Time running out for tardy AMD

Time is running out on PC chip maker Advanced Micro Devices Inc.

Observers say AMD (AMD) needs to release a zippy new version of its K6 processor before Intel Corp.'s Pentium II becomes widely established, or risk losing any chance of carving out a portion of the PC market.

"The overriding issue for AMD is whether they can stop the industry tide towards the (Intel Pentium II architecture)," said Mike Feibus, principal analyst for semiconductor watcher Mercury Research Inc. "

Yet ZDNN sister publication PCWeek Online reported on Wednesday that AMD will delay the rollout of its K6-3D processor until the end of June. The chip was expected to appear at the CeBIT trade show in Hanover, Germany, next week.

Missing CeBIT is the latest in a string of woes AMD has suffered with K6. Missing its June ship date would cast K6's market presence in serious doubt, analysts say.

Late last year, AMD made public its problems with producing large volumes of the K6, its competitor to Intel's Pentium and Pentium II processors.

While AMD's biggest customers haven't complained of a short supply, they aren't rolling in K6s, either.

"We are not supply-constrained and we don't have an excess of inventory," said Andrew Haden, a spokesman for IBM.

Unlike for other customers, the chips for IBM and Compaq are not made in a factory, but in clean rooms normally used to create samples and prototypes, said Dwayne Cox, an AMD spokesman.

Considering the real business need for AMD to flood the market with K6 processors, this sort of just-in-time manufacturing may be too late.

AMD's solution: Convert its fabs, where the chips are made, to make a smaller version. This means three times more chips per silicon wafer -- with less errors, they hope.

Yet shrinking the chip is no mean feat. "This is a tough thing to pull off," admitted AMD's Cox.

Mercury's Feibus says the latest delay reflects badly on AMD's ability to keep a steady stream of chips rolling out the door. "I am not convinced that they can do it, frankly," he said.

Still, AMD's sleight-of-hand in keeping IBM and Compaq happy is paying off.

According to market research firm PC Data, two Compaq Presarios and an IBM Aptiva based on the K6 took top honors in January retail sales. The three models make up 21 percent of the retail sales in the market, said the Reston, Va., firm-a market that mainly consists of PC priced under $1,300.

Within that price range, AMD garners points over Intel in price-performance, giving the company points with the big-league players.

But one analyst likened it to holding a tiger by the tail.

"It's hard to say that it's AMD beating everyone up," said Steve Baker, senior hardware analyst for PC Data. "They are just partnering with the right people, and hanging on for the ride."

Still, if the company can make the transition to smaller chips and get its AMD K6-3D processor to market by this summer, it has a chance, say analysts.

Already, AMD and other processors are eroding Intel's share of the retail market. In January, about 36 percent of the PCs sold were non-Intel processors, according to PC Data.

Better 3-D game capabilities, for one, could grab a bigger piece of the consumer pie. That's where AMD's K6-3D comes in.

Another ace in the hole is Mr. Gates. Microsoft intends to support the special 3-D instructions in the new processor in its 3-D game interface, Direct3D 6.0, due out in the second half of this year.

"The DirectX support is key," said Mercury's Feibus. "The whole gaming industry is starting to support it (as a common platform)."

Yet it's time to stop playing games and solve the problems. Otherwise, it's the Deep-(K)6 for AMD.