How Intel and AMD are carving up the PC market

The microprocessor wars have morphed into a three-horse race with Intel and Advanced Micro Devices (AMD) charging ahead, and Motorola stumbling at the hurdles.

No matter how many computers Apple sells, the grand hopes of the IBM/Motorola/Apple PowerPC partnership have been dashed as the Mac share fell to 3-4 percent and Windows NT on PowerPC was abandoned.

Today there are no RISC processors for Windows NT, which previously included MIPS, PowerPC and Alpha.

"It's been more fun to watch than to be in the business of RISC in the PC market," Michael Slater, founder and principal analyst of MicroDesign Resources. And the Microprocessor Report pointed out, at a seminar to examine the world's PC processor business, that "the three-company relationship has resulted in virtually nothing."

Meanwhile, even though there is no objective way to determine which is the 'best' microprocessor for a PC, Intel and AMD are fighting it out on a number of fronts.

But, according to Slater, the wildcard could come from a future announcement from Via which is deciding on what products to continue and what speeds it can offer.

The future of Cyrix's x86 processor is somewhat uncertain following National Semiconductor's decision to sell Cyrix to Via. Like Cyrix, IDT's future remains uncertain. IDT decided to exit the x86 market and sell Centaur also to Via.

The challenges ahead

Last year Intel's competitors gained ground with low-cost processors becoming an increasing part of the PC market. Slater said that "with the P6 transition complete and with more 0.25-micron capacity ramping up, Intel wants to put the brakes on AMD's expansion."

With a wide-ranging set of announcements, Intel has thrust its P6 processor family into all of its PC market segments, basic (low-end), performance (high-end) and mobile PCs. Slater said AMD shipped only 4.3 million processors, down from five million in the fourth quarter of 1998.

Slater pointed out that AMD's challenges include continuing to increase clock speed, and the company must move quickly to 0.18-micron process. "AMD must also overcome the perception that AMD equals economy processors and must penetrate the business market," he said.

Slater also pointed out that on the core design front, Intel put the emphasis on fast floating point before the competition did. "AMD's K6-2 adds 3DNow but that does not improve the standard floating point performance."

Pricing strategies

Slater also described some of the pricing strategies. For example, Intel has dropped its entry level price from $95 to $65, about one-third, over the past two years. "From top to bottom, Intel uses a 12 to 1 spread for its processors. That's twelve times the price for less than half the performance."

He added the sweet spot is at the low end of the Celeron line, with the much lower entry price of $64. Coppermine, Intel's high-end chip, he said, sells at discount despite the significant performance benefit. "That's a clear signal Intel wants the industry to switch."

On the other hand, Slater said AMD's K6-2 desktop has generally been priced comparably to Celeron and the K6-III focused on mobile models, discounted from Intel's Pentium II mobile. The company's Athlon pricing included small discounts from the Pentium III prices at the same clock speed. For example, AMD offered 7 percent off its 700MHz, 10 percent off its 600MHz and 20 percent off its 550MHz.

Slater also said the public prices on the PowerPC are not updated to keep track of Intel's rapid changes. "Comparing official prices are of little value," he said. "The only prices that really count are the ones negotiated between Apple and Motorola or IBM, and they don't tell us. And Motorola's only customer is Apple."

Intel still ahead of the race

Intel's latest pricing strategy has extended the battle lines. Using the low-end as a base to attack the performance segment is no longer a viable plan. This change has led to the common perception that competing with Intel is a money-losing proposition, Slater said.

But he believes a vendor with the technology to compete in multiple segments at once can easily and profitably supply 10-20 percent of the PC processor market, and that AMD today is the only vendor with a shot at executing this strategy.

In short, Slater's perspective for PC processors maintains that Intel's position will remain strong and the company's new IA-64 architecture will present a new challenge to RISCs in workstations and servers. Athlon success will be the life or death of AMD as the company aims to compete top to bottom in the market. And the RISC challenge is over and past, except for the Mac platform, which is not a challenge but an alternative platform.