Tech Review

Intel charges back, while AMD slides

By Michelle Kessler, USA TODAY
What a difference a year makes.

Chip giant Intel on Thursday touted a long list of accomplishments at its annual meeting with financial analysts in New York. Costs fell. Profits rose. And a new chip manufacturing technique will give Intel another edge, CEO Paul Otellini boasted.

Across the country in San Jose, Calif., rival Advanced Micro Devices apologized. The most recent quarter, in which AMD lost $611 million, "was a disaster," CEO Hector Ruiz told shareholders at their annual gathering.

It was a near reversal of last year, when AMD was leading the industry with Intel scrambling to catch up. The sudden shift shows how precarious things can be for AMD, which is about one-sixth the size of Intel, says tech analyst Roger Kay at Endpoint Technologies Associates.

"They are big," Ruiz told AMD shareholders. "In some (situations), they have 10 times the resources that we do have."

Intel has always loomed over AMD, which long positioned itself as a low-cost alternative. But in recent years, AMD has released products so compelling that loyal Intel customers have switched. The most notable: PC giant Dell.
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That strong competition was good for consumers because it kept prices low, says chip analyst Dean McCarron at Mercury Research. But now Intel has come roaring back. Recent gains:

•Intel in November released a quad-core processor — a chip that combines four computer "brains" in one. AMD's quad-core, dubbed Barcelona, isn't out yet.

•Intel is moving to a new manufacturing technology, called 45 nanometer, Otellini said. The technology will allow Intel to make more powerful chips for less money. AMD is at least 18 months behind, Otellini said.

•Intel is winning back customers. In the first quarter, it had about 81% of the market for PCs and small processors, called x86 chips. AMD had about 19%, down from 25% in the previous quarter, Mercury Research says.

But AMD might soon gain some ground, McCarron says. AMD oversold chips to PC makers at the end of last year. Chipmakers needed to use the glut before buying new chips, causing AMD's sales to slip, he says. Now they've done that, and AMD's sales should rise again, he says.

And AMD should release new products in coming months, including Barcelona, that will be more competitive, he says. "Right now, you're looking at the weakest point in AMD's 2007 (product) road map … (while) Intel is essentially at its best," McCarron says.

Intel also doesn't want to completely squash its rival, Kay says. Intel is already facing an antitrust lawsuit brought by AMD, and could face more monopoly charges if it grows larger. "It's in Intel's best interest to have a viable competitor," Kay says.