AT&T; Begins Production of ‘Megachip’ : But 4 Japanese Rivals Believed at Same or More Advanced Stage
AT&T; claimed U.S. leadership Thursday in the race to produce the “megachip,” a computer memory chip four times more powerful than any now available, and announced that it has begun producing the semiconductors on a limited basis at a plant in Pennsylvania.
But the telecommunications giant is up against at least four Japanese firms that are believed to be at the same stage of development if not further along.
Several companies’ versions of the chip are expected to be rushed to market over the next several months, and some analysts have already ceded the megachip market to the Japanese.
The device is a one-megabit chip, one-eighth the size of a postage stamp, which can store up to 1 million “bits” of information. A bit is about the same as a letter or digit, and 1 million bits are the equivalent of about 100 typewritten pages. The megabit chip could equip personal computers with the power of today’s mainframe computers.
Full Production Next Year
The one-megabit memory chip “will eventually double processing speeds, cut memory cost by a factor of four and shrink desk-top computers to briefcase size,” said AT&T;, whose Bell Laboratories announced six months ago that it had developed the chip.
AT&T; said it has now begun making the chip in Allentown, Pa., for sampling by customers and expects to be in full production by “early next year.”
The megabit chip is the latest stage in the incremental advancement of integrated circuits that began with the development of the one-kilobit chip, which stored about 1,000 bits of information, by fledgling Intel Corp. of Santa Clara, Calif., in the late 1960s. It was the first time that significant amounts of information were stored on a single chip of silicon.
The chips grew in power as more and finer electrical circuits were implanted on chips, leading to the four-kilobit chip, the 16K, the 64K and the 256K, which stores about 256,000 bits of information and is currently the state-of-the-art production chip. Each stage of development has brought fourfold leaps in affordable computer power.
Japanese semiconductor giants Fujitsu, Hitachi, NEC and Toshiba are thought to be in roughly the same position, with Mitsbushi not far behind. Texas Instruments is the other U.S. firm thought to be in the running. IBM, which makes chips only for internal use, said Thursday that its megabit chip remains “developmental” and wouldn’t speculate on when it would enter production.
Jack Beedle, president of In-Stat Inc. of Scottsdale, Ariz., an electronics market research firm, said there isn’t any obvious leader. However, he said he believes that Toshiba, and perhaps other Japanese competitors, could have had a megabit chip in production earlier than this but chose to delay it in order to “milk the 256K.”
Beedle was referring to Japan’s almost complete dominance of the world market for 256K memory chips. The million-bit chip is expected to steal sales and eventually shorten the product life cycle of the highly profitable 256K memory chip, so delaying its introduction will help prolong demand for the 256K.
Steve Lau, marketing director for Fujitsu Microelectronics in Santa Clara, said Fujitsu is “just now beginning” to provide sample megabit memory chips to customers and will continue to do so through year’s end. The company hopes to be in full production by the second quarter of next year.
“I think the key is not to be out there first with an announcement, the key is the ultimate production at a rate of several million pieces a month,” Lau said.
‘Marketing Ploy’
He called AT&T;’s announcement of early production a “marketing ploy” and said, “We don’t want to have a great deal of public fanfare.”
Market researcher Dataquest, of San Jose, says the currently non-existent market for one-megabit DRAM (dynamic random access memory) chips, the type announced by AT&T;, will soar to $260 million next year. By the early 1990s, it could account for two-thirds of a $15-billion market for DRAM chips.
Some observers maintain that only such large, diverse firms as AT&T;, IBM, Texas Instruments and Motorola can mount an effective semiconductor challenge to the Japanese conglomerates, which use many of their own chips in other products they make.
But some doubt that IBM will ever sell its chips to other companies, and critics of newly deregulated AT&T;, which only recently began selling components to outside customers, say its history as a regulated monopoly has left it devoid of marketing skills.
At&T; said it will use the million-bit memory chip in its own computers and phone-switching systems as well as peddle it outside. It wouldn’t divulge specific goals for the megabit chip but has said that it hopes to be selling about 30%, or $1.8 billion, of its component production to outside customers by 1990.
“AT&T;’s move is really needed in the U.S. today, but the question is whether they’re seriously going to go into the merchant market,” analyst Beedle said. “I’m skeptical of their marketing expertise, though I’m certainly not skeptical of their technical expertise.”
