Philips Components will use the 533-MHz TM3400, a pepped-up version of the TM3200 chip with 256 kbytes of L2 cache, for one of two Net Display Modules, an 80 percent complete platform design for Internet appliances that Philips Components unveiled at the Consumer Electronics Show here.

As numerous Web tablet and PDA products begin to flood the market, the Philips platform is an attempt to simplify OEM design time and introduce scales of manufacturing efficiency using the company's huge presence in the LCD market. Philips showcased two products, the S10LP-NG and the S10LP-TC, each composed of a sub-1-kg, 20-mm-thick integrated 10.4-inch thin-film transistor (TFT) touch-screen LCD with system boards for Internet access and software drivers to support an operating system of choice. The TM3200 will go into the higher-end TC version capable of video streaming, with $1,000 OEM products ready for sale late this year, according to Amir Shademan, director of marketing at the company's Web display group.

While Philips forges ahead into the infant Web tablet market with Transmeta in tow, the upstart microprocessor maker believes the TM3400 win vindicates the utility of the Crusoe processor.

"It does a couple of things," said Charlie Hohenshelt, western regional sales manager at Transmeta (Santa Clara, Calif.). "It gets us into the market for embedded applications and opens the door for Philips."

Both the Royal Philips Electronics division and Transmeta want to crack open new markets, but for very different strategic reasons. For Philips, the move into Web tablet design enables the giant to mix disparate components into new applications, according to Shademan. "We have moved to Silicon Valley. We are coming out of commodity components and moving very aggressively into digital solutions," he said.

For Transmeta, the win is a much-needed boost to the company's flagging momentum. Touting its code-morphing technology that uses software to dynamically translate X86 instructions into the chip's hardware, eliminating transistors and saving power, Transmeta's 5600 series initially scored design wins in NEC, Fujitsu, Hitachi and NEC laptops.

But IBM Corp. rocked tiny Transmeta when it stripped Crusoes from prototype ThinkPads, replacing them with ultralow-power Pentium IIIs in October, saying the new Intel iterations proved just as frugal as the Crusoe. And last December, glitches in the company's TM5600 chips, while limited to a single manufacturing batch, forced a recall of NEC 284 LaVie laptops. Since then, Mike Deneffe, director of new business marketing at Transmeta, admitted that the company has not progressed beyond talks with major laptop makers Toshiba, Compaq and Dell.

"The fact that they haven't got these guys is certainly a disappointment," said Linley Gwennap, principal analyst at The Linley Group. Transmeta faces an uphill struggle to gain enough traction in the notebook market to ramp the Crusoe as future Pentium-based iterations running at less than 1 V provide severe competition, he said.

"Transmeta was a bit surprised by how quickly and aggressively Intel reacted," Gwennap said. "Major OEMs are all looking at it [the Crusoe], but nobody is willing to make a commitment.

"Intel has improved to the point where there doesn't seem to be much difference. Why take a risk on a small startup when you're happy with Intel?," he said.

As badly as last year ended, Transmeta continues to plow forward with design wins in the Internet appliance market. The Philips win follows announcements that America Online and Gateway would use the Crusoe for their TouchPad and last December's announcement that Hitachi Ltd. had begun shipping the FLORA-ie 55mi device in Japan.

"Philips has taken advantage of Crusoe's unique capability for power efficiency and performance in a small space," said Jim Chapman, senior vice president of sales and marketing at Transmeta.

Better, Philip's platform strategy, if successful, could act as a product springboard for the Internet appliance market and help seed it with the Crusoe, said Mike Deneffe, director of new business marketing at Transmeta.

"We think it's significant because Philips is taking its technology and the Crusoe to push innovation. LCDs and microprocessors are coming together in a form factor that will enable a drive into the market," he said.

A crucial part of that drive is to bring down costs for devices such as Web tablets, where the cost of the LCD can amount to more than half the cost of a $1,000 product. With parent company LG Electronics owning about 23 percent of the global market share for LCDs, Philips Components hopes to drive down costs through leveraging the standardized platforms with production of scale to help OEMs produce $500 versions of the Net Display Modules within a year, said Shademan.

"This design win shows that the Crusoe really is the best solution for Web pads. It's definitely good news for Transmeta," said Gwennap, who said that this segment holds the most promise for the company, which has entered the market quickly and is building a competitive base. But Transmeta's early success in this nascent market means little while demand for Web tablets still remains unproven, he added.

"It's a very, very fragmented market, and it's pretty hard to see if it's going to be big or not," he said. "The price of the flat-panels is holding things up."

Adrienne Downey, an analyst covering the sector for Semico Research (Phoenix) remains pessimistic about demand for Web pads because of their expense, weight and size compared to increasingly more functional PDAs. "I still don't see a lot of demand for it. Companies keep on announcing, but they don't seem to be much more than niche products for industrial use," she said.

Philips' base projections for the Web tablet market, based on International Data Corp. estimates, assume a 1 million unit market for 2001, growing to 2 million in 2005, said Shademan. Philips will leave OEMs to decide who their customers are, he added.

While the Crusoe processor looks to be marooned on a base of Japanese OEM brands, and with the Internet appliance market suggesting only limited potential, the gains Transmeta has made so far are crucially important, according to Tony Massimini, an analyst at Semico.

"Even if [Transmeta takes] only a small percentage of the notebook market, it's still a pretty good revenue stream. One percent of the market is still several hundred million dollars of business" for Transmeta, he said.

"We're real happy with our position. It's nice to have a product line in both markets," said Deneffe, who said the company considers its Japanese contracts strategically promising. While this segment is only 10 to 20 percent of the notebook market, it looks to be the fastest growing, he said. Deneffe said Transmeta roughly estimates the 2001 global market for notebooks at about 30 million.

"We're very well endorsed in the Japanese market. They integrate new technology faster and better out of the gate."

Another potentially massive endorsement comes from Advanced Micro Devices using Transmeta's code-morphing software to prototype its forthcoming Sledgehammer microprocessor, though Deneffe refused to comment on this.

"We're a new company. Over the next year you'll hear a major announcement that one of the big guys will pick us up," said Deneffe.

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