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Chips & Technologies Goes After Intel, PC Business With New Products

September 30, 1991

SAN JOSE, Calif. (AP) _ Chips & Technologies Inc., a small computer chip maker that’s been struggling financially, on Monday introduced seven microprocessors in a direct challenge to industry leader Intel Corp.

The San Jose-based company unveiled a line of Intel-compatible 386 microprocessors and other products at a New York news conference.

″I think these are definitely make-or-break products for us,″ said Chips President and Chief Executive Gordon Campbell, who once worked for rival Intel. ″Even if we get only 5 percent of the market, it will add greatly to our growth.″

Chips lost $9.6 million on revenues of $225 million in fiscal year 1991 ended June 30.

Microprocessors are the brains of a personal computer. Intel long has dominated the microprocessor business with its 386 model chip, which is the basis for most IBM-compatible personal computers.

Some analysts believe the $1.5 billion 386 microprocessor market has peaked and, despite oncoming rivals, Intel will remain dominant as it continues building faster and more powerful products. Intel has the only next-generation microprocessor, 486.

In April, Intel got its first competition for its 386 microprocessors. Advanced Micro Devices Inc. put a clone on the market, taking away Intel’s five-year monopoly and inciting a lawsuit from Intel, which claimed patent infringement. In turn, Advanced Micro Devices sued Intel for $2 million, claiming antitrust activities.

Chips’ 386 microprocessors don’t duplicate Santa Clara-based Intel’s design, however. Chips instead spent four years and $50 million developing its own Intel-compatible architecture, Campbell said.

″We placed a very serious bet four years ago, that the X86 architecture would continue to dominate,″ Campbell said. ″We had to make lots of assumptions about the direction of PCs, and they all have proven correct.″

Chips claimed its microprocessors were up to 10 percent more powerful than Intel’s, although they’re priced in the same range - $59 to $226.

The new Chips products are:

-Four ″Super386″ microprocessors, including two SX, or ″stripped down″ types and two DX, or more powerful, types. Intel also has 386SX and 386DX microprocessors, but Chips’ top-of-the line DX microprocessor delivers up to 40 megahertz of speed, or 40 million cycles per second. AMD’s 386 also hits speeds of up to 40 megahertz, a bit faster than Intel’s 386 line.

-Two ″SuperMath″ coprocessors, joining a handful of rivals offering alternative products to Intel’s dominant 387 math coprocessor.

-PC.CHIP, described as a single chip personal computer for palmtops, laptops and other small machines. The $35 product is unique because it doesn’t need help from other chips and chip sets to do all the computational work of small computers, according to Chips.

Industry analysts and computer chip makers believe that within a few years microprocessors will also integrate all brain functions of a computer without the help of other chips to organize the work. That’s one reason for Chips’ financial troubles: its main helper product is becoming obsolete.

In its infancy in 1985, the company pioneered the so-called ″chip set″ that directs logic functions around the microprocessor. These powerful chip sets, which won’t be needed by so-called integrated microprocessors, themselves replaced what used to be hundreds of smaller silicon chips.

″Chips & Technologies needed to get into the microprocessor business because their future was in danger,″ explained Michael Slater, publisher and editor of the Microprocessor Report out of Sebastopol.

Thomas Kurlak, a financial analyst that follows Intel for Merrill Lynch in New York, has said Intel shouldn’t worry about any 386 imitators because the company’s 486 microprocessors are expected to boost revenue.

This year, Intel’s 386 line is expected to contribute about $1.3 billion in sales, vs. $650,000 to $750,000 from its 486 microprocessors, he said. Next year, however, 386 sales are expected to drop a bit while the 486 contributes $1 billion in revenues, Kurlak said.

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