Ending the year with a limp, leading chipmakers Intel and AMD look at the road ahead and aren't thrilled with what they see. Yet the conditions won't put a damper on the rivals' competitive fire.
The chipmakers were tripped up unexpectedly by slower sales in the fourth quarter, caused in part by a weaker market for personal computers.
Though the conditions put a damper on the companies' otherwise stellar performance in 2000, they raise even larger questions for the new year.
Namely, what will the first half of 2001 look like? Industry observers expect it to be an ugly time, especially in North America. Consumers, followed by corporations, are expected to respond to the slowing economy by tightening their purse strings.
Despite uncertainties in the PC market, both chipmakers have big plans for 2001. AMD, the chip manufacturer that reinvented itself in 2000 as a maker of sought-after high-performance desktop PC processors, plans to forge ahead with three new Athlon-based strategies.
With a three-pronged strategy, AMD will attempt to enter the corporate market with new multiprocessor offerings. At the same time, it will renew its efforts in the low-cost PC arena and in the mobile market.
At the same time, Intel is coming off one of its worst years in recent memory. The chip giant struggled with product shortages and delays, as well as with recalls. Yet the highlight of Intel's year--the launch of Pentium 4--is likely to become its major obsession in 2001.
Intel will work to drive the Pentium 4 chip into the mainstream PC market, even as it pushes the chip's clock speed past 2 GHz. The company also plans to get its server act together in 2001, with the first production-level Itanium processors scheduled to ship in January.
Creating a new AMD
Despite great success in consumer PCs, AMD has yet to find its way into corporate PCs produced by name-brand PC makers, such as IBM or Hewlett-Packard.
And it won't be easy.
"Corporate is where the volume and the money is," said Mike Feibus, principal analyst at Mercury Research. "AMD hasn't managed yet to convince corporate PC product line managers," he said. "If AMD knocks down that domino, the customers might fall more easily."
Its corporate strategy will be based around the new AMD 760 chipset and forthcoming processor core, code-named Palomino. The package is scheduled to hit the scene in the first quarter, according to AMD.
The company expects PC makers to push workstations and servers based on a dual-processor version of the 760, the 760MP, to corporations.
"We look to see more commercial solutions in the first half of the year," said Mark Bode, Athlon marketing director in the company's computational products group.
Intel, for its part, says better execution and a new look is key for 2001.
The company says it's nearly midway through its metamorphosis from being the supplier of the building blocks for personal computers to being a key technology player not only for the PC industry, but for the communications, networking, wireless and services industries as well.
"We're looking pretty good two years into what is a five-year transition, from a focus on the PC business to a focus on the Internet economy," said Intel spokesman Howard High. "Some people may look at them as mutually exclusive," High said. To Intel, "one is just a bigger version of the other."
Analysts are quick to point out that a change in focus could cause Intel to lose sight of its core business.
"It's clearly a challenge. The more that becomes true, the less focus there is on the core business," said Mercury's Feibus. "It inherently puts Intel at a disadvantage, because (the PC market) is the No. 1 priority for AMD."
Could its core business already be suffering? Intel's 2000 track record suggests it might.
Executives attributed the company's Rambus woes to problems with the memory technology itself, not to Intel's execution.
However, Jeff McCrea, marketing director for Intel's desktop products group, said it is necessary for the group to get back to the ways of the "old Intel."
McCrea acknowledged that the company attempted to ship its 1.13-GHz Pentium III chip too early. "Given that it was another stepping of the processor...I don't think we went through all of our validation processes," he said.
The 1.13-GHz chip was recalled a short time after Intel unveiled it July 31. The company does not plan to make the same mistakes in 2001, McCrea said.
Low-end market untapped for AMD
AMD isn't just gunning for Intel on the corporate side, as it plans to chip away at Intel's hold in the low-end PC market.
AMD thinks that its Duron chip will change the face of the market in 2001. The Duron chip family got off to a relatively slow start last summer because of lack of chipset support. However, the launch of a new Via Technologies integrated ProSavage KM133 chipset opened the door to lower PC prices.
With lower overall system prices and higher clock speeds, Duron is expected to win some market share for AMD.
"That insulates AMD a little from a sluggish PC market," Feibus said.
AMD plans to introduce new Duron chips, starting with an 850-MHz chip in January. The chip will march forward in 50-MHz increments throughout 2001, hitting 1 GHz by the end of the year.
Intel will counter by boosting the speed of its Celeron chip to 800 MHz and greater. It also will turn up the speed of Celeron's front-side bus from 66 MHz to 100 MHz.
Intel plans to keep the pressure on in the first half of 2001 by launching faster mobile Pentium III chips, including a 900 MHz and a 1 GHz, for full-size notebooks. It will debut a 500-MHz ultra-low-power Pentium III in the first quarter aimed at small subnotebooks.
And here again, AMD is looking for a piece of the pie in 2001.
The company is sampling mobile Athlon processors to PC makers and plans to ship the chips in the first quarter.
"Generically speaking, we'll have products available from immediately to a month to six weeks" after the chip is launched, AMD's Bode said.
The race for speed
Clock speeds for the new mobile Athlons have not been announced. But clearly AMD wants to be competitive with Intel.
With Intel shipping an 850-MHz mobile Pentium III, analysts predict that AMD is likely to offer 800-MHz, 850-MHz and 900-MHz mobile Athlon chips.
"We've committed to 1 GHz in 2001," Bode said.
AMD will follow the mobile Athlon with mobile Duron chips in the second quarter of 2001.
When it comes to the consumer desktop market, the Intel vs. AMD speed race is alive and well. Both companies will look to quickly increase clock speeds on their latest, greatest chips over the course of 2001.
Intel will look to quickly crank up the clock on its recently introduced Pentium 4 chip as it simultaneously drives down the price of the chip. Pentium 4 PCs will also drop as low as $1,600 in the first quarter with a 1.3-GHz Pentium 4 processor in January.
The tortoise and the hare
Pentium 4 will also reach higher speeds, with the introduction of a 1.7-GHz or faster Pentium 4 later in the first quarter of the year. Intel executives have stated publicly plans to offer a 2-GHz Pentium 4 in the third quarter. The Pentium 4 is now available at 1.4 GHz and 1.5 GHz.
AMD's Athlon chip will run slightly behind in clock speed. Now at 1.2 GHz, AMD plans to introduce a 1.33-GHz Athlon chip in the first quarter. It will follow in the same quarter with newly designed Athlons, based on the Palomino processor core. The new chip will extend to 1.5 GHz and faster in the second quarter and 1.7 GHz and faster in the second half of the year. But according to current plans, it will not hit 2 GHz until the first quarter of 2002.
AMD executives insist, however--and benchmarks back them up--that Athlon PCs using the AMD 760 chipset, which offers a faster 266-MHz front side bus and higher-bandwidth Double Data Rate Synchronous Dynamic RAM, can compete with Pentium 4 systems. AMD 760-based PCs will continue to increase in availability as volumes increase and additional PC makers sign on to the technology in the first half of next year. Currently only MicronPC.com offers the 760 and DDR SDRAM.
Ironically, one factor that may help Intel in 2001 is Rambus. Rambus memory, which was something of a weight in 1999 and 2000, is fairly well-matched with the Pentium 4, said Nathan Brookwood, an analyst at Insight 64.
The chip can appropriately handle the faster data stream that Rambus memory spits at the processor. And Rambus memory is also coming down in price.
"With the Pentium 4, Rambus might actually provide some performance benefit. If the price premium stays reasonable and the performance stays demonstrable, people might go for it," Brookwood said. "The ultimate undoing of Rambus was that it wasn't coming down the cost curve fast enough."
And, as 2000 has shown, followers of the Intel/AMD chip race should come to expect the unexpected in 2001.
News.com's Michael Kanellos contributed to this report.