March 2000 Industry Update

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Processor Update

Intel Processors

When I spoke with an Intel spokesperson about the apparent supply issues with the Pentium II/III processors, he insisted that the reason is ‘high demand’. However, when speaking with motherboard manufacturers, virtually every one indicated that January and February were flat to down in terms of sales (down as much as 10%, in fact). Considering that this includes sales to OEMs, and the fact that Intel cut production of their own motherboards up to 20%, the Intel position seems to be a bit confusing, to say the least.

Calls to distributors and vendors during February revealed that Pentium II/III processors were extremely hard to come by. Even Intel Product Dealers reported that they had been informed that processors would not be available until late March or early April. Another factor is that while memory production is not up appreciably, there is a large glut of memory in the market, driving prices down to their lowest levels in almost a year. I think Intel is not being entirely straightforward here…

On the other hand, news in the past week indicates that the channel is starting to see processors again. Apparently, in Taiwan the shops are now filled with Pentium II/III chips, and prices are beginning to drop. This might be an indication that whatever internal issues were limiting the supply of processor chips is now ‘corrected’, and the normal flow has resumed.

At IDF in mid-February, three manufacturers (HP, Dell and IBM) revealed that they had sample systems using 1GHz Coppermine processors, as of March 3 would only say they would be available ‘soon’. One interesting thing to note is that Gateway was not among these ‘chosen few’, apparently because they are on Intel’s ‘bad boy’ list for defecting to the AMD camp earlier this year, which we speculated last month might be the case.

It turns out that Intel has decided that MHz is still king, and that there is value in being the first to the magic 1000MHz number. Rumors have been rampant, with most claiming HP will announce a 1GHz system sometime around March 8. Intel is officially saying that the 1GHz Coppermine will be available in small quantities to OEMs only. Volume shipments will not occur until later in Q2, or early in Q3.

Also shown at IDF was a demo of the Willamette processor, running at 1.5GHz. While an impressive display, closer examination indicates that it might not be as great a feat as it looks on the surface, however it is really very difficult to determine at this time exactly what the performance will be. What is obvious is that the attention has turned away from the Itanium and onto the Willamette, at least for the present.

The Celeron roadmap appears to be on the same track as it was last month, with a very quick ramp up to 700MHz, with the intent of killing off the K6-x processor line. In fact, this appears to have been very successful, as can be seen below.

AMD Processors

The end of the K6-III is official. With the Athlon competing with the Pentium III, and the Celeron ramping up to 700MHz by mid-year, AMD realized that they would be unable to justify the K6-III at a price that would allow them to make a profit – and likely wouldn’t be able to push that core beyond 600MHz. On the other hand, the K6-2 will continue to be offered at the very low end for the next several quarters, at least. Intel has nothing to offer in the sub-$50 price range, and there is still a reasonably sized market there. AMD reportedly can produce this chip at a cost below $30, allowing them to make a profit on some very large volumes.

In the mobile space, AMD will be offering the K6-2+ and K6-III+ later in Q2. These will be low power versions of the K6-2 and K6-III (same cache size) intended only for the mobile market. Currently, 60% of the retail market for mobile processors is K6 based systems, which AMD wants to expand upon. Later this year when the ‘Gemini’ technology is offered on the socketed Athlons, the K6-x+ will become low end mobile chips and will eventually be phased out as well. In fact, by year-end, it is expected that AMDs entire product line will be based upon the Athlon.

Currently, the K-75 lags a little behind the PIII Coppermine due to the 1/3 speed cache, however the Thunderbird is due to be released early in Q2. This processor will sport 256KB of full speed cache, and will likely debut at 1GHz or more. This will be the direct competitor of the Pentium III line, and will be offered both as a Socket A and Slot A. K-75 will continue to be manufactured, but will be more of a mid-level processor (if 800MHz to 1GHz can be considered ‘mid-level’).

Later in the quarter, or early in Q3, the Spitfire will be released with 128KB of full speed cache. This processor will be the direct competitor to Celeron, and will be offered at ‘equivalent’ speeds. This means that chances are the Spitfire will not be available in speeds much above 700MHz through the year 2000, unless Intel pushes the speeds beyond what their current roadmap shows. This processor will only be offered in the Socket A package.

Farther out, the Mustang will likely be released sometime in Q4, and will have a 266MHz FSB using DDR and will support SMP (2 processors).

Calls to distributors and vendors revealed that the Athlon is still very popular in the DIY market, particularly with the shortage of PIII processors. Several vendors indicated that many of their customers who initially were looking for PIIIs went with Athlons instead because they were available. In the OEM channel, there is still quite a bit of hesitancy – mostly because of concerns about stability with the AMD chipset. When KX133 based boards become readily available, I expect that this will begin to change, as OEMs are already very comfortable with the Apollo Pro133A (which the KX133 is based upon).

AMD has been preparing for the 1GHz announcement by Intel for over a month. In fact, prior to the February Update, an AMD representative asked me if I had heard any rumors to this effect. When asked specifically about their plans, the AMD spokesperson would only say that their 1GHz K-75 would be released ‘this month’, but that the speculated date of the 13th would be ‘in the ballpark’. From this, I expect the 1GHz Athlon to be announced the week of March 6th.

VIA (Cyrix/IDT) Update

VIA formally announced their VIA/Cyrix III processor on February 22nd, with announced speeds to PR500 (400MHz?). Initial reports have shown disappointing performance, however this is a very immature processor at this time. On the one hand, this means that the performance will likely improve quite a bit before official release (several months away), but on the other hand it means that a PR500 will still be about 200MHz behind the curve at that time! The big question right now is whether VIA made a big mistake picking up Cyrix and trying to compete in this race.

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