Intel aggressive on die size; Question is: Will the processor giant cut prices to fill its 300mm fabs? - Semiconductors

Electronic News, April 8, 2002 by Tom Murphy

Intel Corp. continues to show why it's important to spend $7.5 billion on capital expenditures.

The Santa Clara, Calif.-based chipmaker last week cranked out a 2.4GHz Pentium 4 processor for the desktop PC market, one it said has a 10 percent smaller die size than its 2.2GHz P4. Intel also avowed that all of the 2.4GHz processors would be built on 300mm wafers. Those two elements amount to big production cost-savings for the semiconductor giant, and it will be interesting to see if the company lowers the boom on pricing in the second quarter like it did in 2002.

The die size on 0.13-micron P4 Northwood processors was 148 square mm; it's now 10 percent smaller, or 131 square mm, according to Kevin Krewell, an analyst for Micro Design Resources (MDR) of San Jose. (MDR is owned by Reed Business Information, the parent company of Electronic News.)

The die-size shrink means Intel is working with a die-size range comparable to that used by Advanced Micro Devices Inc.'s (AMD) Athlon Plus 2100 processors built on 0.18-micron technology. The Athlon processors have a die size of 128 square mm, Krewell said.

Meanwhile, AMD spent less than $1 billion on capital expenditures last year, and it will not be embracing 300mm wafer production anytime soon. Additionally, one of AMD's key strategic competitive points seems to be evaporating. Officials at AMD have long claimed that its cost structures are lower than Intel's so even if Intel goes to higher-volume 300mm wafers, it doesn't wipe out AMD's advantages.

But AMD equates cost with die size, and now Intel has a processor that will compete with AMD's small die size. AMD's viability depends on its ability to introduce its own die size shrink by moving production from the Athlon Palomino core at 0.18-micron technology to the 0.13-micron Athlon Thoroughbred core. That die-shrink move could again improve AMD's cost structure relative to Intel's.

AMD said its Thoroughbred cores are now shipping and it will have a product launch this quarter, according to Mark de Frere, Athlon brand manager. The Thoroughbred core will have a die size of 81 square mm at 0.13-micron technology.

"When we launch at 0.13 micron, we will have clear design and engineering advantages," de Frere said. "This will allow us to keep our value proposition of offering competitive products at fair prices."

A late check with Intel revealed that its 10 percent die shrink won't come for two months, and its shift to 300mm for the P4 won't come for at least 30 days. So AMD has the opportunity to meet Intel in the marketplace with its own die shrink.

Despite a 700MHz lead in clock cycles, some indications suggest that AMD's Athlon 2100 Plus will perform some applications just as fast, if not faster, than an Intel 2.4GHz P4 processor, MDR's Krewell said.

As Intel shifts to more advanced technologies, will the company take advantage of its improved cost structure by lowering prices in an attempt to take away market share from AMD? That's a question that could be answered in the second quarter, Krewell said.

In 2001, Intel dropped its price more aggressively in the second quarter as it tried to jump-start the introduction of its P4 line. Historically, Intel cuts prices on its existing processor lines whenever it introduces a new speed grade. That cut is usually at 10 percent across the board, some analysts said.

Will Intel cut prices beyond its usual 10 percent this time? Krewell said Intel has at least some motivation to do so. Intel ramped up its 300mm fab in Oregon to full production, and it plans to get another 300mm fab up to full production by the end of year. In order for Intel to realize some return-on-investment, it has to fill up its fabs with orders. Typically, the second quarter of any year is flat, but Intel might be interested in spurring more demand for its chips, and an aggressive price cut could do the trick.