IIRC, the reason for the sequential turbo setup is to minimize the turbo lag affect. This is when turbo technology was still in its infancy. With all the techological advance, it is possible to creat a smaller, lighter turbo that spins at an extremly high rpm with the help of well made synthetic oil: As much as we all cry about the KO3s, they are an impressive set of hardware in their own right. Audi chose KO3s because they are more compact, can fit into tight places, and minimize turbo lag along with the electronic throttle to a minimal. A stock S4 has a similar power delivery to a small block V8 engine and in 1999, this was not easy to do.
Anyway, the newest thing now is the BMW's variable displacement turbos in their diesel engine which is basically a set of turbines within another set of turbines, sort of speak that is. All these changes in turbo technology makes sequential turbos obselet, at least until something else better comes along that is.
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