Advanced Micro Devices is again seizing the initiative in the megahertz race from arch rival Intel with the launch of its 800MHz Athlon processor.
Along with its Intel-style branding strategy, the new chip is seen by many as AMD's big hope for breaking into the profitable high-performance desktop and workstation markets and eventually taking a slice of the market for powerful servers.
AMD first grabbed the speed crown in December 1999 with its 750MHz Athlon, but Intel struck back later in the month with its 800MHz Pentium. However, the 800MHz Athlon is expected to be available in volume from 10 January, unlike the Intel high-speed chip which won't be out in quantity until later in the year.
Despite this, AMD faces significant marketing and technical hurdles before the chip vendor can break out of its low-cost consumer niche. For starters, AMD's manufacturing history has been chequered. Most notably, the company had difficulty meeting demand for its K6 and K6-2 processors because of production woes. And analysts say that transitioning to a brand new chip architecture is no easy task.
AMD also faces a substantial marketing challenge, which partly explains the switch to the Athlon name. Because of its past manufacturing troubles and market position, some customers associate AMD with cheap chips.
AMD said it expected to manufacture nearly one million of the high-speed chips this quarter, and PC makers such as IBM and Compaq have committed to using the chip in some of their machines.
Compaq said it will offer 800MHz Athlon models in its Presario 5900Z line. Compaq will offer the new chip as part of its 'Built For You' programme, which allows customers to purchase custom-configured Presario PCs directly from the company. And IBM pledged to support the new chip in its Aptiva S Series 870 which features broadband DSL connectivity.
The Pentium III is based on Intel's sixth-generation, or 'P6', microarchitecture, which it first introduced in 1995. AMD calls the Athlon a 'seventh-generation' design. It said the Athlon outperforms the Pentium III not only because of its higher clock speed, but also because it is based on a new, more advanced microarchitecture, the design and organisation of its internal components.
"Judging by the wide assortment of results they've now collected, it seems pretty clear that the chip outperforms current Intel chips," said Keith Diefendorff, an analyst with research company MicroDesign Resources. "They've been saying it for a long time, but this confirms it."
The two chipmakers are within hailing distance of the magic mark although the crown for the winner of the speed competition is up for grabs. AMD leapfrogged Intel's 733MHz Pentium III chip when it launched its 750MHz Athlon PC processor. This marked the first time AMD produced a chip built on its 0.18-micron manufacturing process. The process, which is similar to a 0.18-micron process used by Intel, will allow the company to boost Athlon to 1GHz.
Industry watchers beleive AMD can roll out a 1GHz Athlon as soon as it thinks the market is ready, and certainly by the second quarter of the year. Meanwhile Intel is not expected to have a 1GHz Pentium available in quantity until the second half of this year
"The upside here, especially for the customer who is sensitive to overall performance, is that both companies are beating each other about the head and shoulders to accelerate the rate at which new chips are brought to the market," said Nathan Brookwood, a principal analyst with Insight 64.
Faith in the future
AMD has a history of production problems, but CEO Jerry Sanders said the company had learned from its mistakes and he did not anticipate any manufacturing problems with the new Athlon. "I am confident we can keep up with demand," he said.
Although it has been battered by financial losses in recent quarters, AMD has seen a surge in its fortunes in recent weeks. The company has sold out many of the speed grades of its lower-priced K6-2 processor. And after several consecutive quarters of losses, AMD has said there is a strong chance that it expected to break even or even make a profit in the fourth quarter of 1999.
MicroDesign Resources' Diefendorff explained that AMD, tired of eating Intel's performance dust, has placed its hopes on the K7 processor. "If AMD can execute, which is not yet a sure thing, the K7 could actually grab the performance lead on general applications and possibly even 3D."
Too close for comfort
For the first time, it is possible that AMD could have Intel surrounded. How this could happen is a question that Intel executives are undoubtedly contemplating, he said.
But, Diefendorff pointed out, Intel could potentially blunt the impact of the K7 by moving quickly to a 0.18-micron process. This move should allow Intel to stay ahead of the K7 on frequency and within marketing distance of it on performance.
"If it makes the transition safely, we expect the company [Intel] will never again yield to the complacency that, in this round, has allowed a competitor to get so dangerously close."
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