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July 28, 1994

IBM DENIES IT IS STOCKPILING POWERPC 601 PROCESSORS BUT IT’s DIFFICULT TO WORK OUT WHERE THEY ARE ALL GOING

By CBR Staff Writer

As we have already mentioned, IBM Corp has announced that it will ship the millionth PowerPC 601 processor by the end of this month (CI No 2,447). Now it is also saying that by the end of 1994 total PowerPC sales, from IBM and Motorola Inc will sit at 2.5m processors. IBM is characterising the achievement as one of the fastest ramp-ups of any microprocessor in the computer market, and points out it exceeds industry estimates of demand. IBM presentations show that demand does exceed industry estimates, however, they also raise the question of where exactly these chips have been shipped. There is a sneaking suspicion among a number of analysts that they are sitting in an IBM or Motorola warehouse somewhere. A technology briefing from analysts Paine Webber last week was headlined PowerPC Chips Collecting Dust? and contained the assertion: We believe that IBM is ramping PowerPC supply at a much faster rate than the market can absorb them. The report, by Paine Webber’s Stephen Smith and Neil Herman, points out that Apple Computer Inc will have shipped about 400,000 Power Macintoshes by the end of June and says the other big customer, IBM’s own RS/6000 division, is shipping well under 50,000 units a quarter. Dataquest Inc’s Dominic Ricchetti broadly concurs. Dataquest is forecasting that about 550,000 Power Macintosh systems and about 40,000 workstations and other RISC personal computers from IBM and other vendors will ship this year. Even if Apple can do 700,000 Power Macintoshes that still does not add up to support IBM claims of a million PowerPC 601 chips shipped already he comments. However, IBM Microelectronics has put up a robust defence of the figure, together with a compelling, though complex, argument showing it would have nothing to gain from running production faster than demand. To start with, it is adamant all those million chips have shipped – they are not sitting around in some warehouse somewhere; they all went out of the door. Reasonably enough, it cannot say to whom they were shipped. Moreover, the division points out the same plant in Burlington is producing RAM chips, iAPX-86-compatible processors and PowerPC processors. It claims there would be absolutely no advantage in over-producing PowerPC chips since plant capacity can always be buffered by memory chip production anyway. Other manufacturers may need to keep production high because they have specialised plants producing only one type of processor – Intel Corp, for example – but that does not apply to IBM, they say. It sounds a reasonable argument, but the question where the chips have gone remains unanswered. It seems one or more of IBM Microelectronic’s customers are taking the very unusual step of stockpiling processors. Manufacturers do not normally do this. Stockpiling memory, yes; but processors? No. One suggestion is that some OEM customers predicted strong demand and stocked up with PowerPC processors – a demand that failed to materialise. This is a possibility that Ricchetti entertains – for example Apple might have thought it was going to shift a lot more Power Macintoshes. Another suspect is IBM’s own Power Personal Division – it must be preparing for a production run of its machines – it may have already started. Is there a big warehouse full of Power Personals somewhere? But if anyone comes across half a million or so PowerPC 601 processors, we’d like to know where they are.

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