There is more to last week's announcement that AMD is using IBM to make its K6 chips than meets the eye - it goes to the heart of speculation over AMD's strategy.
Distributors are welcoming the deal while analysts are questioning whether everything is as it seems.
Sukh Rayat, managing director of Flashpoint, described it as ?absolutely brilliant?. He said: ?This is good for the mass market. They [AMD] cannot produce enough product because the product they are producing is being sucked up by the big OEMs and now they can supply the mass market.?
He added: ?The K6 has a lot of attraction for resellers", because of AMD's advanced programme that is attractive on price.
Other distributors are not so sure about the deal. One, who refused to be named, said: ?This all depends on what happens to Socket Seven [Intel's older chip interface design, which it is now shifting towards the newer Slot One/Two]. It depends on how Intel responds. Intel has already announced their prices and they could drag the market away from Socket Seven to Slot One and Slot Two.?
AMD, he claimed, was forced to hire IBM to foundry its K6 chips because its process technology was not up to Big Blue?s. But he conceded: ?The beauty of this arrangement is that it is just a foundry agreement. There is no joint deal, as with Cyrix, where IBM gets half of the chips produced.?
Rayat claimed that dealers are attracted by AMD's and Cyrix? deals with their resellers, encouraging them to go to sources other than Intel - but Intel will not be swayed by those deals. Last year it instituted a set of agreements that will allow distributors to resell its products to the ever-burgeoning small and medium enterprise (SME) market, to hit back at the clonemakers.
Datrontech, a large distributor in the UK, is already selling those products.
Analysts are even more divided than distributors. Joe D?Elia, senior microprocessor analyst at Dataquest UK, questioned whether the deal with IBM signalled any kind of sea change in the market.
He thought then that either AMD had massive deals up its sleeves or was forced to use IBM as a foundry, with masks, for its K6 chips. He said: ?I haven?t heard anything that suggests there are megadeals coming along. If they haven?t solved their problems by now, it shows their process has a fundamental difficulty.?
Last year, AMD claimed that it had solved its process problems and that customer delays would be settled by March 1998. At that time, AMD also said it would start sampling its K6-3D chips to many OEMs and to independent software vendors (ISVs). It described a roadmap to its dealers and claimed it would always maintain a 30 per cent price differential lower than Intel could offer.
Those claims seem under question in the light of the pre-release of Intel prices right up to July.
It appears it may be process rather than capacity problems that continue to dog AMD.
An insider at AMD said today: ?It?s not the capacity, it is the process that is the problem. They can?t yield enough K6 chips to satisfy the market.?
She added: ?The whole battlefield continues to be at the channel level. It depends on whether National/Cyrix, AMD or Intel can woo the dealers sufficiently.?
Neither AMD nor Cyrix were willing to comment on their dealer approach at press time. Intel maintained a dignified silence.
Behind the scenes, there are talks continuing as CPU engineers, in high demand in both the US and India, are wooed by the major players. The 'VNU Newswire' understands that IBM is still talking to AMD about taking over its entire CPU business, as part of a response to National Semiconductor?s takeover of Cyrix last year.
The issue here, according to a senior source at National, is about the graphics capabilitities of Intel?s latest Advanced Graphic Processor (AGP) chip, co-developed with aerospace company Lockheed Martin. ?I saw the new AGP processor on a new Intel motherboard last week and it had a fan on it,? he said. ?Intel is attacking both ATI and Matrox with this and under such circumstances, AMD?s K6-3D is practically irrelevant.?
Intel has attracted most of the major hardware vendors to the AGP 2.0 processor, as previously reported here. And that depends on Windows 98, which now seems set to arrive far earlier than anyone had ever predicted, as revealed here last week.
AGP 2.0 relies on Windows 98 for full support. The question is whether the clone chip vendors like IBM, AMD and Cyrix, have wooed Microsoft to the extent they could have done.
But Dwayne Cox, head of corporate communications in Austin Texas, and in charge of the K6 project, said: ?We believe Socket Seven is safe in our hands. From a feature and capability standpoint, we think we will deliver something with a performance boost.?
Cox said: ?There have been rumours from the Far East that we are selling out but that is not so. We estimate we will get 50 per cent of the market by the end of the year.?
AMD, claimed Cox, will deliver according to its schedule and the foundry deal with IBM meant little more than it was able to deliver extra capacity - on the Super Seven and Socket Seven front.
Intel was unavailable for comment.
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