By Dan Jones

Chinese companies and America Online Inc (AOL) are likely to be the new markets that National Semiconductor Inc will target with its new PC-on-a-Chip, the Geode. The chip – which can handle computing, graphics, audio and digital video – is aimed at the growing information appliance and set-top box market. NatSemi has already snagged 30 companies to use the chip – including massive Chinese PC manufacturer Legend – and has a further 80 interested.

The Chinese deal has the potential to be the most lucrative of all. Legend is working with Microsoft Corp to develop a low-cost set-top box device, dubbed Venus, aimed at bringing internet access and basic PC functions to Chinese consumers at around one- fifth of the cost of a PC-based system. Legend has already developed prototype versions of Venus boxes. The low cost – under $100 – and low power consumption of the multimedia-friendly Geode chip would make it an ideal choice for Venus boxes. Michael Polacek, VP of NatSemi’s information appliance division, estimated that between 50 and 100 million Chinese consumers could be in the market for a low-cost computing set-top box.

AOL will also be using for the chip for devices in its AOL TV project. AOL is partnering with Hughes Network Services (HNS), a division of Hughes Electronics, and Philips Electronics to co- develop a set-top box and deliver its AOL TV service. The offering, which is due for launch in mid-2000, will combine Hughes’ DirecTV satellite service with proprietary AOL web content. The Geode will be used in at least one of the set-top boxes that AOL will roll out. AOL would not confirm if it is also running trials with NatSemi’s tablet-sized WebPAD. A spokesperson said only that AOL was collaborating with NatSemi on some aspects of AOL TV.

However, there is a dark cloud on NatSemi’s horizon. Intel, which once scoffed at the idea of a PC-on-a-chip, is now developing its own. The chip, codenamed Timna, is expected early in 2001. NatSemi’s experience in the x86 PC processor segment – it was essentially forced out by Intel’s savage price cuts on its Celeron line – should tell it that Intel will fight to own this potentially huge new market.