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Cheap chip onslaught from Intel, AMD

The two companies are preparing for a heated battle over budget PCs and processors despite their recent focus on the performance end of the market.

Although Intel and AMD have focused their attention on the performance end of the processor market lately, the two companies are preparing for a heated battle over budget PCs and processors.

Next week, Intel will unveil two new Celeron processors for inexpensive computers running at 566-MHz and 600-MHz, according to sources. The company will then follow up in late April with two more Celerons running at 633-MHz and 667-MHz. A 700-MHz Celeron, which in February was slated for the second half of the year, may also come out toward the end of the second quarter.

The new Celerons in many ways will resemble the high-end Pentium III processor. For the first time, the chips will include "SSE" multimedia extensions from the Pentium III, which means that computers with Celeron chips installed will be able to take advantage of tweaks in applications and games that so far have only worked on Pentium III machines. Additionally, the Celeron chips will be based on the same basic piece of silicon as are Pentium III chips.

The differences between the two chips will mostly stem from their implementation: the processor's eventual clock speed (or how fast they run) and the type of graphics chips and memory with which they will be paired.

AMD, meanwhile, will counter with new notebook processors in the next few weeks and a version of Athlon, code-named Spitfire, for budget PCs toward the middle of the year. Spitfire will displace the K6-2 in desktops.

Overall, this means several price cuts and faster, fancier PCs for consumers over the next few months. "It is clear that once AMD has the Spitfire strategy lined up, it will be more of a challenge to Intel," said Nathan Brookwood, principal at Insight 64.

While less glamorous than Pentium IIIs or Athlons, the inexpensive chip lines for both companies remain crucial elements in their strategies. Celeron chips, which typically sell for $69-$180 in volume, account for roughly 35 percent of Intel's product mix, according to various estimates, and are incorporated in both corporate and consumer PCs. Until recently, AMD has relied on the budget K6-2 for the lion's share of its processor revenues.

A market share slide for either company in this segment has typically been seen as a cause for alarm. Intel, for instance, began a scorched-earth pricing campaign in January 1999, after AMD gained a number of design wins with large computer makers such as Gateway. The ensuing price war sent AMD from profitability to three straight quarters of losses. Two other companies--National Semiconductor and IDT--were forced out of the market because of the price war.

Chips for cheapskates
What's coming from Intel, AMD
March: 566-, 600-MHz Celerons next week. First Celerons to contain multimedia capabilities of Pentium III.

April: 633-MHz, 667-MHz Celerons.

Mid-year: 700-MHz?

March-April: K6-2+ for notebooks, K6-3+ future to be made clear.

Mid-year: Spitfire, a low-cost Athlon

Sources: various
The Intel processors coming next week will represent an evolutionary step forward for Celeron. Not only will the chips contain multimedia extensions, they will be the first chips made on the more advanced 0.18-micron process, which can open the door to a variety of benefits.

As a result, the chips also will contain 256KB of secondary cache, a performance-enhancing feature on the Pentium III, Brookwood said. On the Celerons, however, Intel is disabling half of the cache so the chip can only take advantage of 128KB of the cache.

"It is there, but it is not useable," he said.

Most of the differences between the Pentium III and Celeron chips going forward will exist in the elements that connect to the chip. Pentium IIIs will mostly come in computers with fast Rambus memory and high-powered graphics chips. Celeron computers will come with standard memory and generally less-powerful graphics chips that are integrated into the chipset. Pentium III computers will also come with a 133-MHz system bus, which will provide faster data flow than the 66-MHz bus that is matched with Celerons.

"There was a while there when Celeron was your best price/performance value. Now Celerons are no longer completely competitive," said Peter Glaskowsky, an analyst at MicroDesign Resources, adding "Intel at least for the near future will preserve the differences."

Not to be outdone, AMD will come out with Spitfire toward the middle of the year, stated Byran Longmire, director of product marketing at the company.

Spitfire will also mark the beginning of the end for the K6-2 in desktops. AMD will continue to make K6-2 chips, said Longmire, but no new versions of the processor will come out. Instead, AMD will focus on the K6-2+, a version of the K6-2 built on the 0.18-micron process. The K6-2+ will, however, only be sold in notebooks.

The chip is expected in late March or early April, a spokesman said. AMD is also slated to release a fairly similar chip called the K6-3+. However, the company has already phased out the rest of the K6-3 line because of a lack of sales and overlap with the K6-2 line, sources inside AMD have said.