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AMD, Motorola in copper chip deal

On Monday, the duo will announce they're teaming up to advance the use of new, copper-based chipmaking.

On Monday, Motorola's chip division and Advanced Micro Devices will announce they're teaming up to advance the use of copper-based chipmaking technology, giving both companies a needed boost in a fiercely competitive, resource-intensive industry.

The two companies said they will describe a deal to cross-license and codevelop new chip technology. The undertaking will involve the use of copper in desktop processors, as well as cellular telephones and networking equipment, according to industry sources.

Chips made with copper rather than aluminum circuits would be smaller and faster. Analysts expect that semiconductor manufacturers will eventually make the transition because copper conducts electricity better than aluminum, the metal traditionally used for circuitry on microprocessors, thereby allowing the chip size to be reduced while increasing speed and sophistication.

Motorola and AMD declined to comment on details of the announcement.

For Motorola, the alliance is the latest in a string of moves designed to offset losses from a slumping chip business owing to weak demand and pricing pressures in the Asian markets. For example, Motorola and Lucent Technologies recently teamed up to develop DSPs (digital signal processors) at a new design center in the Atlanta area.

AMD, meanwhile, is expected to use copper technology to propel its chips into the next century. The company's Dresden, Germany, fabrication facility, now under construction, will start to produce samples of copper chips next year.

"Dresden is being built for copper interconnect technology," AMD chief executive Jerry Sanders said in a conference call this week. "We will have copper [processors] in volume in the year 2000."

Turning Dresden into a plant for copper chips may also quell some of the free-floating anxiety surrounding the opening of the facility. Currently, AMD has more factory capacity than it uses, adding to bottom-line costs, various sources say. Additional capacity is also coming from IBM: That company is slated to produce K6 chips later this year. Making copper chips could improve AMD's bottom line if it can produce enough of these high-performance chips and sell them at a premium over its other products.

AMD's next chip generation, the K7, won't adopt the copper interconnect technology--at least not initially. That chip will be previewed this fall and start to ship in volume in the first half of 1999. It is unclear whether the K7 will eventually be the initial AMD copper chip, or whether a subsequent generation be the first to incorporate the technology.

If anything, a licensing deal with Motorola makes sense because it will spare AMD of significant research and development costs, said one analyst.

Any boost would also be welcome for AMD, which is suffering significant financial losses even as Intel, despite setbacks, is still churning out more than $1 billion in profits a quarter. AMD has reported multimillion-dollar losses in the last four quarters and the company has warned that it may not report a profit for the current quarter.