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Advanced Micro Narrows Gap in Race for New Chip
John Markoff The New York Times, 08.18.04, 4:15 PM ET

Hoping to catch up with Intel and IBM in an advanced chip-making technology, the semiconductor maker Advanced Micro Devices was due to announce Tuesday that it has begun to ship chips based on an advanced manufacturing process that is being used to build the next generation of processors.

AMD, based in Sunnyvale, California, is trailing those two rivals in making the shift to the new 90-nanometer manufacturing process, which makes it possible to put more transistors on a single chip or shrink the size of existing chips, effectively increasing performance while lowering prices. But industry analysts gave AMD high marks for its recent manufacturing and design advances.

Both Intel and International Business Machines have stumbled during the transition to the 90-nanometer process, struggling with performance, heat and manufacturing problems. On Monday, Intel said it would delay a projection television chip that was to have been based on the new technology.

Although AMD is about nine months behind Intel in making the switch, the company has not lost significant ground, according to several industry analysts. Moreover, AMD surprised Intel with the success of its move to 64-bit chips, forcing Intel, the market leader, to alter its strategy.

Intel had been betting that it could break the chip market into two incompatible segments, one for 32-bit designs and one for 64- bit designs. The company's Itanium microprocessor, which is a 64- bit design, has not been widely adopted, and the company recently announced a new 64-bit microprocessor that is compatible with its existing X86 designs and that largely copies AMD's 64-bit chip.

Making the shift to 90-nanometer manufacturing has been a significant struggle for semiconductor makers. It effectively doubles the manufacturing capacity of the industry but entails enormous technical challenges because some components of the new chips are no more than five to seven molecules thick.

Typically, each generation of chips is defined by the size of the smallest feature that can be fabricated on the chips, which now have as many as a half billion transistors.

Industry analysts said that AMD would first use the new technology to cut costs by effectively doubling the number of chips that can be made from a silicon wafer.

They warned, however, that the shift to the new manufacturing process, which can reduce costs while increasing performance and reducing heat, had to be smooth if AMD was to stay in the processor race.

"AMD has had a mixed manufacturing record," said Ashok Kumar, a semiconductor analyst at Raymond James & Associates, a financial services company. "It's imperative that they have a seamless transition." The company said that the first chip being manufactured using its 90-nanometer process was a version of its Mobile Athlon 64 processor for portable computers. Currently those machines are the fastest-growing segment of the personal computer market, and the high volume makes the components potentially the most profitable.

Hector Ruiz, AMD's chief executive, said that despite Intel's significant edge in manufacturing capacity in the new technology, AMD still held important design advantages that would help it in the marketplace.

At the same time, Ruiz acknowledged that the company could have done a better job of marketing some of its existing advanced hardware design features.

AMD has been including in its chips an antivirus and worm feature called Enhanced Virus Protection that is activated by the recently introduced Microsoft Windows XP Service Pack 2. Intel has announced a similar feature, but it is not yet available in Intel chips.

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