Cyrix takes a tumble

By : |May 10, 1999 0

Only the paranoid survive

When Andy Grove of Intel, the Industry’s elder statesman, made that statement about
the IT industry and corporate survival, he wasn’t kidding. National Semiconductor was
playing with fire when it started a price war in the entry-level low cost PC business.
Without the kind of cash that Intel gets from the more lucrative business of selling chips
for servers and high end workstations, National couldn’t match its foe and took a
fall.

The story so far
Let’s travel back in time when Cyrix was an independent upstart that was trying to
take on Intel in the PC processor market. With a little help from IBM, Cyrix was chugging
along fairly well but Intel had it outclassed. Enter National Semiconductor that bought up
Cyrix and threw its hat into the ring. National’s first move was to stop IBM from
manufacturing Cyrix brand processors. On hindsight this seems in the same leagues as
Apple’s early decision not to license the Mac OS that lead to Windows dominating the
PC arena.

What happens to the CPU market now?
The Cyrix brand is most probably going to be history now. However, there is the
microprocessor fabrication unit. One would have to see who buys that. IBM has been touted
as one potential buyer. The decline of Cyrix automatically means that an opportunity opens
up for both AMD and Intel. National was shipping roughly six million microprocessors
annually. Other developments include a blow to the sub $500 PC segment that relied on
cheap Cyrix processors for its fuel.

                                 

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A shot in the arm for Intel and AMD

One possible outcome of this collapse on the part of the third largest vendor is that
numero uno Intel gets a boost. AMD could also benefit but the company has been hamstrung
by its inability to produce large numbers of chips with a low defect rate. One wonders
what would happen if Intel got a dominant position in the sub $1000 market to complement
its stronghold in the lucrative PC server niche. Initially the company would benefit but a
Microsoft-DOJ style battle may happen in the world of PC microprocessors too.

What does it mean for the Indian consumer?

This pullout will have a fairly minor effect on the Indian market. Unlike in the US where
Cyrix had, along with AMD, taken a dominant position in the sub $1000 PC segment; India
has been Intel country through and through. Cyrix just moved in some time back and was
trying to replicate Intel’s GID strategy of supplying chips to and legitimizing the
small vendor segment that dominates the Indian PC market. However, the cheapest PCs in the
sub Rs 30,000 price range will disappear and we’d be stuck with forking out an extra
Rs 3 to 5 thousand for the entry-level PC after a few months when the Cyrix MIIs would
vanish from the market. In the long term it could be bad for the PC buyer with the recent
trend of cheap PCs stalling and the old regime of more features at the same price
reasserting itself.

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