AMD warns of third-quarter losses

AMD, Intel's biggest competitor, has warned that it will be posting third-quarter operating losses as revenues drop 15 per cent below the previous quarter.

Both companies are engaged in a fierce price war, forcing chip costs down in a bid to tempt users to buy more powerful processor systems. Intel has recently slashed prices on some of its older chips by as much as 50 per cent, forcing rival AMD to drop Athlon prices by a similar amount.

AMD also attacked Intel saying that the architecture in the Pentium 4 design means that an accurate comparison between Intel's and AMD's chips is no longer possible.

According to the rival chip maker, the Pentium III outperforms the Pentium 4, even though the latter has a higher clock speed. AMD said that such developments are "devaluing" megahertz measurements and comparisons.

It also said that the company was being hit by declining sales in the flash memory market, which it expects to drop by about $100m, or 30 per cent, from second-quarter levels. Flash chips are largely used to store data in mobile devices.

Meanwhile, Intel said that it expects to see a rise in chip demand through the second half of this year, counteracting the drop that dogged the first six months.