A Checkup on Rambus
SAN FRANCISCO -- Is all well with the superfast memory chips based on Rambus (RMBS) - Get Report designs? Many in the chip industry have been wondering, even as Intel (INTC) - Get Report insists its Rambus-based chipsets will roll in September. Investors don't have to wait that long. Early indications of Rambus' success or failure will appear next month.
Rambus is one of the most closely watched semiconductor stocks. Research groups have predicted that its revolutionary designs will capture a large portion of the memory market within three years. But memory makers have balked at the idea of paying Rambus royalties for the design. Intel has tried to use its clout to force the standard on the chip industry, but speculation has mounted in recent weeks that even Intel is
backing off from its support. At midday Thursday, Rambus was up 5 11/32, or 7.1%, at 80 7/8.
For PC makers to ship computers based on Rambus designs this year, they must sample by next month the chipsets, which are devices that connect the microprocessor to its memory. This sampling gives chipmakers time to test and place large-volume orders. There is precious little room for delay. Intel's chipset, code-named Camino, is in Intel's manufacturing plant now, says
Morgan Stanley Dean Witter
analyst Mark Edelstone. (Morgan is an underwriter of both Intel and Rambus.)
The first of Intel's samples should come off the lines at the end of the month, Edelstone says. And that's when things will start to happen. "Everything is lining up for a Rambus rollout in September," says Rambus CFO Gary Harmon.
Over the next several weeks, those keeping an eye on the new Rambus-based chips can see early signs of progress.
Late May
Intel will test its chipset for flaws, says Steve Cullen, memory technology analyst for
Cahner's In-Stat Group
. This should take a week or two.
Early June
Only when Intel is certain the chipsets work will it send samples to PC makers, such as
Hewlett-Packard
(HWP)
,
Compaq
(CPQ)
and
IBM
(IBM) - Get Report
. "Intel will want to announce this or at least let it leak out, so that people will believe Rambus will really happen," says Cullen.
Mid-June
Makers of memory modules will announce certification by Intel so they can ship the components as soon as the orders from the PC makers come in. While at least two leading companies,
Kingston Technology
and
Toshiba
, have already received this certification, watch for announcements from
LG Semiconductor
,
NEC
(NIPNY)
and
Hyundai Electronics Industry
. "Any two of those will be enough of a sign" that things are on track, Cullen says.
Meanwhile, product announcements should emerge from original equipment manufacturers for computers that will run on Intel's fastest chip, Pentium III, at speeds of 550 megahertz or above. These announcements may indicate whether the boxmakers are planning to install Rambus-designed chips in their new PCs.
And memory makers like
Micron Technology
(MU) - Get Report
and
Hitachi
will place orders with makers of Rambus chip testers. Only five of these Rambus testers have been sold so far, says
SG Cowen
equipment analyst Min Pang, and some 25 are expected to be sold by year's end. Only four companies make them now --
Teradyne
(TER) - Get Report
, Japanese-based
Advantest
, H-P and
Schlumberger
(SLB) - Get Report
. A sale of even one tester is a big deal, since they sell for some $4.5 million each -- an investment that memory makers don't make lightly or quietly. Cowen does not have an underwriting relationship with any of the above companies.
Teradyne in particular should be telling, says Pang, since it's in the best position now to capture the bulk of the Rambus testing business. H-P and Schlumberger only recently introduced products and will need a longer time to get them to market.
While each piece of this Rambus puzzle is important, everything hinges on the Camino chipset coming flawlessly out of Intel's plant, says Cullen. If there are still problems with the Camino now, Intel will likely have to announce another delay, he says.
Because in the meantime, there are too many players waiting for the word go.
