By Donlon, J. P.
Chief Executive (U.S.) , No. 114
The Internet is the computer," has been the mantra of Sun Microsystem's Scott McNealy since 1989. Six months ago, Oracle's Larry Ellison announced his vision of what he calls a "network computer"-a $500 open-systems machine that, when linked to the Internet or corporate network, could substitute for a more expensive PC. Are the PC's days numbered? "Macrocosm" author George Gilder thinks they are. Intel CEO Andy Grove dismisses the Internet PC as the Cabbage Patch Doll of computing. Even if one believes that people like Gilder and Ellison hyperventilate about this, it would be unwise to discount the appeal for lowcost alternatives to the standard desktop PC. After all, the typical office spends $40,000 over five years on a single PC when software and maintenance are factored in, according to The Gartner Group, a technology consulting firm.
Unlike an ordinary PC, which requires complex operating systems such as Windows 95 and runs programs on its hard drive, a simpler teleputer would download an operating system from a network and store data on a remote server. The Financial Times reported that Boeing has expressed interest in buying 100,000 of these so-called "cheap, dumb" terminals.
Among the first to unveil the technology that would make this controversial computer concept-among other products-a reality is Milpitas, CA-based LSI Logic, a $1.3 billion ASIC chip maker. ASICs, or application-specific integrated circuits, are customized chips designed for highly complex and specific functions. By taking the lead in integrating many functions on a single chip, LSI has leveraged its expertise in gate arrays (a particular type of ASIC) to come up with its "System-On-A-Chip," which enables such low-cost devices such as Sony's PlayStation or Thomson Electronics's set-top boxes used for digital satellite broadcast.
LSI-an acronym for "large-scale integration"-was founded in 1981 by Wilfred J. Corrigan, 58, former CEO of Fairchild Semiconductor, whose previous experience working for Motorola earned him the distinction as the godfather of Silicon Valley. The son of a Liverpool dockworker and trained as a chemical engineer, Corrigan took LSI public in 1983. Thanks to its contracts with the military and aerospace customers, the company thrived during the 1980s, when Japanese memory chips flooded the market and threatened many U.S. chipmakers. But by 1990, a year after Corrigan had undergone triple bypass surgery and almost lost the company, LSI faced a serious crisis in the decline of mainframes, which used a lot of custom circuitry. In 1992, the company laid off a few hundred employees and shut down an obsolete German factory. Corrigan assembled his lieutenants-including EVP Brian Halla, formerly of Intel; Cy Hannon, EVP of worldwide operations; and Moshe Gavrielov, SVP of international marketing and sales-and called on them to rethink the company's future.
The team shifted to more complex projects that used its expertise in miniaturization-allowing customers to create entire systems on a single silicon device that formerly required dozens of separate chips. The CoreWare process, which allows up to 5 million gates to be embedded in a chip, is the heart of LSI's architecture. Its G10 technology can put up to 49 million transistors on one custom designed chip. By contrast, Intel's Pentium Pro, the industry's new PC standard, holds 5.5 million transistors on a single chip.
Whatever one assumes about the growth and character of the Internet, these chips, which cost LSI's customers about $35, can be optimized for a variety of uses, including video, such as the digital video disk players that will be released later this year. They could readily be used for a variety of set-top boxes for integrated entertainment systems incorporating video, disk, and CDROM. Corrigan believes that the first of these so-called "Internet appliances" may be introduced by the end of this year.
Corrigan's challenge, however, was made more difficult in early May when Halla, his top lieutenant, presumed successor, and head of new-product development, resigned to take the top job at National Semiconductor. …