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AMD rolls out new chips
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June 5, 2000: 1:30 a.m. ET
AMD upgrades Athlon, adds Duron to compete against Intel's Celeron chip
By Staff Writer David Kleinbard
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NEW YORK (CNNfn) - Advanced Micro Devices, the second-largest maker of microprocessors, is upgrading its flagship line of chips and unrolling a new line for value-priced PCs in an effort to take market share from Intel Corp., its much larger rival.
AMD (AMD: Research, Estimates), based in Sunnyvale, Calif., on Monday will unveil new versions of its flagship Athlon line that can process information faster than previous versions because the memory cache will be located on the same die as the microprocessor. A memory cache stores data that a computer's central processor needs to get repeatedly, such as instructions from the operating system.
In previous Athlons, the cache memory was separate from the microprocessor die and created a bottleneck because it operated at a slower frequency than the processor. As an example, the memory cache for a one gigahertz Athlon chip operated at only 350 megahertz, or one-third the speed of the processor. The new Athlons, code named Thunderbird, will have "full-speed cache memory," meaning that the cache will operate at the same frequency as the processor to which it is attached.
In addition, the new architecture is cheaper for AMD to manufacture.
 "Moving the cache onto the die will enhance performance, and it becomes more and more important as the chip gets faster," said Linley Gwennap, a semiconductor analyst at The Linley Group in Mountain View, Calif. "Now that the Athlon has been out for a while and they have some experience with it, they have been able to enhance the design."
The move enables AMD to catch up with Intel (INTC: Research, Estimates), which has produced Pentium III chips with the memory cache on the die for several months.
The Athlon line has competed effectively against Intel's Pentium III in the U.S. retail desktop PC market, surprising some analysts who previously considered AMD little more than a thorn in Intel's side. AMD also has been aided by extremely strong industry-wide demand for microprocessors, which is driving both Intel and AMD to increase production capacity by investing billions of dollars in new fabrication plants. AMD sold 1.2 million Athlons in the first quarter of this year.
"This time around they did the unexpected - they came out with the Athlon and were able to build it and get major PC makers to buy it," said Dean McCarron, a semiconductor analyst at Mercury Research in Scottsdale, Ariz.
David Prairie, a spokesman for AMD, said that the new Athlons will start at 750 Mhz and go up to 1 Ghz in 50 Mhz increments. They will carry the same prices as the previous versions, he said.
Duron to target lower end PCs
AMD will also announce Monday that it has started commercial shipments of its new Duron chip, a product formerly code-named Spitfire. The Duron, which will be available in 600, 650 and 700 Mhz versions, is designed to compete against Intel's Celeron processor in the market for PCs priced below $1,200. AMD's existing chip for value-priced PCs, the K6-2, tops out at 550 Mhz. The company will continue to manufacture K6-2s throughout this year, and demand for them remains "extremely strong," said AMD's Prairie.
"The K6-2 is a fairly old product family and is priced quite low in the market," said Mercury Research's McCarron. "The Duron is a stronger and higher performance product, and pricing will be higher as well."
"The K6-2 is out of gas and they can't push it much further," said The Linley Group's Gwennap.
Separately, AMD said that it has begun commercial shipments of processors from its new fabrication plant in Dresden, Germany. AMD has invested $1.9 billion in the new plant, which started construction in 1996. Previously, all of AMD's microprocessors were made in a plant in Austin, Texas. AMD hopes that the added capacity will enable it to achieve its goal of capturing 30 percent of the global microprocessor market by the end of 2001, up from 17 percent currently.
AMD is strongest in chips for laptops and value-priced desktops sold to consumers. However, it lags well behind Intel in chips for desktops in the $1,000 to $1,500 range sold to corporations, where its market share is less than five percent.
Intel now has six plants devoted to making microprocessors, and is investing billions of dollars this year to increase its capacity.
"Even if both of AMD's plants were operating at full-capacity, they still wouldn't capture more than 30 percent of the overall market," said Mercury Research's McCarron.
For the quarter ended April 2, AMD said it earned $189.3 million, or $1.15 per share, nearly double the 58 cents-per-share profit analysts polled by earnings tracker First Call had expected. Sales for the quarter rose 73 percent from the same period last year to $1.09 billion. 
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