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EE Times: Semi News
Price war appears inevitable between intel and AMD
Jack Robertson
(04/20/ZOU1 1:57 PM EDT)
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Rivals on several fronts, lntei Corp and Advanced Micro Devices Inc. are partners in financial pain
And with neither company clear on whether the PC market is nearing recovery, another heated pricing war looks likely as AMD
tries to wrest market share away from its much larger competitor.
AMD chairman and chief executive Jerry Sanders fairly gioated this week as he reported that tirst—quarter sales held steady with
the previous period, compared with tntel’s 23% sequential drop in quarterly revenue
Touting the desktop Athlon and upcoming successor, the Palomino, which is launching this quarter initially for notebook PCs,
Sanders said AMD is prepared to go heaci—to~head with its rival on processor pricing.
"We‘ll buttress ourselves against any foolish moves by our competitor. We‘ii match them {in price] clock cycle by clock cycte," he
said.
Although both are banking on new—generation processors as a buffer against stormy business conditions, the promise of a price
war between the two could end up in steeply eroded margins, analysts said
Though choosing to blame weak overail demand over pricing competition, intel said its gross margin couid drop another 3
percentage points, to 49%, in the current period, after nose-diving to 51 7% last quarter from 63% at the end of last year
Citing a "tack of visibility" concerning the current quarters sales, Inte! chief Hnancial officer Andy Bryant said revenue could range
from a 7% drop, to $6..2 biilion, to a slight gain over last quarters $5 GB biiiion
AMD did not report earnings estimates, but said second—quarter revenue wilt be anywhere from fiat to down 10%, from $1 19
billion in the first quarter.
i·
propel the new processor into the market, a move that will likely be met by similar cuts from AMD.
Intel is atso said to be struggling to deliver its iGi·lz Pentium lll processors for notebook PCs in any volume, with shipments
deiayed up to a month or more Analysts said the company's 933Ml-lz Pentium lll will hoid the fort as it is still considerabiy faster
than anything AIVID offers in the notebook market
""i`he really savvy consumer might [notice the speed dilference]," said Ellean McC3arron, an analyst at Mercury Research inc.,
Scottsdale, Ariz. "There are certain applications where you would lf you’re playing a demanding action game or working with
video, you might notice a siight difference "
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Ei§,Timcs.comQ;li‘$r?:c1viQi$Etp\6E(2tps4i9igVil‘d§c ta9eiriasi;e3A3ao Filed Wl 3/2003 Page 3 <>·‘ 3 page 2 are
All/iiD's iirsbquarter net earnings of $124.8 billion dropped 30% sequentially and 34% year over year The company increased its
share of processor unit shipments to 21%, from 17% in the previous period, Sanders said
AMD is "on plan" to continue increasing its processor market share, but is unlikeiy to reach its previously announced goal of 30%
by year*s end, he added.
Athion chips wiii continue to be made on Fab 25's aiuminum interconnect line in Austin, Texas, Sanders said. As Athlon migrates
to higher frequencies requiring copper interconnects, production wiii be centered at Fab 30 in Dresden, Germany, which will be
operating at i00% capacity by year's end
ANID will shrink top—end processor dice by starting 0 t3·micron production in Dresden in the fourth quarter. The company pians to
convert the Austin fab to flash memory, which is now rnade solely in Japan via a joint venture with Fujitsu Ltd., Sanders said
AMD said it is hoiding to its previousiy announced $1 billion capitai spending pian, up $200 million from iast year iviore than halt
the budget is earmarked for expanding capacity in Dresden and transitioning to 0.13 micron.
AMD and lntei both conceded that flash memory chip saies will remain down. AMD, which is suing flash customer Aicatel for
breach of contract, said it has no such probiems with its other 25 iong—term iiash contracts
At intel, where Hrst-quarter net earnings ot $485 million represented a drop of 82% year over year and 78% sequentially, the
company aiso is maintaining its capital spending schedule. intel will allocate $7.5 billion to capitai improvements this year, and
spent $2 6 biliion in the first quarter, according to Bryant
During tast weei<‘s conference cali, Bryant said he saw no quick market turnaround that wouid resurrect lntel's networking and
communications businesses The company disclosed that these, along with all other non-PC~related business, suffered a $1 06
billion operating toss in the iirst quarter.
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