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Ten O'Clock Tech
AMD's Holiday Buzz
Arik Hesseldahl, 10.02.02, 10:00 AM ET
NEW YORK - It just wouldn't be a typical autumn if there weren't a scramble by chip companies to proclaim themselves the source of the fastest chip yet produced. This fall is no different.
Advanced Micro Devices (nyse: AMD - news - people ) is again laying claim to the throne it has traded back and forth with rival Intel (nasdaq: INTC - news - people ) over the last several years, announcing yesterday a new version of its Athlon XP processor. It's dubbed the Athlon XP 2800+, and the number is intended to position the chip against Intel's latest Pentium 4, which runs at a clock speed of 2.8 gigahertz.
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We've already had much to say about AMD's system of rating its processors (see: "AMD Celebrates A Birthday"), but this time we can't help but notice that AMD went to a lot of trouble to announce a chip that apparently isn't yet available on the market.
The company said the chip will start showing up in niche computers targeted at gaming enthusiasts by the end of the November. Companies like Systemax (nyse: SYX - news - people ), Alienware andFalcon Northwest have been producing specialized PCs aimed at gamers and others for whom the standard beige-box fare simply won't do, and AMD often finds its chips sold into their machines. Don't be surprised if the gaming geek in your life puts one on their Christmas list. AMD hasn't yet said which PC vendors will have the chip when it's released.
The chip will have a 333-megahertz system bus. The system bus is the pathway between the processor chip and the main memory chips in the PC--the faster it works, the faster the whole system seems to run. Previous Athlon chips had a system bus that ran at 266 MHz.
For AMD, doing this "paper launch," as it's often called, is merely an exercise in public relations. The company has suffered some setbacks recently: Its Hammer family of desktop chips has been delayed. They too will carry the Athlon brand and now won't be available in systems from PC vendors until the second quarter of 2003, the company said last month. The Hammer family is a 64-bit chip that can also run natively in 32-bit mode. Its Sledgehammer line of chips is being targeted at server and workstation computers, but the Clawhammer line--the one that has been delayed--is going into desktops and is expected to reassert AMD's ability to compete more closely with Intel on a performance basis.
With the Athlon XP 2800+, AMD is doing what it can to generate some buzz for the holiday PC sales season. Under the circumstances it's probably the right move since there are big things brewing in the house of Intel.
Intel is supposed to have its next headline-grabbing chip on deck for release any day now--and certainly before the end of the month. Its next Pentium 4 chip will have a clock speed that tops out at 3 GHz. But that's not all. The chip will boast a new capability that Intel calls hyperthreading. It's a technique that allows the chip to act on two instructions at once. When one set of chip instructions stalls, the chip can act on another, which increases efficiency. The net gain is a performance boost of about 30%.
But hyperthreading doesn't come without a few problems that Intel is still in the midst of solving. We're told that some PC software that as yet runs only in a single-threaded mode suffers a slowdown when run on a computer with a hyperthreading chip. We're also told Intel is still working with a few software vendors on solving this issue. Both Microsoft's (nasdaq: MSFT) Windows XP and some of the latest distributions of Linux support it.
"The longer Intel waits, the more software works with hyperthreading," says Kevin Krewell, analyst at InStat/MDR, a research firm in San Jose, Calif.
So what does it all mean for the mainstream PC buyer? Not much yet. The highest-end chips from either company rarely show up in computers sold at prices that consumers like to pay until months after they're released. But the performance fight between the two has important implications for the bottom line. When Intel has an edge, its favorite tactic is to slash prices on every chip in its lineup that AMD is still competitive with--and then charge a decent premium on its top-line chips. It's a battle that has certainly left AMD bloodied. Sales in its most recent quarter were about $600 million versus $985 million in the comparable quarter a year ago. Its market share is down too. But over the years we've learned never to count this company out.
But perhaps it's telling that AMD Chief Executive Hector Ruiz recently called for a new business model in the semiconductor industry.
Speaking to a forum on finance and technology hosted by Financial Executives International last month, Ruiz said he believes the old business model, meaning the traditional relationship between suppliers like AMD and its customers, the PC manufacturers, "is broken."
"To be successful, we believe that semiconductor companies must build relationships with customers that blur the lines and create a 'complementor' relationship where the companies are connected and invested in each others success," he said. "Our industry is in the midst of a fundamental change that will redefine the class definition of a semiconductor company and rewrite the metrics used to evaluate its success."
What we think that means is that AMD would like to do more joint development deals, like the fab-sharing agreement it has with Taiwan's United Microelectronics (nyse: UMC - news - people ) to share the expense of building a new chip factory that is set to open in Singapore in 2005. How AMD would structure a similar arrangement with a PC manufacturer or two--and more importantly, which manufacturers they might be--are certainly tantalizing thoughts.
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