Battling With AT&T;, IBM for Megabit Market : Japanese Favored in Race to Build Largest Computer Chip

Several Japanese companies are the odds-on favorites to win the race to be the first on the market with the world’s largest computer-memory chip.

United States electronic giants American Telephone & Telegraph Co. and International Business Machines Corp. also have disclosed plans to build a 1-million-bit chip, with four times greater storage capacity than the largest device now available.

But it is the Japanese who are expected to end up with the lion’s share of a market for 1-million-bit chips that Dataquest estimates will reach $1.5 billion in 1988 and around $10 billion in the early 1990s.

Unending Quest

The 1-million-bit chip has been the holy grail of the electronics industry for some time, part of the computer designer’s unending quest to put more power into a smaller package.

A memory chip is a fingernail-sized slice of silicon. Small disks covered with these chips form the brains of a computer, reading and executing the software that make up the operating system and applications programs. The larger a computer’s memory, the more complex the software it can understand.

Memory is measured in bits, with each bit representing a one or a zero. A string of eight bits forms a byte, and each byte represents a letter, number or other character.

A typical personal computer can store 64,000 bytes of data in its main memory, equal to about 250 typewritten pages. A computer using 1-million-bit memory chips could store 4,000 pages in the same amount of space.

Million-bit chips set visions of miniaturization dancing in computer designers’ heads and inspire projections that desk-top computers could soon have the power of the huge multimillion-dollar machines known as mainframes.

Thomas Thomsen, president of AT&T; Technology Systems Group, predicted that the “megachip,” as it is called in the industry, “could help put a super minicomputer in business, industrial or other special environments where space is at a premium--or for that matter, in your lap.”

Fujitsu, Hitachi, NEC, Mitsubishi and Toshiba are all working on megachips of a type known as Dynamic Random Access Memory (DRAM), the fastest-growing segment of the chip market.

Expect Production Soon

Given their record against the two American corporate giants, analysts expect at least three of these companies will be ready to produce one sometime this year.

The Japanese have already captured 92% of the world market for the 256,000-bit chip, the largest now available, and almost 70% of the total DRAM market, valued at about $5 billion.

AT&T; is the largest U.S. manufacturer of 256,000-bit chips, with about 5% of the market.

Dataquest analyst Ken McKenzie credits the Japanese success to their position as the world’s most efficient manufacturers. “Manufacturing is the key element in producing chips--how cheap can you make them and reliable.”

Because chips are so tiny and precision so important, the failure rate is extraordinarily high. Consequently, a huge amount of capital is needed to support the start-up of manufacturing.

All of the Japanese chip manufacturers are part of much larger electronics conglomerates that can both afford to finance production and have a voracious appetite for chips within their own operation.

Also, the Japanese government guarantees low-interest loans for the industry and finances basic research, allowing its chip makers the luxury of losing money in order to gain market share.

Beyond Experiments

AT&T; is the first U.S. company to move beyond the experimental phase in building a megachip. In January, the company announced that its device would be ready for manufacturing in quantity by the end of this year and would be in full production in 1986.

IBM has announced two versions of an experimental chip, but both use non-standard designs and packaging that would make them unlikely candidates for any products other than IBM’s own.

McKenzie said that, even should the Japanese win the race for the 1-million-bit chip, reaching the next horizon is anyone’s game.

West Germany’s Siemens, which is only now shipping its first 256,000-bit chip, has launched a $710-million research project to be the first on the market with a 4-million-bit chip. Siemens’ self-imposed deadline: 1989.