Although basic math would appear to be on AMD's side, the company faces several challenges in launching its new Athlon 64 family, which has been years in the making. One of the big challenges is that although 64-bit chips are making inroads into the server and workstation markets, many analysts and tech companies believe that desktop computers just don't need the added boost.
AMD tried to address that concern on Tuesday, when it launched the AMD Athlon 64 line at a posh event at the Yerba Buena Center for the Arts. As expected, the chipmaker launched several varieties of the new chip, including an Athlon 64 FX processor for desktops and three Athlon 64 models for desktops and notebooks.
"Our industry, right now, is hungry for another round of innovation," AMD chief executive Hector Ruiz told the crowd of reporters, analysts and computer enthusiasts.
The biggest factor on AMD's side is that the company is not expected to charge computer makers substantially more for the Athlon 64 than they would have to pay Intel for a comparable 32-bit chip.
"They are essentially giving you 64 bits for free," Insight 64 analyst Nathan Brookwood said.
With the chip's price and performance now public, and some systems on the way, AMD has its work cut out for it.
"The main thing here is that the chip is out, and AMD has performance that's competitive with what Intel is offering," said Dean McCarron, an analyst with Mercury Research. "Now, it has to have parts to sell. It comes down to the manufacturing equation. Things look pretty good for the second half of 2004. The big question is: how many (chips) can it sell, and how fast can it ramp production between now and then?"
AMD currently has about 16 percent of the PC processor market, having posted a share of 15.7 percent in the second quarter of this year, McCarron said. AMD's share has reached as high as 22 percent in the past.
AMD also faces other challenges, including convincing people to move quickly to 64 bits from 32-bit software. The main benefit of moving to 64-bit chips is that such systems can process more than 4 gigabytes of physical memory at a time.
However, Brookwood estimates that it will not be until 2005 that leading-edge PCs actually come standard with 4GB of memory -- and an additional year until the average system has that much memory.
But the version of Windows that's needed to run 64-bit software is only in beta, or test form, with a final release not planned until the first half of next year.
Athlon's large size presents another challenge to AMD -- it is comparatively expensive to produce. At 195 square millimetres, it's larger than Intel's current Pentium chips, which occupy 150 square millimetres. Intel has said its next-generation Pentium, code-named Prescott, will occupy only 112 square millimetres.
Brookwood said AMD needs to create a smaller Athlon 64 during the next six to nine months if it wants to compete on a cost basis with Intel. "This is clearly not a good long-term solution for AMD as a desktop processor," Brookwood said. "They must shrink it."
AMD said the Athlon 64 and its server sibling, the Opteron, will be moved from 130 nanometres to a 90-nanometre manufacturing process in the first half of 2004. The finer wiring will help AMD shrink the size of the chip and boost clock speed.
Though the current need for 64-bit systems is debatable, AMD can make the argument to customers that they are "future proofing" their machines by buying a chip that runs today's applications fast but can also be upgraded to run 64-bit programs down the road.
Some customers are likely to respond to that argument, while others will not, IDC analyst Alan Promisel said.
"I think that there's demand in certain market segments, such as within the consumer gaming market or in content creation. There, 64-bit computing certainly is relevant," Promisel said. "For the mainstream commercial user, however, the apps aren't out there for it yet. Instead, I think it's laying the groundwork for 12 to 18 months down the road, when there will be more applications."
AMD also announced the official list prices for the chip, though large computer makers strike their own deals.
AMD's top-of-the-line Athlon 64 FX-51 model for desktops, which runs at 2.2GHz, will sell for $733 (£443) in 1,000-unit quantities, AMD said. The company will also offer a standard Athlon 64 Model 3200+ chip for both desktops and notebooks, both selling for $417 in 1,000 unit quantities. An Athlon 64 3000+ chip for notebooks will list for $278, AMD said.
The company rattled off the names of several computer makers that will use the new chips, though many big names were missing from the list. Fujitsu in Japan and Fujitsu Siemens in Europe both have systems ready now, while Hewlett-Packard will offer Athlon 64 systems in the fourth quarter, AMD said.
In an interview, AMD senior vice president Dirk Meyer said he has "confidence" that all the computer makers that use AMD's Athlon XP processor today will eventually sell machines with the Athlon 64. He added that the company hopes to sign up some companies that aren't using its chips today. Dell and Gateway currently use only Intel's chips in their computers, though Gateway was once, for a brief time, AMD's largest customer.
Ruiz said, "Others have been intimidated out of joining us today," but he added that still other companies are supporting AMD's efforts.
AMD is counting on the new chip to help the company reverse a tide of red ink. It lost $140m last quarter and has not turned a profit since the second quarter of 2001.
Meyer said, as with past chip launches, Athlon 64 shipments will start slowly but grow quickly. He said the company expects to sell tens of thousands of the processors this quarter, hundreds of thousands in the fourth quarter and in the millions of units per quarter starting next year.
Although AMD briefly had the fastest clock speed with the original Athlon chip, Meyer said the company has learned that it must continue to advance its chips during their lifetime, or they will be quickly surpassed by Intel. "It's not enough to get a product to market the first time," Meyer said.
The company made its case to the group of people most receptive to the Pitch: hardcore gamers, many of whom had won a contest to attend Tuesday's launch.
Others, like Taylor Nichols, paid $600 to be part of the launch, although that included an AMD Athlon 64 motherboard as well as round-trip airfare, meals and a stay at the upscale W hotel, where AMD had a room in which participants could play a handful of games that are optimised for the new chip.
"It's pretty nice," Nichols said. "Playing Unreal Tournament, the stuff just smokes."
However, Nichols and other gamers said it will probably take at least six months before there are many games that are optimised to run on the new chip.
Meyer, the AMD senior vice president, argued that the technology was needed now, showing off games that run native in 64-bit mode as well as showing quotes from game developers and other industry executives.
"You often hear that people are limited only by their imagination, but actually, the opposite is true," Meyer said, adding that technology has yet to allow people to create reality out of what they envision in their heads.
CNET News.com's John Spooner contributed to this report.
