Rambus Sifts Through Swirling Rumors

Memory makers race Rambus to market with competing technology.
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SAN FRANCISCO -- Rambus (RMBS) - Get Report CFO Gary Harmon was surprised to hear the scuttlebutt Thursday that he had resigned. Nothing could be further from the truth, attests Harmon, who says it was just the latest rumor concerning his small Mountain View, Calif., company.

Unconfirmed rumors swirl daily around Rambus, a company that makes a revolutionary chip design that is intended to boost computer memory performance and to allow a processor to work as much as eight times faster than with today's memory devices. (One key design problem with the Rambus chip was acknowledged by

Samsung Semiconductor

spokesman Nick Schwartzman, but he downplayed the problem's overall significance.)

Such a blizzard of rumors is rare in the staid chip industry, where competing parties generally know and like each other. Despite the latest rumor, shares of Rambus have rebounded, something that puzzles even Harmon. After tumbling 43% from its all-time high Jan. 12, the stock began to rally March 24, gaining 23% to close at 74 1/4 Thursday.

If you believe

Steve Appleton, CEO of memory giant

Micron

(MU) - Get Report

, you'd think there's little chance of seeing computers based on revolutionary Rambus memory designs this year. But if you listen to

Intel

(INTC) - Get Report

or other makers of dynamic random access memory, or DRAM, Rambus is right on track for a September rollout.

Rambus is dominating conversations in the chip industry these days because it's presented the biggest change to memory designs since DRAM first came out in the early '70s, says Steve Cullen, chip analyst for

Cahners In-Stat Group

. "Like Rambus, synchronous DRAM

which came out in the early '80s required different design techniques, but it wasn't as dramatic a change as Rambus."

Intel alone has more people working on Rambus-based chips than Rambus' own 150-person workforce, says Robert Chaplinsky, a partner with venture-capital firm

Mohr Davidow

, an early investor in Rambus. That has produced momentum so powerful, Chaplinsky argues, that to stop it would cause a crisis in the computer industry.

But that momentum seems to be slowing. Memory chipmakers have yet to order the equipment to test the chips. "We're looking at testing equipment, and the orders aren't there," says one chip-equipment stock analyst, who asked that his name not be used. "The demand isn't there."

Rambus skeptics, many of whom refuse to be named for fear of alienating Intel, point out that

Hyundai Electronics America

began sampling PC-133 DRAM, yet another alternative to Rambus' product, and would produce it in mass quantity by June.

Skeptics further note that

Via Technologies

is expected to have PC-133 chipsets out by next month, beating Intel's rollout of its Rambus chipset, code-named Camino, by four months.

Finally,

Semiconductor Insights

, an independent technology-assessment firm, told

TSC

that it is testing a Samsung Semiconductor double-data-rate DRAM chip, or DDR, but that it has not been able to get its hands on enough samples of Rambus-designed chips to conduct similar tests.

The alternative getting the most attention is PC-133. Although only 30% faster than current DRAMs -- as opposed to Rambus' eightfold performance boost -- it is seen as a possible steppingstone to DDR. Because DDR is close to being developed, Cullen says PC-133 could bridge the gap.

That's the theory, but it will all depend on which way Intel goes, he says. "I believe that no one understands the requirements of Intel processors as well as Intel itself," says Cullen. "So far Intel has said they won't do PC-133. Intel believes Rambus will be significantly faster."

Despite its dominance of the PC chip market, Intel can't act in a vacuum. Via Technologies sells chipsets mainly to

Advanced Micro Devices

(AMD) - Get Report

and

National Semiconductor

(NSM)

. And if either company could put its chips on a PC-133 chipset before Intel debuts Rambus-based chipsets, those chips would attain the performance edge they need to match or beat Intel. And that, Rambus skeptics say, puts pressure on Intel to come out with a PC-133 chipset of its own.

"Functionally, PC-133 is about as good as a Rambus 400 MHz DRAM," which is expected to be the first Rambus chip to roll out, says one Intel analyst, who asked that his name not be used.

Rambus' Harmon says the speculation doesn't bother him. Rival DDR chips being developed are intended for the server market. Rambus will see little competition since chipsets aren't in the works for PCs. "Rambus is ahead of DDR," Harmon says.

Intel, he adds, controls 80% of the chipset market. Even if Intel itself came out with PC-133 chipsets, Harmon says, those could be geared only for low-end PCs, since it doesn't have the performance that Rambus can deliver to more expensive computers.

"I don't think it would have any impact at all," Harmon says.

Samsung's Schwartzman says that its DDR and Rambus chips should emerge around the same time, but which one takes hold depends on which has a supporting chipset, and so far, he says, Intel's Rambus chipset is on schedule. But Samsung, he adds, looks at all alternatives.

"We will sell whatever the market buys," he says.