interesting article:
sjmercury.com
Posted at 9:54 p.m. PST Friday, February 27, 1998
IBM gets call for AMD's K6 chip
But outputwoes aren't solved yet
BY TOM QUINLAN
Mercury News Staff Writer
IBM has signed on to help Advanced Micro Devices Inc. manufacture its popular but scarce K6 processor, the Sunnyvale chip maker announced Friday.
But analysts agreed that AMD still must solve its internal production problems if it is to make a significant dent in rival Intel Corp.'s market share.
AMD officials released few details of the two-year agreement, which is still being finalized. According to the release, IBM is promising only to deliver an unspecified number of finished wafers -- the silicon disks from which chips are cut -- to AMD beginning in the fourth quarter of this year.
That will give AMD the ability to deliver more K6s to manufacturers at year's end. But the deal does nothing to increase the immediate availability of the chip, and so offers manufacturers only a small incentive to continue building computers that use it, industry observers said.
Sources indicated that the real value of the IBM agreement will come when AMD releases its next generation chip, the K7, early next year.
''(AMD) will have access to any of IBM's technology that its willing to pay for,'' said one source familiar with the talks going on between the two companies.
That would include advanced manufacturing techniques for making smaller, more powerful chips and faster access to larger wafers that AMD will need in order to compete long-term with Santa Clara-based Intel. It is widely agreed that Intel's dominance in microprocessors -- it has more than 85 percent of the PC market -- hinges in part on its mastery of the manufacturing process.
''At first glance, this actually seems to be a bad deal for AMD,'' said Ashok Kumar, an analyst for the Minneapolis-based financial services firm of Piper Jaffray Inc. ''Right now it costs AMD about $40 to make a chip. They're going to have to pay IBM $50 or $55 a chip.''
''But what this deal really does is give AMD access to IBM's 0.18 micron process technology for their next generation chips, so they can avoid the problems they had with the K6,'' he added.
AMD is currently having difficulties manufacturing its K6 processor using a 0.25 micron process, where the spaces between the wires on a chip are 200 times smaller than a human hair.
By the time AMD is ready to mass produce the K7, the standard for making complex microprocessors is expected to be the even more challenging 0.18 micron process. IBM is among the first semiconductor manufacturers to begin using that process technology, albeit in a limited way.
If IBM can help AMD overcome the production problems that plagued the introduction of the K6, AMD could be well positioned to challenge Intel in 1999.
But AMD may not be able to take full advantage of IBM's manufacturing prowess if it cannot solve its own K6 production problems first, analysts say. That's because AMD and Intel are now manufacturing chips that use different designs -- and AMD must act quickly to keep computer manufacturers from committing to the Intel architecture.
Last year, Intel began to move away from the traditional plug-in socket design used by both the Pentium and the K6. Its Pentium II uses a new, patented card design that AMD cannot copy.
''It's critical that AMD prove that it can manufacture enough chips to meet demand,'' said Nathan Brookwood, a senior industry analyst for San Jose-based market research firm Dataquest Inc. ''That's when companies are going to decide if they will continue to manufacture PCs that use the K6 design, or if they move to (Intel's) Pentium II architecture for their low-end system designs. There's very few companies anymore that are going to be willing to support both designs at that price point.''
In recent months, AMD has acknowledged that the number of usable chips it has been able to get from each wafer, has been disappointing, particularly with the 0.25 micron process. In January, Kumar estimated that AMD's yield was as little as 1 percent.
Recently, however, the yield for at least some of AMD's production lines have increased to as much as 50 percent, sources said, meaning AMD might be able to meet its stated goal of producing as many as 15 million K6 chips this year. Intel does not disclose its yields, but they are widely believed to be in excess of 70 percent.
AMD doesn't intend to comment on its production problems until April, a spokesman said. |
