The going will be tough for new fabless CPU companies, such as Rise and Transmeta, claimed a senior AMD executive.
Fabless companies are operating a flawed business model, which will turn them into bottom feeders, he said.
"Only by innovating ahead of Intel are you able to add value," Dana Krelle, an AMD vice president told 'Newswire' at Comdex this week.
Fabless chip companies will be unable to do this, he continued.
"The trouble with foundries is that they want their 50 per cent profit margin," he said. Throughput at contract foundries is rarely at optimal capacity and operators do not supply access to bleeding edge technology at the design stage. The upshot is that fabless chip design companies go into the unprofitable, down market sector. "It's a business that's damn hard to survive," he said.
Krelle based his judgement on his previous life with Nexgen, a CPU house more or less forced into merger with AMD a few years back.
"There used to be two big fabless chip companies - Nexgen and Cyrix - where are they now? Nexgen is part of AMD and Cyrix is part of National Semiconductor," he added.
Speaking at Comdex, Krelle argues that AMD has pulled far away from the rest of the pack - including Nat Semi.
"Intel and AMD are the only two companies that share these characteristics: ownership of foundries and multiple, top-notch design teams that keep innovating on a multi-generational basis."
The inference we are to draw is that Nat Semi-Cyrix is hamstrung because it works on single lifecycle upgrades.
With the introduction next year of the K6 Sharptooth and the K7, it is ready to take on Intel in all market segments, Krelle said.
Operating at 400MHz clock speed, Sharptooth outperformed the Intel Pentium II 450MHz in independent tests, in a demo shoot-out at AMD's meeting rooms in the Las Vegas Convention Centre.
"We're not optimised for clock, we're optimised for performance," Krelle said, in what sounds like a well rehearsed soundbite.
Sharptooth is pitched at the performance segment of the market - and will take into the high-end consumer business, Krelle said.
He rejected suggestions that Sharptooth is a short shelf life transitional technology, bridging K6-2 and K7.
When the chip moves to 0.18 micron level production at the end of 1999 it becomes feasible that Sharptooth becomes the entry-level product," he said.
The K7 will fit inside PCs in the $1,995 and $2,995 bracket, Krelle revealed.
"The K7's strong floating point performance will take it into the graphic intensive market. We imagine that Intel-hater Intergraph will be among the first in the queue to place their K7 orders," he claimed.
In a demo, Krelle put the K7-powered PC through its paces, in which a DVD software version of 'Godzilla' the movie was played. Graphics performance was certainly impressive.
As for the launch date, Krelle said: "This is first silicon. We're on track (for shipping) for the first half, next year."
Pricing is not such a big issue, according to Krelle, secure in the knowledge that any price war would hurt Intel more. Wall Street punishes any Intel failure to meet its numbers very severely.
"It is a fine outcome when a market ends up with two companies, both of which are nicely profitable," commented Krelle. "That's the way it works in many industries."
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