Inside IBM's Xbox Chip
Big Blue offers a sneak peak at the powerful chip at the heart of Microsoft's next-generation gaming console.

There's a lot riding on Microsoft's new and much-hyped gaming console, the Xbox 360 -- and not just for Microsoft (MSFT). IBM (IBM), maker of the chips that will run the machine, has a lot at stake, too.

IBM is keen to improve its reputation for manufacturing semiconductors after Apple (AAPL) earlier this year said it would begin using chips from Intel (INTC) starting in 2006 (see BW Online, 6/7/05 "Apple Hits the Intel Switch"). At least part of the reason for the switch was Apple's frustration with the pace of development at IBM and Big Blue's inability to deliver a version of its PowerPC 970 chip suitable for use in a notebook computer. At other times, IBM has struggled to produce the number of chips that Apple needed.

To prove its chipmaking mettle, IBM is showing what its new Xbox chip is made of -- literally -- on Oct. 25. the outfit will make the disclosure at the Fall Processor Forum, an annual gathering of chip engineers taking place Oct. 25-26 in San Jose, Calif.

MULTI-BRAINED. The chip was developed specifically for Microsoft, and as such IBM won't sell it to any other customers. That's in contrast to the arrangement for IBM's Cell Processor, which is going into Sony's (SNE) PlayStation 3 console but is also being used in other specialty computer systems (see BW Online, 8/25/05, "Cell: A Chip That Is Going Public").

Microsoft will own the rights to the chip, says IBM Vice-President James Comfort. IBM says the chip is in full production at its factory in East Fishkill, N.Y., and at a plant in Singapore owned by Chartered Semiconductor (CHTR), which will serve as a second source for Microsoft, and was a partner in the development.

The Xbox 360 is only one of three gaming systems for which IBM's microelectronics group has either fully or partially been involved in chip design and development. IBM collaborated with Sony and Toshiba (TOSBF) on the development of the Cell Processor in PlayStation 3, due for release in early 2006. It has also landed a chip in the forthcoming Nintendo Revolution.

The Xbox 360 chip will feature three "cores" -- a core being the central brain of a chip. Chip companies including IBM, Intel, and Advanced Micro Devices (AMD) have been building chips for personal computers using two cores. Just last week Apple Computer announced a new version of its PowerMac G5 computers which use a dual-core version of IBM's PowerPC chip.

"DESIGN RE-USE." Having two -- or in this case, three -- cores allows a chip to more efficiently split computing tasks and thus get more work done in less time. Adding a second core generally delivers a significant improvement to computing performance while minimizing the impact of power consumption and heat. Getting the right tradeoff between those two forces of physics is a constant battle for chip engineers. The more power a chip consumes, the hotter it gets, and the harder it is to keep cool.

Each core will also be able to act on two threads at once. Think of threads as customers at a grocery store waiting in a checkout line. Each core would be like a checkout clerk who can work with two customers are once, thus shortening the wait time. Each core's ability to handle two jobs simultaneously means the chip can act like it is in fact six chips. Each core will operate at 3.2 gigahertz, which is comparable to the processing speed of Intel's fastest Pentium processor.

Analyst Kevin Krewell of Instat/MDR, which is hosting the Fall Processor Forum, says the new IBM chip shares much of its lineage with the Cell Processor and other chips in the PowerPC family that have come before. "The basic core at the heart of this chip is very similar to that in the Cell Processor," Krewell says. "There's definitely some design re-use going on here."

CONSOLE RACE. Success of the Xbox console, due to be released on Nov. 22, is crucial for Microsoft as well. While the company doesn't disclose Xbox results specifically, the division that specializes in home entertainment reported a loss of $391 million on sales of $3.2 billion, or 8% of the total, in the year that ended June. 30.

Microsoft loses money on every first-generation Xbox it sells. New versions of the product will be managed with a much closer attention to cost. "IBM was given a size and a cost to shoot for, and IBM put as many cores in and as much performance as it could in within those boundaries," says Krewell.

Microsoft, in a bid to get its next-generation gaming console on the market before Sony's PlayStation 3, held suppliers to tight deadlines. IBM's Comfort said the company sped up its development cycle to meet Microsoft's demanding timetable. IBM's Engineering Technology Services unit kicked development into high gear, cutting a process that would have normally taken 30 to 36 months down to 24 months. That meant making sure there were no mistakes made along the way. "We paid extremely close attention to detail in our design practices," Comfort says.

COMING ATTRACTION. "Microsoft is really touting the fact the the Xbox 360 will be on the market before the PlayStation, and that means that IBM had to build the chip right the first time," Krewell says. "There was little opportunity to go back and re-spin the silicon."

As the Xbox 360 makes its debut in the coming weeks, consumers and critics across the U.S. will get the chance to put IBM's chipmaking prowess to the test.