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AMD is betting on low-priced chip

Chipmaker's new Sempron is designed to vie with Intel's Celeron, but can it really make AMD the king of the low end?

Advanced Micro Devices plans to use its forthcoming Sempron chip to prove that the way to some PC buyers' hearts is through their wallets.

The chipmaker, which announced its Sempron brand in early June, will attempt to woo buyers of low-priced desktops and notebooks, taking on Intel's Celeron processor in the low-end PC game.

Sempron, which was designed to deliver multimedia performance on the cheap, will become an important part of AMD's desktop-processor strategy after it's released later this year. Right now, the company's Athlon XP chip is used in both low-priced and midrange PCs. Sempron can compete with Celeron, thus taking some pressure off of the prices of higher-numbered Athlon XP chips. AMD will continue marketing Athlon XP for more expensive, midrange PCs.

AMD has offered a low-priced chip dubbed Duron in the past and has also been working on even less-expensive processors for emerging markets. Lately it has not offered a Duron outside of a handful of markets.

In the past, "we have chosen, in some cases, not to serve the low end of the value market," said Bahr Mahony, the company's manager of mobile products. "We haven't wanted to take Athlon XP down to that level. Sempron will serve a portion of the value market that we've historically not consistently served."

While Athlon XPs can be found in Hewlett-Packard desktops priced as low as $399 and in HP notebooks priced as low as $849 before rebates, AMD plans to market Sempron for those PCs. It will aim to place the chip in desktops that cost less than $549 and in notebooks that sell for under $999.

But Sempron notebooks could hit prices even lower than that. The machines could start at $650 or $700, Mahony said, but still deliver features, such as 15-inch screens and CD burners, that meet the needs of most buyers.

Despite what will be a relatively low price, Sempron will be able to tackle tougher jobs, such as working with multimedia files, the company said. These days, even buyers of low-end desktops expect to be able to edit a photo on their new computer, Mahony said.

While it probably won't make as much from each Sempron sale as it does from each Athlon sale, the chip could still deliver gains for AMD.

"Having Sempron could allow AMD to gain more design wins, because PC makers would have the option of using the money saved (by using a cheaper processor) to upgrade other features that may be more attractive," said Dean McCarron, an analyst with Mercury Research.

Price motivates buyers in a number of PC markets, such as retail sales in the United States.

But "the problem AMD has had for the last two years is that it's expensive to make Athlon XP an entry-level brand," said Steve Baker, an analyst with NPD Techworld, referring to the chipmaker's hesitation to offer Athlon XP at superlow prices.

AMD has picked up market share in desktops at retail outlets in the United States during the last few months, Baker said, but it's been heading the opposite way in notebooks. Prices have something to do with that, although each company's market share can also rise or fall based on things like monthly promotions, he said.

During April, AMD garnered about 40 percent of the retail PC market in the United States, versus Intel, which had a hair over 57 percent. But Intel dominated notebooks with about 78 percent of the market, versus AMD's 19 percent. Overall, Intel had 65 percent of the U.S. retail market, compared with just over 32 percent for AMD, according to NPD Techworld.

Overall, AMD's first-quarter market share was 14.9 percent, compared with Intel's 83.6 percent, according to Mercury Research.

Lately, the average retail selling price for a desktop, sans screen, has hovered around $725, while notebooks have ranged between $1,300 and $1,400. But, when notebooks reach the $699 level, usually after various rebates, "they sell like crazy," Baker said.

While Mahony could not comment on specific details about the chip, Sempron is expected to follow a formula used in the past with chips like the Duron or Intel's Celeron, in which the chip sells for less but doesn't offer as much performance or as many features as its premium-brand sibling. Intel Celerons, for example, are de-featured versions of the Pentium 4 or the Pentium M, depending on which market the chips serve.

Thus Semprons are expected to be available in lower-model numbers, such as 2500+. By comparions, Athlon XPs top out at 3200+, and Athlon 64s at 3800+. The Semprons also will use less cache than the Athlon XP, which has as much as 512KB, and will lack the 64-bit extensions of the Athlon 64.

Still, Sempron is expected to share the Athlon XP's chip-packaging systems, which affix the processor to a motherboard, the main circuit board in the PC. Using the Athlon XP's system ensures that some Semprons will be able to fit into the very lowest-priced systems. Some versions of the chip, however, are expected to use Athlon 64 packages as well to allow them to be used along with Athlon 64s in some PC lines.

Meanwhile, Sempron list prices are expected to closely match those of Intel Celeron chips, meaning that chips such as a Sempron 2500+ will cost about the same as a 2.5GHz Celeron. Right now, Intel's desktop Celeron list prices range from $69 for a 2.2GHz version of the processor to $117 for a 2.8GHz version of the chip.