After beginning 2000 in an all-out sprint for the 1GHz mark, chipmakers Intel and Advanced Micro Devices are ending the year with a noticeable fourth-quarter limp.
The chipmakers were tripped up unexpectedly by slow fourth-quarter sales, caused by a weak PC market. Though the market puts a damper on their otherwise stellar 2000 performance, it raises even larger questions for 2001.
Namely, what will the first half look like? Industry observers expect it to be ugly, especially in North America, as consumers, followed by corporations, respond to the slowing economy by tightening their purse strings.
Despite uncertainties in the PC market, both chipmakers have big plans for 2001. AMD, the chip manufacturer that re-invented itself in 2000 as a maker of sought-after high-performance desktop PC processors, plans to forge ahead with three new Athlon-based platforms.
With a three-pronged strategy, AMD will attempt to enter the corporate market with new multi-processor offerings. At the same time, it will renew its efforts in the low-cost PC arena and in the mobile market.
Meanwhile, Intel is coming off one of its worst years in recent memory. There were product shortages, recalls and product delays. Yet the highlight of Intel's year 2000 -- the launch of its Pentium 4 -- will become its obsession in 2001.
Intel will work to drive the new Pentium 4 chip into the mainstream PC market, even as it pushes the chip's clock speed past 2GHz. The company said it also plans to get its server act together in 2001, with the first production-level Itanium processors scheduled to ship in January.
Despite great success in consumer PCs, AMD's chips have yet to find their way into corporate PCs produced by name-brand PC makers, such as IBM or Hewlett-Packard and doing so won't be easy. "Corporate is where the volume and the money is," said Mike Feibus, principal analyst at Mercury Research. "AMD hasn't managed yet to convince corporate PC product line managers," he said. "If AMD knocks down that domino, the customers might fall more easily."
The corporate platform will be based around the new AMD 760 chip set and forthcoming processor core, codenamed Palomino, due to arrive at 1.33GHz in the first quarter, according to AMD. AMD expects PC makers to target corporations with workstations and servers based on a dual-processor version of the 760, the 760MP.
Intel, for its part, says better execution is key for 2001. The company says it's nearly midway through its metamorphosis from a supplier for the PC industry into a supplier for the PC, communications, networking, wireless and services industries. "We're looking pretty good two years into what is a five-year transition from a focus on the PC business to a focus on the Internet economy," said Intel spokesman Howard High. "Some people may look at them as mutually exclusive," High said. To Intel, "one is just a bigger version of the other."
Analysts are quick to point out that a change of focus could cause Intel to drop the ball on its core business. "It's clearly a challenge. The more that becomes true, the less focus there is on the core business," said Mercury's Feibus. "It inherently puts Intel at a disadvantage because [the PC market] is the number one priority for AMD."
Could its core business already be suffering? Intel's 2000 track record suggests it might. However, Jeff McCrea, marketing director for Intel's Desktop Products Group, said it is necessary for the group to get back to ways of the "old Intel".
McCrea acknowledged that company attempted to ship its 1.13GHz Pentium III chip too early. "Given that it was another stepping of the processor... I don't think we went through all of our validation processes," he said. The 1.13GHz was recalled a short time after Intel announced it on 31 July. It does not plan to make the same mistakes in 2001, McCrea said.
AMD isn't just gunning for Intel on the corporate side. Intel enjoys a healthy share of the lower-cost PC market. AMD thinks that its Duron chip will change that in 2001. The Duron got off to a somewhat slow start last summer due to lack of chip set support. However, the launch of VIA Technologies' integrated ProSavage KM133 chip set opened the door to lower PC prices.
AMD hopes to win back some market share via its low-cost, high-clock speed Duron chip. "That insulates AMD a little from a sluggish PC market," Feibus said. AMD plans to introduce new Durons, starting with an 850MHz chip in January. The chip will march forward in 50MHz increments, throughout 2001, hitting 1GHz by the end of the year. Intel will counter by boosting the speed of its Celeron chip to 800MHz and greater. It will also turn up the speed of Celeron's front side bus from 66MHz to 100MHz.
Despite small presence by AMD, and now Transmeta, Intel has a stranglehold on the market for mobile PC processors. Intel plans to keep the pressure on in the first half of 2001 by rolling out faster mobile Pentium III chips, including a 900MHz and a 1GHz, for full-sized notebooks. It will debut a 500MHz new ultra-low-power Pentium III in the first quarter aimed at small subnotebooks.
AMD is, again, looking for a piece of the pie in 2001. The company is now sampling mobile Athlon processors to PC makers. AMD plans to ship the chips within the first quarter. "Generically speaking, we'll have products available from immediately to a month to six weeks" after the chip is launched, said Mark Bode, Athlon marketing director in AMD's Computational Products Group.
Clock speeds for the new mobile Athlons are unannounced so far. But clearly AMD wants to be competitive with Intel. With Intel now shipping an 850MHz mobile Pentium III, analysts predict that AMD is likely to offer 800MHz, 850MHz and 900MHz mobile Athlon chips. "We've committed to 1GHz in 2001," AMD's Bode said. AMD will follow the mobile Athlon with mobile Duron chips, in the second quarter of 2001.
When it comes to the consumer desktop market, the Intel-AMD speed race is still alive and well. Both companies will look to quickly increase clock speeds on their latest, greatest chips over the course of 2001. Intel will look to crank up the clock speed and drive down the price of its recently introduced Pentium 4 chip. Pentium 4 PCs will drop as low as $1,600 in the first quarter with a 1.3GHz Pentium 4 in January.
Pentium 4 will reach higher speeds with the introduction of a 1.7GHz or faster chip later in the first quarter of the year. Intel executives have publicly stated plans to offer a 2GHz Pentium 4 in the third quarter. The chip is now available at 1.4GHz and 1.5GHz.
AMD's Athlon chip will run slightly behind in clock speed. Now at 1.2GHz, AMD plans to introduce a 1.33GHz Athlon in the first quarter. It will follow in the same quarter with newly designed Athlons, based on the Palomino processor core. The new chip will extend to 1.5GHz and faster in the second quarter and 1.7GHz and faster speeds in the second half of the year. But, according to current plans, it will not hit 2GHz until the first quarter of 2002.
However, AMD officials insist (and benchmarks back them up) that Athlon PCs using the AMD 760 chipset, which offers a faster 266MHz front side bus, and higher bandwidth double data rate synchronous dynamic RAM can compete with Pentium 4 systems.
AMD 760-based PCs will continue to increase in availability as volumes increase and additional PC makers sign on to the platform in the first half of next year. Currently only MicronPC.com offers the 760 and DDR SDRAM.
Ironically, one factor that may help Intel in 2001 is Rambus. Rambus memory, which was something of an albatross around the company's neck in 1999 and 2000, is fairly well-matched with the Pentium 4, said Nathan Brookwood, an analyst at Insight 64.
The chip can appropriately handle the faster data stream that Rambus memory spits at the processor. And Rambus memory is also coming down in price. "With the Pentium 4, Rambus might actually provide some performance benefit. If the price premium stays reasonable and the performance stays demonstrable, people might go for it," Brookwood said. "The ultimate undoing of Rambus was that it wasn't coming down the cost curve fast enough."
And, as 2000 has shown, followers of the Intel-AMD chip race should come to expect the unexpected in 2001.
Additional reporting by Michael Kanellos.
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