AMD's K7, which will introduce the Slot A module just as Intel is shifting its products
to Socket 370. Once the K7 moves to 0.18-micron technology, it too is likely to adopt
on-die L2 cache, turning Slot A into Socket A.
The big losers in this transition are SRAM vendors, which won't have the PC market to
sell into much longer. But shifting SRAM production to the processor vendors will require
them to add fab capacity. Building this capacity will take time, slowing the transition
to on-die cache. But build it they will. In two years, modules will be a fading memory.
How Far Can Intel Go?
When the U.S. Federal Trade Commission (FTC) launched a new antitrust investigation of
Intel a few months ago, the usual tales made the rounds: stories of Intel threatening to
cut off supplies of its processors to system makers that purchased from Intel competitors
or otherwise transgressed. Intel denies all of these tales, of course, forcing the FTC to
sift through a mountain of paperwork seeking the proverbial smoking gun. Intel freely
admits, however, to making a different kind of threat, one that may ultimately catch the
FTC's attention.
Intel maintains, for the most part, good relations with all of its major customers. For
system makers that design their own system-logic ASICs or motherboards, a key benefit of
this relationship is early access to technical specifications of future Intel processors.
Boards and particularly ASICs can take a year or more to design, test, and debug before
they are ready for production. To deliver products based on the newest Intel processors
when they are released, system makers must have detailed technical specifications for
those processors a year or so ahead of time. To obtain early access to this technical
information, Intel's customers must sign a nondisclosure agreement (NDA) with Intel. Like
most NDAs, Intel's agreements contain a clause that allows the company to terminate the
agreement at any time for any cause; in this event, the receiving party must return all
copies of Intel specifications. The NDA also covers samples, or prototypes of unreleased
Intel processors, which must be returned if the NDA is terminated. Without these
prototypes, system makers cannot test their designs with the new Intel processors and
therefore cannot ship their products in a timely fashion.
In the workstation or server markets, most vendors design their own boards and ASICs.
Many PC makers simply buy third-party chip sets and motherboards that work with the
latest Intel processors, but, to differentiate their products, the top PC vendors do
their own design work. Thus, to be a major system vendor, an Intel NDA is an essential
requirement.
Clearly then, Intel's termination of a customer's NDA is a severe punishment. Intel
admits to taking this step twice in the past year, first with Digital then with
Intergraph. In the first case, Intel took action after Digital launched a hostile lawsuit
without warning, accusing Intel of stealing intellectual property and then lying about
it. In this case, Intel was provoked into taking drastic action, but one can ask whether
the punishment fit the crime. Within six months, Digital chose to settle the suit, at
least in part because it needed a good relationship with Intel to remain competitive.
The Intergraph situation is even more questionable. Intergraph had threatened
patent-infringement lawsuits not against Intel but against some of Intel's other
customers. These customers asked Intel to indemnify them, shielding them from
Intergraph's patents. Instead, Intel asked Intergraph to stop asserting its patents;
after Intergraph refused, Intel terminated its NDA. Intergraph has since filed suit
against Intel for failing to give the system maker access to technical data and other
anticompetitive behavior.
According to contract law, Intel can terminate NDAs whenever it chooses and can partner
with whomever it wants. Antitrust law, however, applies a higher standard to a company
that is the only supplier of a critical component, a category into which Intel clearly
falls. Such a company must treat its customers fairly and equally.Intel claims that it
does treat its customers fairly and equally, but that Digital and Intergraph acted
unfairly and thus deserved to be singled out. By this interpretation, Intel was merely
quelling bullies who were causing trouble in the neighborhood. But suppose Digital or
Intergraph has valid patents that are being infringed? Shouldn't these companies have the
opportunity to prove their case in a court of law? Instead, Intel can easily bring these
companies to their knees simply by cutting off their NDAs.
I believe Intel's dominant position gives it an added responsibility to support all of
its large customers equally. Any grievances it has with a system vendor should be settled
through negotiation or in court, not by cutting off that vendor's ability to deliver
competitive products. Allowing Intel to terminate NDAs arbitrarily gives an already
dominant vendor too much power over the entire computer-systems market.
Intel Seeks Salvation on Internet
A lack of compelling new applications is reducing demand for Intel's more expensive
processors, dampening the company's revenue growth. Little progress has been made since
then. Intel's latest strategy is to use the Internet to build demand for Pentium III--a
strategy that has as much to do with Microsoft's intransigence as with the processor's
technical capabilities. 
Over the past year and a half, Intel has tried to build demand for CPU-hungry
technologies such as digital photography, video-conferencing, 3D graphics, and voice
recognition. Although some have caught on to a modest degree, they remain niche
applications without appeal to broad markets, particularly the businesses that still buy
the majority of PCs. These technologies have not become ubiquitous for a variety of
reasons, but perhaps the biggest is Microsoft's refusal to embrace them. 
With Windows, Office, and other applications, Microsoft controls the core software used
on most PCs. But with no strong competitor to spur its creativity, the Redmond giant sees
no need to improve its user interfaces with 3D graphics or voice recognition. At the
recent WinHEC, the company paid little heed to these areas other than a lame 3D-GUI demo
that may not have any more impact than last year's ill-fated Chromeffects demo. 
While waiting for Microsoft to upgrade its user interfaces, Intel has been unable to
build widespread interest in 3D or voice recognition, the very tasks that Pentium III is
best at. Intel's new strategy revolves around the Internet, something that Microsoft
doesn't fully control. By working with many plug-in vendors and Web-site owners, Intel is
spurring the use of 3D, audio, and video on the Web in ways that make a high-end
processor more attractive. 
Of course, these features are already available today via browser plug-ins. The vast
majority of Web sites, however, consist of text and simple graphics, leading to the
widespread belief that users who are just surfing the Web should buy the cheapest
available PC. Intel's fervent hope is to turn this paradigm around, such that anyone
using the Web--which means just about anyone with a PC--will want a more powerful
processor. 
To start, Intel has made sure that important plug-ins, such as Macromedia Shockwave and
RealNetworks Real Player, are available with Pentium III enhancements. Other plug-ins,
such as Haptek's Virtual Friend, have not been widely used in the past but deliver a more
compelling experience with the new enhancements. 
To showcase these new features, Intel has put together a Pentium III owner's site,
www.intelweboutfitter.com, but this site is mainly an exclusive race track: it's fun to
drive around the site with your Pentium III (no other processors allowed), but after you
finish, you haven't accomplished much. 
To build demand for its high-end processors, Intel is working with more-mainstream sites
such as www.disney.com, www.etoys.com, and www.sharperimage.com. These sites draw a lot
of traffic, most of it from people with processors less powerful than a Pentium III. Such
visitors may want a processor upgrade
after seeing the new features on these sites. 
For example, Sharper Image allows you to download a 3D image of certain products so you
can examine them from multiple angles, just as you would in a physical store. This
feature works with Pentium IIs and other slower processors, but with SSE, the images have
more resolution and/or better lighting, making them look more realistic. Compute power,
not bandwidth, is the issue here; unlike video, 3D images work
well with merely a standard modem. 
Getting all these plug-in vendors and Web sites behind Pentium III before the product was
even launched required plenty of legwork by Intel--and quite a bit of money. This funding
is typically in the form of technical assistance to implement the new features but is
sometimes a direct investment from Intel's $400 million venture fund. 
This campaign is well beyond what other CPU makers can afford. Conceivably, a K6 III
processor with 3DNow could offer an experience similar to that of Pentium III, but most
of the plug-ins don't support 3DNow. Intel says its agreements with vendors are
nonexclusive and don't bar them from supporting non-Intel processors, but AMD can't match
Intel's ante to these vendors. 
External competition is not Intel's primary concern, however. The company must keep PC
buyers from focusing exclusively on Celeron to the detriment of Intel's more profitable
high-end products. Given Microsoft's delays, Intel's Internet strategy could be the
quickest solution to this problem. Success requires that more sites adopt 3D and other
high-performance features; if PC buyers appreciate these additions, their affinity for
the cheapest PCs could be broken. 
Socket Strategy Challenging for AMD
Although AMD has struggled to earn a profit over the past several quarters, some good
signs have emerged recently. We estimate the company's share of the PC processor market
rose to 12% in March of 98, and it is particularly strong in the U.S. retail market,
capturing 35% in June (according to ZD Market Intelligence). While AMD may be profitable
for the rest of the year, maintaining growth and profitability in 1999 will be
challenging.
The company's growing market share is due in part to its internal improvements. The K6-2
is a strong product that matches all of Intel's high-volume speed grades and even
includes 3D acceleration features that Intel's chips lack. Perhaps more important, the
company appears to have overcome the manufacturing problems that kept it from shipping
enough parts in 1997 and early 1998. After some initial problems, the new 0.25-micron
process is ramping well and has completely replaced the older process.
AMD's gains, however, should also be viewed within the context of PC market cycles. When
Intel began pulling out of the 486 market (some say prematurely) in 1995, AMD's market
share surged to 17% as it became the number-one supplier of 486 processors. During 1996,
however, the company was unable to keep PC makers interested in 486 motherboards. As a
result, AMD's market share plummeted to 9% by April 96. This crash was particularly
severe due to the vendor's lateness in delivering a Pentium-class product.
If history repeats itself, AMD should be nearing the top of its cycle. Intel's withdrawal
from the Pentium market is nearly complete, and PC makers are turning to the K6 to fill
their Socket 7 motherboards. But in the past, PC makers have tended to follow Intel to
new sockets, most lagging Intel by no more than a year. This window set a limit on AMD's
ability sell into the older socket.
This cycle, however, could be different. The PC market is much larger than three years
ago; even at 10% to 15% of the market, AMD today represents enough units to keep chip-set
makers and motherboard vendors interested. Intel is also helping in this regard: by
short-sightedly walling off Slot 1, it has given the alternative chip-set makers little
choice but to support AMD's plans.
PC makers have also changed. In the past, the market was so small and uniform that they
tended to use a single motherboard for all systems. This discouraged support of
alternative sockets. Today, many PC makers have separate motherboards for business and
consumer systems, and for mainstream and low-cost systems. The new model allows the use
of Socket 7 for low-cost consumer systems, for example, without changing other platforms.
Intel itself is recommending that OEMs use Slot 1 for mainstream systems and the new
Mendocino socket in low-cost systems next year. These changes will keep the Socket 7
market from disappearing as quickly as in previous processor transitions. We project
continued sales of Socket 7 processors well into the year 2000, although the total
shipments of these chips is likely to gradually decline during that time. The shape of
this decline poses challenges for AMD.
That vendor now supplies about 75% of all Socket 7 processors, with the remaining share
held by cutthroats like Cyrix and IDT, which have recently been playing limbo with Socket
7 prices. (The current winner is IDT with its $30 WinChip-180.) AMD has mainly stayed
above this fray, but to increase its Socket 7 share, it would have to cut prices (and
margins) to compete with these smaller vendors.
The alternative is to try to reverse the downward trend of Socket 7 sales by getting OEMs
that have already converted to Slot 1 to go back to Socket 7. Most of these systems are
entrenched Intel design wins; to make headway in this difficult area, AMD needs both a
strong product offering and some weakness on Intel's part.
Intel isn't planning to cooperate. As PC prices dropped, AMD benefited from Intel's slow
response time. Recent indications, however, are that PC prices may be firming, and Intel
has finally responded with a strategy. Celeron brought Intel into sub-$800 PCs, and we
expect the combination of the socketed Mendocino and the integrated Whitney chip set will
enable Intel-branded sub-$600 PCs by mid-1999. This combination will not leave
significant market segments for AMD to dominate.
As long as OEMs want a competitive CPU market, AMD has a good shot. Although its reliance
on Socket 7 poses challenges, the company's success will ultimately be determined by the
performance of its processors. With a strong product portfolio, AMD should be able to
maintain its share in 1999 or even see some growth. Sizable gains, however, will be more
difficult to come by without aggressive pricing that would jeopardize profitability.
In review, the myths about the sub-$1000 computer raises many questions. Even though they
may represent 40% of the PC market, two-thirds of all PCs are still bought by businesses.
With all the new and undecided technology, businesses are not convinced that the low end
computer is the best deal because there is another myth not mention in the review, you
may get what you pay for.
Bibliography
Miller, Michael. Cybersex Shock. PC Magazine 10 Oct. 1995.
Shifting Into The Fast Lane. U.S. News & World Report. 23 Jan. 1995.
Wilson, David.  The Internet goes Crackers. Education Digest. May 1995.