Motorola deal helps AMD keep pace with Intel

Monday's deal between chip maker Advanced Micro Devices Inc. and Motorola Inc.

Monday's deal between chip maker Advanced Micro Devices Inc. and Motorola Inc. gives AMD the ammunition it needs to keep pace with rival Intel Corp., analysts say.

As reported here last week, Motorola (NYSE:MOT) will give AMD (NYSE:AMD) access to important copper technology for designing next-generation processors.

The move helps AMD keep pace with Intel (Nasdaq:INTC), which is expected to have few problems in transitioning to its own version of copper technology.

"Copper is critical to get to higher [processor] speeds than with today's aluminum," said Mike Feibus, industry analyst with semiconductor market watcher Mercury Research Inc. "It will be the way of high-speed circuits." Current PC processors use aluminum "wires" on silicon to connect the transistors.

By doing away with aluminum and using the so-called copper interconnect technology, AMD's next-generation K7 chip will hit 1,000MHz by the year 2000, said Sanders.

Motorola will use copper in its own PowerPC chips as well. The specific technology is known as HiPerMOS 6L.

IBM Corp. (NYSE:IBM) announced that it had developed copper technology for its chips almost a year ago. Semiconductor maker Texas Instruments Inc. (NYSE:TXN) made a similar claim last December.

While Intel has yet to make a copper announcement, the company is expected to use the technology in 0.13-micron chips.

"Aluminum is a proven technology which we will stay with until the tools and production equipment are available [for copper]," said Seth Walker, spokesman for Intel.

Two better than one
For AMD, the Motorola partnership represents a way to curb research and development costs without losing access to key technological advances.

"AMD knows that R&D is the lifeblood of an enterprise," said W.J. Sanders III, AMD's chairman and CEO, in announcing the deal.

The agreement gives both companies the rights to each other's patents for seven years.

"The alliance shows that, unless you are an Intel or an IBM, you need partners to keep pace," said Michael Slater, principal analyst and founder of MicroDesign Resources Inc.

Embedded knowledge
The alliance will also result in Motorola receiving AMD's flash technology for adding embedded memory in processors.

While a long way off, the embedded strategy should allow Motorola to offer a line of integrated processors for information appliances and communication devices.

That's if it lasts.

"The embedded technologies will take a long time to develop," said MDR's Slater. "Partnerships in the semiconductor industry don't have a great track record."