special report The balance of power in the semiconductor industry is currently being determined by, of all things, a plug.

How a microprocessor connects to the rest of the computer has become one of the crucial issues in the personal computer business. A processor's plug--or slot--largely dictates the design of a PC, and Intel is using its chip design as a vehicle to further tighten its grip on the market for processors and other components used to run personal computers.

Essentially, the processor giant could force others out of the business with a radically different chip design that only Intel knows how to build. This design, called Slot 1, will connect the chip to the computer through a slot instead of the traditional pin structure, making current processors obsolete--and possibly the competitors that make them--as computer makers choose its design over others.

"By the end of 1998, Intel will almost completely have converted to the Slot 1," according to Linley Gwennap, editor in chief of The Microprocessor Report. "There is no amount of money that would interest Intel in licensing it. The only way they might be interested is if there might be a violation of antitrust law."

That remains a very open question. Although the Justice Department is investigating Intel's recent move in the graphics chip market with the acquisition of Chips and Technologies, its dominance in the processor market has not drawn similar scrutiny.

[Editor's note: On Wednesday, September 24, the Federal Trade Commission served a subpoena to investigate Intel for evidence of unfair competition in the semiconductor market. See related story.]

Even though Intel already owns over 80 percent of the microprocessor market for computers, legal experts say there may be little that antitrust regulators can do about it because unfair business practices are particularly difficult to prove in the processor industry. This leaves scarce protection for competitors, who say the consumer will ultimately suffer if Intel's expansion continues unabated.

Intel says the Slot 1 design is necessary to increase performance in a market that is forever demanding higher speeds and more complicated applications to process. But competitors say Intel's motives are not focused solely on customer improvement. (Intel is an investor in CNET: The Computer Network.)

"It doesn't technically add any benefit, but our real concern is that it is

The Pentium II's Slot 1: revolutionary design.

Current pricing trends seem to bolster that point. Although Intel has been cutting desktop chip prices drastically, it's going the other way with server chips. The company recently released a new Pentium Pro, a server chip that sees no competition from Cyrix or AMD, at $2,675--more than three times the cost of the most expensive Pentium II chip, a desktop processor that remains competitively priced.

The Slot 1 design adopted by Intel uses a long, grooved-edge

The Pentium's Socket 7: Intel's past--AMD and Cyrix's future?

Older Pentium and Pentium-compatible chips use a connector design called Socket 7, in which hundreds of pins in intricate rows connect the processor's base to the motherboard.

Analysts agree with Intel's assertion that the Socket 7 pin design is approaching a performance ceiling. "You run out of gas on the Socket 7 environment," said Roger Kay, senior analyst at International Data Corporation. Optimum performance for Socket 7 tops out at processors running at 300 MHz.

Competitors have aggressively copied the Socket 7 design, allowing them to develop chips that compete directly with Intel's. AMD (AMD) and Cyrix (CYRK) have used publicly released specifications, technology licenses, reverse-engineering techniques, and the court system to acquire information about Intel's chip-building techniques.

This time around, Intel has gone to great lengths to ensure that competitors do not get access to its designs.

"The processes underlying the Slot 1 and Slot 2 [Intel's next-generation chip technology] designs are protected under trade secret" as well as patents, Intel spokesman Chuck Mulloy said. Intel specifically excluded licensing Slot 1 bus designs to AMD when the two companies settled their long-standing disputes over Pentium patents this year, Mulloy acknowledged.