Intel’s Basic PC plans could be fatally flawed

If there are going to be one billion PCs across the planet in the next few years, they’ve got to be a lot cheaper than they are now. This premise is central to Intel’s plans for market segmentation but the concept is also shared by Stan Shih, Acer’s CEO, as well as rival chip companies Cyrix and AMD. This week, at the Intel Developer Forum (IDF), Craig Barrett, CEO of the company, gave an indication of just how this plan might be assured. It is based on the removal of so-called “legacy” elements in a PC, such as ISA slots, coupled with cheaper microprocessors using the 370-pin slot, as well as smaller chassis designs. But it turns out that Intel’s figures might only shave a matter of a few dollars off the price of a PC, and in so doing, could also have an impact on the performance of a machine. Intel’s strategies to lower the cost of a PC depends on the following features, according to a slide it showed at IDF this week. The plan partly depends on PC designers using Windows drivers for so-called soft migration. Under this scheme, Windows 98, for example, could take care of both the audio and the modem on a PC, using the so-called Audio Modem Riser. Another component in the plan is the use of the 370-pin Celeron. It is much cheaper for Intel to make a package, using a socket, than to design a Slot One based system. This, in effect, is a climbdown by Intel, which after telling everyone that the original Celeron, released in April, would offer them better peformance, have now admitted that they did not need to lead PC vendors and end users down that route. The whole Celeron family will move to the 370-pin technology, while Intel will, however, retain Slot One for other members of its processor family. And in early January, we are likely to see a 366MHz pin-based chip using Socket 370. So-called “legacy removal” depends on the dropping of ISA slots and their replacement by other technologies. USB seemed to be that flavour of the month in Palm Springs. Other elements in the plan include the use of the Micro ATX form factor motherboard, “smart integration” of chop sets, and the use of a 90 watt or lower power supply. There are several Achilles’ heels in Intel’s arguments, which could, however, leave it without a leg to stand on. If soft audio and soft DVD are used in the PC design, there is bound to be a performance hit. Using Windows 98 will reduce performance of both and only a small amount of money is saved anyway. One Intel engineer said: “Audio and DVD are not quite there, yet”. If audio performance is hit, end users are going to notice the difference and want to plug a relatively inexpensive card into the system. Using soft modems is also likely to hit performance but suffers from another problem. Attendees at the forum were treated to a new word called homologation this week. This, put simply, means that assemblers of machines using the soft modem spec will still need to have such systems certified by the governing telecomms authorities in their regions. One answer could be for Intel to lower the price of its processors to a point where it doesn’t make a gross margin of 45 per cent plus on its parts. However, for Intel, this route is blocked because its entire business model and its future R&D depends on such profits. Although it is now generally accepted that PC sales are set to grow, and to grow in healthy volume, the real question is whether people will be satisfied with a system which, however cheap, is second best. Intel does not want to go it alone on its plans to rid the world of ISA and to make systems cheaper. But, at the same time, it will find it difficult to persuade its partners to take the leap into this brave new world unless it is persuaded to trim its own profits. That is unlikely. ®