Intel-Rambus Relationship Shows Signs of Trouble

Intel's relationship with Rambus, once seemingly rock solid, is showing some cracks.

The chip maker, which decided several years ago to throw its impressive weight behind the Rambus memory standard (RDRAM), has endured numerous problems over the past year, due to the complexities and high price of the technology (see "Intel's Travails"). In a report Wednesday in the Financial Times, Intel's chief operating officer, Craig Barrett, frankly addressed its Rambus-related problems. "We made a big bet on Rambus and it did not work out," Barrett is quoted as saying.

Barrett's statement was unexpected, says Avo Kanadjian, vice president of worldwide marketing at Rambus, the company that designed RDRAM technology. Rambus doesn't manufacture RDRAM, but memory vendors pay the company a royalty when they make and sell it.

"We were surprised by the article," Kanadjian says. Nonetheless, the company still anticipates high marks for RDRAM when Intel launches its Pentium 4 processor. "We are very excited about the Pentium 4 launch, and we think the performance gains will speak for themselves," he adds.

Intel executives didn't try to soften Barrett's comments. His statements merely reflect a viewpoint the company has come to acknowledge over the last six months, says Howard High, spokesperson. That said, Intel still believes RDRAM is the best memory technology out there, High adds.

"With RDRAM, we clearly believe the technology is wonderful in the sense of performance," he says. However, it is still too expensive, he says.

Intel Sought, Planned for Rambus

In 1996, Intel executives started looking for the next memory technology, High says. "We knew back then that we needed a higher-performance memory for the future," he says. Then, EDO memory was mainstream, and SDRAM was on its way up. Intel projected that once its microprocessors reached the 800-MHz to 1-GHz range, even SDRAM memory would become a bottleneck.

RDRAM seemed the clear choice, he says. Others felt the same way.

"A few years ago, RDRAM seemed the only real option for the P4," says Kevin Krewell, senior analyst with MicroDesign Resources. However, Intel would have done well to just wait for the memory market to evolve naturally, he says. Today, PC-133 SDRAM is suited to mainstream users, and the upcoming Double Data Rate SDRAM should work well with high-end systems.

But Intel eventually opted for RDRAM. The company expected the memory's early high prices to drop, reaching parity with SDRAM pricing while offering superior performance, High says.

Kanadjian disagrees with High on pricing. RDRAM should always cost more than standard SDRAM, although the difference will shrink, he says.

"It is a better technology," he says, and vendors deserve to earn a premium for it. But the premium remains too high today, he acknowledges. He blames the wild fluctuations of the SDRAM market. By the second half of 2001, RDRAM's premium will drop, Kanadjian. He expects it will cost, on an industry average, only about 20 percent more than the same amount of PC-133 SDRAM. A spot-check of retail prices today for a 128MB of memory RDRAM versus the same amount of PC-133 SDRAM shows more than a 100-percent premium. RDRAM should cost about the same as DDR as that memory ramps into the market, he says.