Intel's New Rival: Texas Instruments
By Arik Hesseldahl
Wednesday February 13, 10:08 am Eastern Time
Forbes.com
With the launch of its latest microprocessor, the XScale chip, Intel is throwing down
the gauntlet for the start of a new battle, with a new rival.
Having handily won control of the majority of the market for chips in personal
computers, despite the best efforts of its rival Advanced Micro Devices , Intel is
now turning it considerable attention toward mobile phones and handheld computers.
And in both cases it's going up against Texas Instruments , which has a long-established position supplying chips
for both.
Intel's move comes at a crucial time. Both PDAs and
mobile phones are heading into a period of significant
change. Phones are adding to their traditional voice
functions, absorbing new features revolving around
wireless access to e-mail and the Internet. PDAs are
headed down the wireless path too, in some cases
merging with phones by adding voice capability.
Much of this new functionality is rooted in the use of
ever more complex microprocessors that can handle
both voice and video without killing the battery of a
handheld device.
Curiously, both Intel's XScale chip, announced Feb.
11 in Japan, and TI's OMAP chip spring from
similar origins. Both are built around a core
technology developed by ARM Holdings , the
British licenser of intellectual property and chip
design firm.
Intel has been producing chips based on ARM's
StrongARM design foundations since it took over the
chip operations of Digital Equipment in 1998. While StrongARM has recently become the chip of choice for
companies making PDAs using Microsoft 's PocketPC operating system--among them Compaq ,
Hewlett-Packard and a long list of others--XScale is aimed squarely at TI's heart: high-end wireless phones.
But in sizing up the competition, TI looks like anything but an easy mark, even for Intel. Late last year, Palm said the
next generation of its handheld devices would run mostly on TI's OMAP chips after years of exclusively using
Motorola 's Dragonball line of chips. Palm's arrangement with TI is nonexclusive, meaning it's free to use other chips
from either Intel or Motorola as it sees fit.
TI also has a long and established history supplying chips to wireless phone manufacturers, including market leader
Nokia and other big players, like Ericsson .
"It's going to be tough to displace TI from all the sockets its chips are already in," says Will Strauss, president of
Tempe, Ariz.-based market research firm Forward Concepts. Strauss estimates that TI controls about 58% of the market
for mobile phone chips, followed by Qualcomm , which accounts for between 10% and 15%.
But to build a beachhead in a new market, Intel is looking toward Japan, where third-generation mobile phone service
first launched to mixed reviews last year. Hitachi , Fujitsu , Acer , NEC , Toshiba and Casio were among those
announcing plans to use the chip Feb. 11. Intel has also been working on a 3G phone product with Mitsubishi since
2000.
But any mobile phone or PDA also needs another type of chip: flash memory. Intel makes more of them than anyone
else does, and Strauss calls it Intel's Trojan horse. It would be easy, he says, for Intel to offer its customers package
deals combining XScale and flash memory chips, and later to integrate the flash memory into the XScale chip itself.
There may be business enough for both Intel and TI. Consumers snapped up 8 million PDAs last year and will buy 15
million in 2004, according to research firm Cahners In-Stat. But the real volume is in mobile phones, some 400 million
of which shipped last year, according to In-Stat estimates. The firm expects mobile phone shipments to reach 900
million units by 2005 and says that about half of those will be data-enabled.
AI
