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Intel challenged in low-cost arena

AMD and Cyrix are engaged in ambitious product strategies that will likely challenge Intel in the cheap computing space.

Despite production snags in 1997, Advanced Micro Devices and Cyrix are engaging in ambitious product strategies that will likely challenge Intel in the cheap computing arena.

Both companies will try to maintain performance parity with Intel's Pentium II processors while selling their chips for significantly less.

Along with Integrated Device Technologies, AMD and Cyrix are also making a concerted effort in the graphics segment. All three chipmakers are hammering out standards for an additional, common set of 3D instructions that will be incorporated into processors this year.

One of the key strategic points for these chipmakers is their continued reliance on the older Pentium design, the so-called Socket 7 market. Socket 7 chips remain less expensive to make than mainstream Pentium II chips based around the "Slot 1" architecture and will likely perform better than the first iteration of Intel's low-end Pentium II chips, called Celeron, analysts say.

Advanced Micro Devices (AMD) is already making a strong showing in the Socket 7 market with its K6 processor. It is being used by Compaq in several low-cost consumer models and has been adopted by IBM for its Aptiva line of consumer PCs.

Another positive note for AMD is that it now has a chip partner with a prodigious amount of manufacturing capability and experience. AMD announced in late February that IBM Microelectronics would manufacture the K6 processor. IBM is expected to begin making the chips starting in the third quarter, which would complement AMD's internal production of the K6.

Cyrix will also try to challenge Intel with its highly integrated MediaGX processor, which uses a completely different design but is cheaper still. Toward the end of the year, the integrated processor will likely be incorporated into business machines selling for $599, said Steve Tobak, vice president of corporate marketing at National Semiconductor, which bought Cyrix last year. And corporate users, he added, will be eyeing computer expenses in 1998.

"Sooner or later the gap will have to close between the price of consumer PCs and business PCs," he said. "I think Celeron will be a weak offering for that segment."

Cyrix was instrumental in igniting the sub-$1,000 PC market when it hooked up with Compaq for one of the first low-cost designs from a major PC vendor. The Compaq Presario 2000 series was announced back in February of 1997 and featured a Cyrix MediaGX chip. For $999, it offered many of the bells and whistles of an Intel-based $2,000 PC at the time.

Currently, Cyrix chips are featured in new, low-cost Compaq notebooks.

Michael Slater, principal at MicroDesign Resources, said that one or both of the companies will chip away at Intel's market share and possibly account for 20 percent of the Intel-compatible market this year because of the cost savings they can provide to vendors. All of the competitors combined now account for roughly 15 percent of the market.

"Socket 7 will continue to have a strong presence in the low-end," Slater said.

Further, these companies will give computer manufacturers greater autonomy by making them less dependent on Intel. "PC makers do not want Intel to have the degree of control over their business that Intel has today," Slater added.

The first advances for both AMD and Cyrix will occur toward the middle of the year. At that time, AMD will release its K6 3D, a 350-MHz version of the K6 processor that includes the additional 3D instructions. Similarly, Cyrix will release a 300-MHz version of its 6X86 processor as well as a 266-MHz version of the MediaGX.

AMD's K6 3D will begin to feature a faster bus, the conduit through which the processor talks to other components in a computer. Cyrix's chip will also support the high-performance bus. Chipsets for creating the faster 100-MHz bus will be marketed by a number of companies, including Acer, Tobak said. Intel is similarly coming out with a 100-MHz bus for its 350- and 400-MHz Pentium II processors during this time frame.

In the second half of the year, AMD will come out with the K6 3D+, a 400-MHz version of the chip with an integrated L2 cache. AMD will also outline its strategy for the K7, its next-generation microprocessor, at the Microprocessor Forum in October. Samples of the K7, which is due in 1999, will be previewed at Comdex, the spokesman said.

Cyrix's MediaGX will increasingly take on more functions and be segmented for corporate and consumer markets through this year and next, Tobak added. The corporate version of the chip, for instance, will incorporate the network adapter functions directly into the processor. By contrast, a consumer version will include functions for a modem and the IEEE 1394 interface, a technology for connecting consumer electronic devices to a PC.

While both sets of the Cyrix chips will be focused on low-end computers, Cyrix will begin to branch out into set-top boxes in 1999, about the same time that Intel has said its Pentium II core chips will begin to appear in fixed-function devices.

Meanwhile, Cyrix will come out with a 333-MHz version of the 6X86 in the third quarter, followed by a 350-MHz version in the fourth quarter. In addition, a 300-MHz version of the MediaGX will come out in the third quarter.

AMD shipped 7 million K5 and K6 processors in 1997 and has a goal of 15 million K6s in 1998, according to Slater. Cyrix sold 6.5 million its chips in 1997 and will have capacity for 10 million chips in 1998.

Intel is an investor in CNET: The Computer Network.