When Intel Israel general manager and plant manager Amir Elstein said last week that Intel Israel’s contribution to Intel (Nasdaq:INTC) would be revealed in all its glory this year, he was referring to two events that will occur within a month of each other.
The latter event will take place on March 12, when Intel will officially launch its Centrino family of processors, including the Pentium-M, developed in Israel under the code name “Banias”.
“This is a real Blue-and-White (Made in Israel) product,” said a senior Intel Israel executive last week. The comment might be considered a disparagement of the Pentium MMX processor, developed at Intel Israel’s Haifa R&D center in the 1990s. On the other hand, another “Made in Israel” processor project, code named “Timna”, designed for graphics capability, was halted in 2001, when it became clear there was no market for it.
The other event occured last Thursday, Intel officially revealed its PXA800F processor, code named “Manitoba”, partly developed in Israel, which is designed to grab a substantial share of the market for advanced cellular telephone processors. It has an Xscale-series processor, with 4-megabyte flash memory, 312 Mgps transmission speed, and a DSP chip, and is designed to replace three separate components in existing cellular telephones. The phones will still need radio and analog chips, which will be supplied from other sources, but Intel may supply these as well in the future.
Until now, Xscale architecture has been used in hand-held devices, such as Compaq’s iPaq, but the Manitoba processor is intended for cellular telephones. Communications companies believe the customers’ ultimate ambition is to own a cellular telephone with voice, data communications, multimedia and agenda capabilities; in short, a cellular telephone cum PDA device.
The question is which device will more resemble the other. We may see people holding a device resembling Nokia’s (NYE:NOK) 7650 cellular telephone, but with a larger PDA-capable screen. Nokia has already developed the series 9100 Communicator with such characteristics. Alternatively, the device might look more like a hand-held device with a microphone and earphone to hold conversations, like Handspring’s (Nasdaq:HAND) Treo communicators, which operates on Partner Communications (Nasdaq: PTNR; TASE:PTNR; LSE:PCCD) and Cellcom’s GSM networks, and Cellcom’s XDA network, due to be introduced in a few months.
The migrant chip
Intel has opted for the cellular telephone option. At the Petah Tikva R&D center, Intel Israel R&D manager cellular division Uri Barkai claims the Manitoba processor provides a “rich user experience”. His comments imply that the first, and possibly only, customers will be cellular telephone manufacturers. Intel has already had some design wins with them.
Intel has already shown Manitoba-based examples to potential customers, and the company expects the first products with the processor will be launched in mid-2003. The processor is designed for mid and high-end products, i.e. multimedia-capable cellular telephones. Six Intel developments centers across the world participated in Manitoba’s development. Two of them have an Israeli connection: Petah Tikva, and Calgary, Alberta, in Canada, both of which were facilities of DSPC, acquired by Intel in 1999 for $1.6 billion.
It was actually an earlier processor that made the migration from PDA to cellular telephone. Barkai says we’ll soon hear announcements by makers of cellular telephones based on Xscale architecture. Intel's aim is for the Manitoba processor to give next generation cellular telephones that processing power and communication capability.
Existing processors provide voice communications using GSM networks and surfing on GPRS networks. Petah Tikva is already working on the next version of processors that will also support WCDMA data communications networks, meaning globe-trotters will really have to make an effort to be out of touch.
It appears that Intel’s Israeli development centers will set the tone for current and future processors’ dual band capability. The Petah Tikva development center is developing processors for cellular networks, while the Haifa R&D center is developing processors for wireless networks, such as the Pentium-M “Banias” processor. Collaboration by the two centers will lead in future, possibly even by next year, to a processor combining both cellular and wireless capability. The product may be only launched close to Banias’s replacement, code named “Dotan”, under development in Haifa. The Banias processor will have added dual band capability, using 802.11a and 802.11b standard wireless networks, in a few months.
This venture will be competing with Agere Systems (Nasdaq:AGR), Proxim Corp. (Nasdaq:PROX) and Avaya (NYSE:AV), which are developing combined processor-software products that can migrate between wireless and cellular networks. There is an Israeli angle in this venture, too: Avaya Israel is responsible for part of the company’s project. Unlike Intel, which has not yet announced the potential customers for its product, the processor-software product already has a declared customer: Motorola (NYSE:MOT).
Seeking a captive customer
Intel’s rival for cellular telephone processors, Texas Instruments (NYSE: TXN), was quick to remind the world that many hand-held devices and cellular telephones are already equipped with software similar to the kind for which Intel claims priority. The two companies’ rivalry goes back decades to one of the milestones in computer history. Intel supporters claim that Intel cofounder Robert Noyce invented the integrated circuit, while Texas Instruments’ supporters attribute the invention to Jack Kilby.
Intel is one of the most important suppliers of flash memory chips for hand-held devices and cellular telephones, while Texas Instruments is the largest supplier of processors for cellular telephones, with over half the market. Its cellular telephone maker customers include Nokia, Matsushita Electric Industrial (NYSE:MC), NEC (Nasdaq:NIPNY; LSE:NEC; XETRA:NIPN), and Fujitsu (Tokyo:6702), which supplies telephones to NTT DoCoMo (NYSE:DCM; LSE:NDCM). In the PDA sector, Texas Instruments supplies processors to Palm (Nasdaq:PALM), which despite losing market share, is still the world’s largest PDA maker.
In contrast, Intel supplies processors for hand-held devices based on the competing PocketPC operating system. However, the market leader for processors for hand-held devices in recent years has been Motorola, whose delivery of DragonBall processors to Palm gave it a handsome entrance. That was before Texas Instruments pushed Motorola aside with its processors for newer Palm products. Motorola is also a major supplier of processors for cellular telephones - which it also manufactures, providing the company with captive customers.
In order to beat Texas Instruments on the cellular phone court, Intel has apparently made an end-run. Intel has signed a series of agreements with Asian manufacturers of cellular telephone and components for brand name telephones. Intel believes an increasing number of manufacturers will turn to Asia for manufacturing, and was therefore quick to ensure a position as their sub-contractor.
Intel and Texas Instruments have taken different approaches, derived from their different histories. Both are trying to integrate as many components as possible on their processors. Texas Instruments - a specialist in analog processors (known from the first cellular telephones) - has added more DSP capabilities to its processors, with the aim of developing a processor with all capabilities. Since telephone makers refuse to by flash memory for their telephones, it refuses to incorporate flash memory on its processors. However, Texas Instruments has already announced its intention of incorporating RF components, which Intel is still considering whether to incorporate, on its new OMAP-platform processors, scheduled for launch in late 2004.
For now, Intel prefers relying on outside suppliers for RF components, but has already created a fait accompli by incorporating flash memory components in its Manitoba processor. Its next battle will be waged against cellular telephone processor maker Qualcomm (Nasdaq:QCOM), which dominates the CDMA market, and has a 10-15% share of the entire global market for cellular telephone processors.
BroadCom (Nasdaq:BRCM) has also made its intention of entering the cellular market clear when it acquired Mobilink Telecom, which gave it GSM and GPRS capability.
Intel’s veteran partner, Microsoft (Nasdaq:MSFT) cannot help it in the cellular market. Although Microsoft has an operating system for smart cellular telephones, for now most of its support tends to the Symbian OS and Java-based platforms. In a world in which operating systems determine processor requirements, instead of vice versa as in the past, Intel’s battle for the cellular telephone market has become much tougher.
Published by Globes [online] - www.globes.co.il - on February 19, 2003