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AMD fights for life in Pentium market

Advanced Micro Devices (AMD), once the second-largest supplier of 386 and 486 processors after Intel, is now fighting desperately to get a piece of the newly dominant Pentium-class processor market.

Advanced Micro Devices (AMD), once the second-largest supplier of 386 and 486 processors after Intel, is now fighting desperately to get a piece of the newly dominant Pentium-class processor market.

AMD's predicament is rooted in two strategic blunders. First, the company stumbled badly in delivering its Pentium-class processor, called the 5K86 (formerly known as the K5). Second, the company all but lost its key customer and chief ally, Compaq Computer, at least for now.

That leaves Intel indisputably in control of the market that will dictate the speed, strength, and cost of future PCs. Compaq had hoped that AMD would help it wrest that power away from Intel, but as the K5 strategy went south, the PC maker returned to the Intel fold for protection.

"AMD is definitely behind the game. Compaq had hoped that they were going to deliver [a 5K86 processor] but you can't bet your business on a philosophy," said Michael Slater, publisher of the Sebastopol, California-based Microprocessor Report.

Intel currently supplies Pentium processors that run as fast as 166 MHz and has plans to crank this up to 200 MHz in the third quarter. Intel's Pentium Pro processors already run as fast as 200 MHz. Currently, the only processor that AMD actually ships that is on par with Pentium-class performance is the AM5X86 processor, which offers performance equivalent to a low-end 75-MHz Pentium processor but is still based on an older 486 design.

AMD does have a strategy for catching up, a strategy that includes:
--Tentative plans "later this year" for an AM5X86 that runs at 166 MHz and offers performance on par with a 90-MHz Pentium.
--Delivery in the second quarter of its 5K86, initially offering performance equivalent to a 75-MHz Pentium but later speeding up to the levels of 90-, 100-, 120-, and 150-MHz Pentiums.
--Production of its real Pentium competitor, the 180-MHz K6, beginning in the first quarter of 1997.

But Nathan Brookwood, an analyst at San Jose, California-based Dataquest, believes AMD has two major hurdles to overcome in order to bring out the K6 processor--AMD's last good hope for offering a significant challenge to Intel's Pentium Pro.

First, AMD must make the K6 compatible with Intel chipsets and motherboards--not a trivial task, said Brookwood.

Second, the company has to gear up its new semiconductor plant in Austin, Texas, to handle the sophisticated production technology required to make advanced processors. Also not a piece of cake, Brookwood said.

"The bottom line is that there is no credible alternative to Intel. Other guys [such as AMD and Cyrix] lost ground to Intel last year," Brookwood said.

As recently as a year ago, AMD's fall from grace couldn't have been foreseen. At that time, Compaq had chosen AMD and its Pentium-class 5K86 products as its primary development partner and, after Intel, AMD was the processor supplier of choice for most other PC vendors as well.

Now AMD continues to supply Compaq with 486 processors, but the 486 is yesterday's technology. Even AMD officials concede they have a predicament.

"Clearly we don't have the breadth of product line that we'd like to have. It's also clear that we're just selling entry-level [processors]," an AMD spokesperson said. "It's going to be a long haul."