Intel seeks chip set domination

Risking further investigation by the Federal Trade Commission, Intel Corp. is preparing to shut out its rivals from competing in the huge secondary chip set market for Pentium II computers, said industry experts this week.

"(Intel is) locking out a lot of competition and that's just bad for the market," said Peter Glaskowsky, senior analyst for semiconductor research firm MicroDesign Resources Inc.

Three companies, which have previously announced what are known as "core logic chip sets" for computers using the Pentium II processors, face legal action from the PC chip giant if they try to market their products.

Such chip sets-for instance, Intel's (INTC) latest 440LX-are necessary to shuffle data between the processor and other parts of the computer, such as main memory or various peripherals.

"To develop these chip sets you need access to the (sixth-generation bus design)," said Intel spokesman Chuck Malloy. "And that is protected by a combination of patents and trade secrets."

When Intel announced the Pentium II in May 1997, it mapped out what it called the P6, or sixth-generation, bus-the high-speed data freeway between the processors and other parts of a computer's motherboard.

However, it has turned out that this freeway isn't so free.

"The primary motivator for Intel to move to the P6 bus was the competitive landscape," said Mike Feibus, principal analyst with semiconductor market watcher Mercury Research Inc. "The bus is completely proprietary-no one can use it without Intel's permission."

Yet, Intel seems to think that's unlikely. "(Aside from cross-licensing,) we don't intend to license this technology to a third-party," said Malloy.

For Intel, it's simple. PC makers who want to use the Pentium II processor in their computers must use the P6 bus, and therefore, Intel's chip sets.

Only problem: The Santa Clara, Calif., company is about to up the cost of doing so.

The current chip set, called the 440LX, will soon be phased out in favor of one that pushes data around faster, dubbed the 440BX. Yet, customers will be paying a premium of more than $20 for the new chips, say knowledgeable sources.

And the industry is now locked into this expensive course. Over the past two years, its share of the market has jumped to almost 72 percent from 27 percent in 1995, according to Mercury Research.

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