Problems with new microprocessors

Press, 27 February 1980, Page 31

Problems with new microprocessors

Reprinted from the “Economist,” London

Some horrendous problems in developing applications for the latest generation of microprocessors have been identified by Intel, the outstanding micro-chip innovator of the 19705. Intel thinks they can be solved. But they are bound to slow down the microprocessor revolution.

The problems arise with the very powerful new 16bit microprocessors, designed to do anything from operating a robot to being the brains of a computer terminal. Intel’s version is called the 8086. The basic processor costs around $35 but a typical customer would pay $2OOO or more for extra chips to go with it. The customer — designing all this into, say. his new robot — is faced with the task of choosing which chips to have, how to wire them together, how to write the software for them, and so on.

Mr William Davidow, head of microprocessor systems at Intel, reckons that in the early 1970 s a customer needed to spend only $300,000 or less to develop an application off his own bat. Today, however. with the new 16-bit

microprocessors, it would cost him around $5 million. The solution is for the customer not to do all the applications development on his ow but to get the microprocessor manufacturer to help him. This should bring the cost down to about SIM. But that is still far more than in the early 19705. Many users of chips, especially small firms, will be restricted to applications involving simpler microprocessors and will have to eschew some of the latest technology. Then there is another major headache. Partlv to help the customer reduce his applications development cost from SSM to SIM. Intel reckons it will have to spend around S2OOM closing the application technology gap for its 8086: in other words, in order to develop a whole family of electronic devices to work in tandem with the basic processor, to design software, and so on. That S2OOM is just for research and development. It excludes the investment in manufacturing facilities that will be needed. Concealed behind this cost estimate is a highly significant assumption. To justify spending S2OOM on closing the applications gap, Intel calculates that, the 8086 and its related

products will have to achieve sales of at least $2 billion during the microprocessor’s lifetime in the marketplace. That may sound over-optimistic for a market in which Motorola, National Semiconductor, Texas Instrument, and Zilog are among the competitors. How many companies selling $2 billion-worth of 16bit microprocessors can the market stand?

Morgan Stanley’s electronics experts reckon that Intel’s 8086 family will be selling at an annual rate of S2SOM by the end of 1980. Intel is reckoned by some observers to dominate (by value) the market for the new, advanced 16-bit processors at present. Is it planning to be the monopoly (or near-monopoly) supplier of 16-bit processors? The chances are that, as competitors get their advanced 16-bit families ready, they will steal some of Intel’s thunder. And the demand for 16-bit processors looks like increasing as customers learn to use them. On the other hand, microprocessors do seem to be heading for a situation like that in mainframe computers, with few competitors able to afford to stay in the game —and certainly not much room for the Europeans.