In the war for PC processor dominance, it has been AMD versus Intel for twenty years. Intel claims an overwhelming majority of the global PC processor market share pie along with a consistently profitable business. AMD can claim victories in the war, but their recent battles have been marked by spectacular losses.

The fight has been a fierce one for AMD. For months, underdog AMD had been able to crow about their incredible accomplishment of beating Intel to the high water mark of 1 GHz processor speed. Every time Intel bumped their Pentium 4 processors up another notch, they were beaten by AMD by another notch up the gigahertz ladder. This game was very satisfying for AMD who had long been in the shadow of their competitorÕs processorsÕ higher clock speeds. When Intel dominated the megahertz category, AMD would respond with Òmegahertz doesnÕt matter ø our chips outperform IntelÕs in every industry standard benchmark at the same megahertz for half the cost.Ó Early in 2001, AMDÕs Athlons outpaced the Intel Pentium III and Pentium 4 processors by hundreds of megahertz, finally breaking the gigahertz barrier and leaving Intel in the dust. Even at a premium price, the fastest 1.4 GHz Athlon was still less than half the cost of the Pentium 4 at 1.3 GHz. AMD finally could say: ÒOkay, now megahertz matters.Ó

In the past week, AMD has been hit with a lot of bad news. On Tuesday, AMD announced that it would lay off 2,300 people or a total of fifteen percent of its total workforce in a cost cutting move. One thousand of those layoffs are in Austin, Texas where AMD has two large chip wafer fabrication (fab) plants. The mood here in Austin, where some 12,000 high tech company workers have lost their jobs in the past nine months, is somber to say the least.

Gateway also announced that they would be dropping all of their AMD Athlon PCs in favor of IntelÕs Pentium-class processors. Gateway was not alone in snubbing the AMD Athlon this year. Large US computer makers IBM and Micron PC along with British PC OEM Tiny Computers announced earlier in the year that they would no longer be using any AMD parts for their business PCs in the North American and European markets.

Meanwhile, Intel ramped up their Pentium 4 processor clocks to 1.5 GHz, then 1.6, 1.7- up to 2 GHz in what seems like a blink of the eye. Intel had the extra-added bonus injury of entering into a price war with AMD early in the summer, slashing the prices on all high-end Pentium 4. AMDÕs profits and processor clock sagged on the news. Athlons would not reach any higher than 1.5 GHz anytime in the near future. Intel was talking about 3.5 GHz by this time next year. AMD immediately stopped the Òsize mattersÓ talk and retreated to familiar Òit is really the benchmark performance that mattersÓ territory.

All is not lost at AMD however. AMD shipped a record 7.7 million processors last quarter and are on target to have a 30% chunk of the overall PC processor market by yearsÕ end. Compaq, prior to being taken over by Hewlett-Packard in August, claimed that half of their consumer PCs were based on AMD processors. HP in turn said in July that 33% of their new Pavilion consumer PCs would be based on AMD processors. HP-Compaq has no plans of dropping AMD processors in their new PC offerings any time soon.

Another advantage AMD has is that the gaming geeks are on their side. Check out any of the hardware-centric video game web sites on the Internet and you will find almost all of them are squarely in the AMD camp. Recommendations for AMD processors on web sites like Hard OCP, Sharky Extreme or Firing Squad have and do drive a lot of sales for AMD processors. These sites strive to be semi-objective on their recommendations and have garnered large and loyal followings in the lucrative computer gaming community. If Kyle at Hard OCP says: ÒYou could pay mad loot for a P4, but our benchmarks say that you donÕt get a good bang for that buck with Intel. Grab a 1.4 GHz Athlon for a hundred bucks, slap it in your Quake III rig and you wonÕt get owned at the next LAN party,Ó there are a lot of people who will immediately pay for a new Athlon just so they can get better frame rates on video games.

There are advantages to closing the chip fabs in Austin as well. AMD is most famous for their Athlon processors but also manufactures flash memory and networking chip products. The networking products are respectable, but much less profitable than the PC processors. Since the Austin fabs mostly crank out networking chips rather than PC processors, AMD axed those fabs. Apparently the Austin fabs are fifteen years old, would be difficult to retool to newer PC processor manufacturing technology given the state of environmental activism in the Austin area and will save AMD millions of dollars a year in operating expenses. AMD is working with the Austin Chamber of Commerce to secure a new site for the brand new fabrication plant called Fab 35. The best-case scenario is that the two old fabs are sold to another Austin semiconductor maker like Applied Materials and AMD builds Fab 35. Worst case is that those two fabs rot in south Austin while shiny new Fab 35 goes up near Dell on the north side of town.

Speaking of Dell, they are the only major PC maker to never use AMD processors. DellÕs top brass has been indifferent in the past about AMD, but Dell is unwavering in its support for Intel processors. Intel has rewarded that support with volume discounts and engineering support most OEMs are very jealous of. Rumor mills like EnglandÕs The Register have relayed stories that Dell is testing new configurations featuring Athlon CPUs and Nvidia nForce motherboards, but all development engineers at Dell have told me that is absolutely false. The Register claims that they Òknow for a fact that Dell tests all new AMD parts,Ó but have no satellite offices here in Austin, Texas that I can find.

AMD may be down, but they are not out in their PC processor war with Intel. More than anything, AMD has to cultivate the low-end consumer and hard-core geek markets they already have and milk them for all it is worth. This means more alliances with OEMs (other than Dell) and an ad campaign aimed at hard-core geeks. It might sound vulgar when put so bluntly, but there is nothing noble about a fine company like AMD having to shut down because they refused to remain competitive against their rivals. <>

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