In 1985, Sinclair developed the ZX Spectrum 128 in conjunction with their Spanish distributor Investrónica. Investrónica had helped adapt the ZX Spectrum+ to the Spanish market after the Spanish government introduced a law requiring a special tax on all computers with 64 KB RAM or less, and that all computers sold in Spain to support the Spanish alphabet and show messages in Spanish.

The appearance of the ZX Spectrum 128 was similar to the ZX Spectrum+, with the exception of a large external heatsink for the internal 7805 voltage regulator added to the right-hand end of the case. This external heatsink led to the system's nickname, "The Toaster".

New features:

• 128 KB RAM with RAM disc commands 'save !"name"'
• 3-channel audio via the AY-3-8912 chip
• MIDI compatibility
• RS-232 serial port
• RGB monitor port
• 32 KB of ROM
• improved BASIC editor
• external keypad

The machine was simultaneously presented for the first time and launched in September 1985 at the SIMO '85 trade show in Spain, with a price of 44,250 pesetas. Because of the large number of unsold Spectrum+ models, Sinclair decided not to start selling in the UK until January 1986 at a price of £179.95. The external keypad was not available for the UK release, although the ROM routines to use it and the port itself remained.

The Z80 processor used in the Spectrum has a 16-bit address bus, which means only 64 KB of memory can be directly addressed. To facilitate the extra 80 KB of RAM the designers used bank switching so the new memory would be available as eight pages of 16 KB at the top of the address space. The same technique was used to page between the new 16 KB editor ROM and the original 16 KB BASIC ROM at the bottom of the address space.

The new sound chip and MIDI out abilities were exposed to the BASIC programming language with the command PLAY and a new command SPECTRUM was added to switch the machine into 48K mode, keeping the current BASIC program intact (although there is no command to switch back to 128K mode). To enable BASIC programmers to access the additional memory, a RAM disk was created where files could be stored in the additional 80 KB of RAM. The new commands took the place of two existing user-defined-character spaces causing compatibility problems with certain BASIC programs.

The ZX Spectrum 128 had no internal speaker, unlike its predecessors. Sound was produced from the television speaker instead.

The AY-3-8910 is a 3-voice Programmable Sound Generator, or PSG. It was designed by General Instrumet in 1978 for use with their own 8-bit PIC1650 and their 16-bit CP1610 computers.

The PSG is widely used in many arcade cabinets, pinball machines, and many micro-computers. Here is a list of some of the major brands of computer that used the AY-3-8910:

• Intellivision
• Vectrex
• Amstrad CPC range
• Oric-1
• Color Genie
• Elektor TV Games Computer
• All MSX-1 and MSX-2 computers
• ZX Spectrum home computers

General Instrument spun of MicroChip Technology in 1987 and the chip was sold under the MicroChip brand, and licensed to Yamaha as the YM2149F which the Atari ST range of computers use. Functionally the PSG is very similar to the Texas Instruments SN76489.

Variants:

• AY-3-8910
  Comes with 2 general purpose 8-bit parallel I/O ports, used for Keyboard and Joystick in for instance MSX.
• AY-3-8912
  Same chip, but in a 28-pin package. Parallel port B is not connected to save cost and space.
• AY-3-8913
  Same chip, but in a 24-pin package. Both parallel ports are not connected.
• AY-3-8914
  The AY-3-8914 has the same pinout and is in the same 40-pin package as the AY-3-8910, except the control registers on the chip are shuffled around, and the 'expected input' on the A9 pin may be different. It was used in Mattel's Intellivision console and Aquarius computer.
• AY-3-8930
  Backwards compatible but BC2 pin is ignored
YM2149F
Yamaha Produced chip, same pin-out as the AY-3-8910, but pin 26 could halve the master clock. Can be used to replace the AY-3-8910 if pin 26 is left disconnected.
• YM3439-D
  CMOS version of the Y2149 in 40-pin DIP
• YM3439-F
  CMOS version of the Y2149 in 44-pin QFP
• YMZ294
  Variant of the YM3249 in an 18-pin package. Parallel ports not connected, and all sound channels mixed on 1 port.
• T7766A
  Toshiba variant of the AY-3-8910, fully compatible. Used in some MSX models.
• Winbond WF19054, JFC95101, and File KC89C72: Fully compatible versions of the AY-3-8910 produced for slot machines.

The Z80 quickly became popular in the personal computer market, with many early personal computers, such as the TRS-80 and Sinclair ZX80, using the Z80 as their central processing unit (CPU). It was also widely used in home computers, such as the MSX range, SORD, and the Amstrad CPC, as well as in many arcade games. Additionally, it was also used in other applications such as industrial control systems, and embedded systems. The Z80 was widely used until the mid-1980s, when it was gradually replaced by newer microprocessors such as the Intel 80286 and the Motorola 68000.

The Z80 microprocessor was developed by Zilog, a company founded by Federico Faggin in 1974. The Z80 was released in July 1976, as a successor to the Intel 8080. It was designed to be fully compatible with the 8080, but also included new features such as an improved instruction set, more powerful interrupts, and a more sophisticated memory management system.

The Z80 quickly became popular in the personal computer market, with many early personal computers, such as the TRS-80 and Sinclair ZX80, using the Z80 as their central processing unit (CPU). It was also widely used in home computers, such as the MSX range, SORD, and the Amstrad CPC, as well as in many arcade games. Additionally, it was also used in other applications such as industrial control systems, and embedded systems. The Z80 was widely used until the mid-1980s, when it was gradually replaced by newer microprocessors such as the Intel 80286 and the Motorola 68000. The design was licensed to Synertek and Mostek as well as the European SGS.

The Z80s instruction set is binary compatible with the Intel 8080, so that 8080 code such as the CP/M Operating System and Intel's PL/M compiler for the 8080 can run unmodified on the Z80. The Z80 had many enhancements over the 8080 such as 16-bit data movement instructions, block copy and block I/O instructions, single bit addressing of all registers, IX/IY offset registers, better interrupt system and a complete duplicate register file for context switching during an interrupt.