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I'm still new to PCB design so don't mind this question if it sounds silly . What exactly is the function of the oscillator in the arduino board? Is it clock speed ? If it is, why doesn't it come inbuilt the IC? (The avr chips) what if I have two ICs that require an oscillator of same frequency on one board, can I use the single crystal for both ICs or do I need two ?

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why doesn't it come inbuilt the IC?

Slower clock speeds usually mean slower code execution times but if that is OK then quite often slower clock speed = smaller power consumption. It makes sense therefore to have the crystal external so the designer can optimize current consumption especially if powered from a battery.

Quite often you'll find an MCU with two crystal circuits - one might be a regular 1MHz to 50MHz interface and the other might use a 32,768 Hz watch crystal - when the MCU has done its fast computational stuff it might fall back to the much lower speed wristwatch crystal where overall power consumption is many times smaller than when using the fast crystal.

Yes, many crystal ocillator circuits provide the output that can be fed into another MCU via the xtal input on that 2nd device.

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  • \$\begingroup\$ The two crystal circuits seems quite interesting, where can I find such circuits? But how does the MCU choose which crystal to use? \$\endgroup\$ Nov 7, 2015 at 16:21
  • \$\begingroup\$ There's an Atmel chip we use but I can't remember its name off-hand. The software decides when to drop into low clock speed mode. Given that there is an internal "clock" that always uses the 32,768 Hz clock it can time itself to reasonable accuracy when it decides to wake up and go fast. \$\endgroup\$
    – Andy aka
    Nov 7, 2015 at 16:28
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Crystal as the name self explains is piece of glass and it can't be integrated in MCU as it is too big and is made with different technological process compared with silicone wafer producing.
You can use the same XTAL if your MCU outputs the buffered clock signal and the second one accepts clock in signal.

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