The new chips, which will be released officially later this month, effectively give AMD the speed crown in both the performance and budget segments of the processor market.
Even better for consumers, the chips are cheap, as pricing pressure is returning once again to the processor market. The 1.2-GHz Athlon is available for $598 from retailer BzBoyz.com and for $574 starting Monday from Accubyte. The 800-MHz Duron sells at several dealers in the $110 to $130 range.
AMD and Intel have slugged it out all year over performance claims. Intel's fastest chip for the performance segment tops out at 1 GHz. The company introduced a 1.13-GHz Pentium III in August, but it had to recall the chip the same month because of a glitch. Intel, however, will likely take the crown back with the debut of the Pentium 4, which sources say should arrive in November.
Compaq Computer is among the companies expected to adopt the faster Athlon chip.
In the budget segment, the 800-MHz Duron is 100 MHz faster than Intel's fastest Celeron.
An AMD spokesman said the company has been shipping the chip to distributors and will officially release the chips this month.
While all of these new chips will offer consumers better PC performance for the holiday season, buyers can also expect another benefit: lower costs.
Prices have been declining weekly in the microprocessor market, according to studies from Merrill Lynch and other researchers. Lower chip prices typically lead to lower prices on computers. Chip shortages earlier in the year slowed the usual pace of price cuts.
Both AMD and Intel chips, for instance, sell retail for less than their official wholesale price. AMD's 1.1-GHz Athlon sells officially for $612 in 1,000-unit quantities. Several dealers are offering it for less than $450.
Earlier this week, AMD CEO Jerry Sanders indicated that the company will likely limit production of Duron in the fourth quarter because of pricing pressure.
In July, price pressure was a distant thought. "We have such a desirable product, we don't have to cut prices to get business," Sanders said then.
Insight 64 analyst Nathan Brookwood said pricing pressure was bound to appear as AMD went from shipping its Athlon in large quantities. In the third quarter, 3.6 million Athlons and Durons were shipped. The effect of such pricing is showing up in the spot market for processors.
"One would expect to see a little bit of price erosion or aggressiveness in pricing," Brookwood said.
Nonetheless, considering AMD's history, its market position is an accomplishment, he added. "For AMD to sell a chip for $600, considering where it was two years ago, is still a major achievement."
In a conference call Thursday, Gateway CEO Jeff Weitzen said he was pleased with both the overall supply of chips and Intel and AMD individually, now that Gateway is using chips from both companies.
"I think both AMD and Intel have been very good suppliers over the last couple of quarters," Weitzen said. "We're certainly a lot happier this quarter than we've been in previous quarters."
News.com's Michael Kanellos contributed to this report.