All powered up and nowhere to go

It must be tough being Intel these days. The PC market is clearly in a slump and demand will stay flat in 2001, according to market researchers. And while Intel continues to push processor speeds, users and company buyers are hard pressed to find any application that needs a faster PC.

Unless someone comes up with a killer application that requires this processing power, Intel will continue to struggle and demand could even decline in the year ahead.

At the same time, the company has been pushed by AMD on speed and price which is offering chips of equivalent speeds at up to 25 per cent less. Hence Intel's latest move on prices.

This advances Intel's strategy of having the Pentium 4 displacing the Pentium III on desktops by the end of the year, a move also aimed at countering AMD.

Intel is being challenged on another front by upstart Transmeta, whose Crusoe processor is starting to garner big wins, especially by laptop vendors in Japan. Sony has already created a laptop that uses its low-drain chip, and NEC announced two new Versa notebooks based on 600Mhz Crusoe TM 5600s. In addition, Fujitsu is making 12,000 Crusoe-based notebooks for a Japanese corporate.

By choosing Transmeta, NEC has bucked tradition. The new Versa is targeted at US corporate customers, to which vendors have traditionally been reluctant to offer non-Intel chips. The new slimline NECs, weighing about 1.5kg, come with a 10.4in display, 128Mb of Ram and a 20Gb hard drive.

And there are rumours in Silicon Valley that Toshiba may also be going with Transmeta's Crusoe for some of its notebooks later this year.

To be fair to Intel, it has apparently seen the light and, after two years of waffling on this segment of the market, is working hard to catch up with Transmeta. It has some low-drain high-speed processors of its own, with more in the works.

Of course, the reason for the interest in low-drain chips is that people want longer battery life and no major breakthrough in battery technology is on the horizon. I love the fact that a company like Transmeta is pushing Intel and AMD into addressing this problem. One of the new NECs is supposed to allow eight hours' work non-stop on laptops, pretty much getting you through a working day without needing a recharge.

The additional battery drain caused by wireless links are making this issue even more pressing. I can use the Metricom Wireless network to connect to the internet at 128Kbps anywhere I go throughout Silicon Valley, and 802.11-based wireless campus networks are becoming more widely available.

Internet appliances

Later this year, Verizon and Sprint, two major national US telecom providers, will make 156Kbps wireless networks available to about 80 per cent of the US. These could boost the market in internet appliances, another area in which Intel has been challenged. Chipmaker National Semiconductor has scooped about 85 per cent of this market today, while Intel concentrated on creating ever more powerful desktop chips.

But again Intel has started to push designs at this market, and even won a big contract to provide 240,000 web terminals to AOL in Spain.

The internet appliances market has been slow to take off, but most analysts believe that eventually these devices could outsell PCs by as much as five to one. The key reason is that, while PCs will continue to be the device of choice for connecting to the internet in the US and in some industrialised nations, they are just too hard to use and too expensive for many other users.

In some places web terminals or modified web phones could be the primary way to connect to the internet. In others, the internet connection of choice may only come through some type of handheld computer or mobile phone.

By that reckoning National Semiconductor, whose chips are already in most of the internet appliances and mobile phones around the world, could emerge as the big microprocessor powerhouse in the future.

Although Intel does not completely buy into the idea that web appliances will eventually rule the world, its recent ventures into this space suggest at least that it will not hand the market to National Semiconductor or any other players without a fight.

Intel is clearly at a time in its lifecycle where maintaining its world dominance of the chip market is no longer a breeze. Staying on top may be harder than it ever imagined.