Although it need not know more, a good compiler should know more than just the core 8051 instruction set. Certain special features found in some 8051 derivatives require compiler support if you wish to write and compile code that takes advantage of them; examples include multiple data pointers and expanded address spaces. Of course, it is also convenient (although not necessary) for a compiler to include header files with SFR definitions for the derivatives you will be using.

--Sasha Jevtic