Transmeta should look at moving out of the laptop PCs into a less competitive market, despite finally easing production problems with its 5500 and 5800 processors, according to analyst firm IDC.
The US chip designer said recently that three new laptops from Sony and Fujitsu, using the 5500 and 5800 chips, signalled the beginning of its recovery, but industry observers are more sceptical.
"They've still got a niche position, but it's really niche now," said Andy Brown, research manager for mobile communications with IDC. "They're going to find it really hard going from now on, especially with the industry consolidating. They might want to look at other areas, like embedded chips, where low power is a key play."
Sony recently launched a new PictureBook laptop, the PCG-C1MV, with a 733MHz version of the TM5800 chip. Fujitsu's new LifeBook P-2040 includes an 800MHz TM5800 chip, and the LifeBook P-1000 uses a 700MHz TM5500 chip. The chips -- announced in June 2001, but delayed by production and design problems -- are designed to address complaints that the company's original line of chips did not perform as well as advertised.
But in the meantime, Transmeta's lead over heavyweights like AMD and particularly Intel has become imperceptible. "When Transmeta came to market, they had a compelling offering backed with a lot of heavy marketing. But the other major chip manufacturers have stepped up their concentration on mobile computers now. They made the classic mistake of heavy marketing without the products and without the quality to back it up," Brown said.
Part of the company's problem now is the ambition of its original strategy: to compete head-on with the biggest chip makers on their own turf, by offering superior products. When Transmeta launched, Intel and AMD did not offer much in the way of low-power chips for lightweight laptops, but they have been quick to respond: Intel with SpeedStep and AMD with PowerNow, both technologies designed to reduce chip power usage when it isn't needed.
"Ultraportables are essentially not a consumer play, it's very corporate, and that's Intel's heartland," said Brown. "The benefit in the short term was that Intel had done things very badly in that market."
A sign of the shift since then on Intel's part was the degree to which mobile computing was emphasised at last week's Intel Developer Forum.
Transmeta says that it still sees an opportunity in the lightweight market, because Intel and AMD have not yet produced technology as well-suited for such devices. "We are not taking on Intel and AMD in areas where they are most entrenched in the larger notebooks, but in niches such as ultraportable where we have an excellent opportunity to demonstrate our technology benefits of lower power, cooler operation (and) long battery life," said spokesman Phillip Bergman. "These are segments of the market that are also more attractive, because of growth potential in units."
Brown said areas that may still be open to a big Transmeta presence might be embedded chips for products such as routers or "blade" servers, although Transmeta's server push has so far failed to gain steam.
The market for PDAs and mobile phones might also be lucrative for Transmeta. Intel is promoting its new Xscale processor for such devices, but does not yet have a dominant presence. Brown also noted that the handheld market seems to be consolidating on the architecture of UK chip designer ARM, with Microsoft standardising its Pocket PC operating system on ARM, and Palm moving to ARM-based processors later this year.
Transmeta says it will play a large part in emerging technologies like tablet PCs and other embedded devices.
The company also hit back at a report by Taiwan-based industry paper Digitimes, which suggested that the company has lost traction with manufacturers because of production problems and delays. Bergman said the article was, "unsourced reporting (which) we do not believe has any validity, based on interactions with our customers."
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