A chip set is the vital hardware embedded in a motherboard that lets a processor talk to the rest of a PC's hardware -- from the system memory to the hard drive to the modem. Chip sets aren't as sexy as a high-speed processor, but they're every bit as important. A good chip set makes a system run well and a processor look good.
Back in the days when 486 processors ruled the land, numerous companies made chip sets to support them. Intel also offered a few middling chip set products back then, says Dean McCarron, principal analyst for Mercury Research. But in 1994 the company decided to get serious about its chip set products.
Intel realised that chip sets were key to the success of its processors, says Kevin Krewell, senior analyst with MicroDesign Resources. "The fate of your processor and the system [a vendor] sells depends on the chip set."
Also, Intel was understandably eager to quickly push the industry toward its new Pentium chip, says Mario Morales, program director for semiconductors at market researcher IDC.
Intel's early chip sets weren't perfect, but the company steadily improved its products and quickly established a solid reputation, Krewell says. By 1995, Intel owned 28 per cent of the worldwide market, according to Mercury Research. That's up from 10 per cent in 1994.
Despite its success, Intel made a mistake early in the game that would come back to haunt it, says Mike Feibus, principal analyst with Mercury Research. In a move intended partially to slow processor competitor AMD, Intel stopped shipping its 430 series chip set, which worked with AMD's processors as well as Intel CPUs, he says.
The unintended result is that Intel gave the remaining chip set vendors enough room to survive. After Intel's entry and subsequent dominance in the chip set market, Taiwan-based chip set makers such as VIA Technologies, Silicon Integrated Systems (SIS), and Acer Labs (ALI) were basically on life support, he says.
"Arguably, VIA wouldn't have been around if not for Intel vacating a good business," he says.
The 820 Bomb Drops
Intel continued to build popular and respected chip sets, including its classic 440 products and its 810 integrated graphics product. And it was wildly successful: By the end of 1998 Intel owned about 72 per cent of the worldwide chip set market, with VIA, SIS, and ALI splitting the rest, according to Mercury Research.
Then came the 820. Set for a September 1999 launch, the new chip set offered a handful of improvements over existing chip sets. Among the features: a faster system bus (133 MHz instead of 100 MHz), a 4X Accelerated Graphics Port, and support for a next-generation memory type, the now infamous Rambus (RDRAM).
Intel designed the 820 chip set to complement its "Coppermine" Pentium III processor, which can take advantage of the faster bus. Intel planned to launch a set of the new chips in October 1999.
However, days before the launch of the 820, Intel announced the chip set was having problems handling RDRAM and postponed the launch.
The move forced vendors to scrap tens of thousands of motherboards based on the chip set, which hampered sales of high-end desktop systems for months, McCarron says. What's more, the next month, when Intel announced its Coppermine-based PIIIs, the company could not offer a chip set that fully supported all the processor's features.
But VIA Technologies could.
Intel's Oversight, VIA's Opportunity
VIA had initially planned to offer a RDRAM-based chip set for the PIII processor, says Timothy Chen, VIA spokesperson. (VIA has a licensing agreement with Intel.) The company's design team studied the technology and saw great possibilities -- but decided the time and cost to overcome the accompanying technical difficulties were too great.
Confident that Intel would face similar technical problems with RDRAM, early in 1999 VIA started pushing the PC-133 SDRAM standard, an evolution of the popular PC-100 standard. Intel subsequently sued VIA, claiming a breach of its licensing agreement. Intel argued its license allowed VIA to produce only a chip set supporting a 100-MHz system bus, not a 133-MHz bus. In July 1999, VIA launched its Apollo Pro 133 chip set anyway.
VIA noticed Intel's weakness with RDRAM and put a stake in the ground for PC-133, Mercury Research's Feibus says. VIA was supporting the 133-MHz front side bus of the latest PIIIs, and Intel was not. For the first time, companies following Intel's directions had the disadvantage, he says.
VIA won attention and some major PC vendors as customers. Companies such as Hewlett-Packard and IBM eventually embraced versions of VIA's chip set, Feibus says.
Rambus Problems Continue
By November 1999, Intel had solved the 820's RDRAM problems and launched the 820 chip set at Comdex.
Unlike most Intel launches, however, few vendors rushed RDRAM-based systems to market. Long-time Intel supporter Dell was among those to embrace RDRAM memory.
Dell's Dimension line highlights new technologies, says Neeraj Srivastava, director of product marketing for Dell Dimension. RDRAM and the 820 were top-of-the-line technologies, so they were suited to the Dimension line, he says.
But for many vendors, the new technology wasn't worth it. At the time, RDRAM was scarce and prices very high, even for vendors, says Sherry Garber, vice president of Semico Research. In December 1999, RDRAM cost three times the price of SDRAM, she says.
System makers weren't the only ones hesitant to jump on the Rambus bandwagon. RDRAM is more difficult to make than SDRAM, and manufacturers must pay a fee to the originating company, Rambus. Regular SDRAM memory became profitable, and memory-makers decided to forego RDRAM, Feibus says.
Intel, on the other hand, wanted to use RDRAM with its upcoming Pentium 4 processor, Krewell says. So it sought to get the memory standard into volume production by using it with the PIII, he says.
"Intel was trying to force a technology into the marketplace," he says. RDRAM was pushing the state of the art, and that led to problems, he says.
CPU speeds beyond 800 MHz need RDRAM, says Howard High, spokesperson for Intel. The company contends Rambus technology is still the best solution going forward. But to this day, RDRAM is still too costly, he acknowledges.
Lingering 820 Problems
Intel's biggest mistake was lacking a good SDRAM chip set option, Krewell says. With its 440BX chip set aging, and its 810 and 810E limited to integrated graphics, a significant hole opened in the company's product line--and VIA was there to fill it. Intel tried to create a stop-gap product to appease vendors: an 820 chip set with a Memory Translator Hub (MTH) to work with SDRAM.
But that created more problems instead of solving existing ones.
Last May, Intel acknowledged a flaw in the MTH and recalled the product. Owners of 820-based systems with the MTH were offered replacement 820 motherboards with RDRAM.
Few mainstream vendors used the 820 with the MTH, but Intel had shipped close to a million motherboards with the altered chip set. In addition to the public relations problems, Intel took a $US200 million charge to cover the recall.
Rambus Ruckus Requires Fence-Mending
Intel's 820 problems and its decision to push RDRAM strained some of the company's business relationships, Intel's High acknowledges.
Some partner companies joined Intel's RDRAM road, while others took a different route, says High. Because Intel has been such a stalwart supporter of RDRAM, companies that don't like the technology are unhappy with Intel, he notes. Consequently, Intel is rebuilding some relationships.
Intel made a good start in June when it released its 815 and 815E chip sets, its first to natively support the PC-133 SDRAM standard. The products met with positive reviews, and Intel's own benchmarks show the products outperforming its RDRAM-based 820 products on a variety of mainstream tasks.
But for VIA, the door is already open.
The Apollo Pro 133 product put VIA on the map, VIA's Chen says. Sales are booming. In August 2000 the company shipped 5.5 million chip sets, and it expects to ship 6 million to 6.5 million in September, he says.
Mercury Research estimates Intel owned 68 per cent of the worldwide desktop chip set market in 1999, with VIA at about 22 per cent, SIS and ALI splitting 10 per cent, and AMD registering its first 1 per cent in this market.
A snapshot of today's market probably finds VIA with about 43 per cent of the world's chip set market -- tied with Intel -- SIS and ALI still sharing about 10 per cent, and AMD with about 4 per cent, says Mercury's McCarron. Intel will probably finish out the year slightly ahead of VIA, he says.
Memory Challenges Continue
In July 2000, the Intel-VIA lawsuit was largely settled. But the battles between Intel and VIA are far from over. VIA has acquired a processor division (from both Cyrix and Centaur) and a graphics division (S3's graphics chip business). It has also established strong relationships with companies such as AMD and 3Com, Chen says. And the company will soon offer chip sets that support Double Data Rate memory (DDR SDRAM), a direct competitor to RDRAM.
Meanwhile, Intel must win back vendor and customer faith in its RDRAM-based chip sets. Intel is getting ready to launch its next major processor line, the Pentium 4. The first chip set for this processor, called the 850, uses RDRAM exclusively. Intel says the release will still take place in the fourth quarter, as announced.
But PC vendors say it will ship later in the fourth quarter than Intel originally planned. They complained last week that problems with the 850 chip set have pushed back the launch date from late October to late November.
Meanwhile, RDRAM availability has improved, Semico's Garber says. More memory makers now produce it, and demand remains relatively low. However, despite the increased supply, RDRAM still costs as much as 2.5 times SDRAM's price, she says.
Intel has announced plans to create an SDRAM-based chip set to support the new processor, but that isn't due until 2001. With VIA and others offering cheaper high-speed chip set alternatives, Intel may have to step more quickly in order to hang on to its market share. For now, Intel remains vulnerable to quick and creative competitors.