AMD to unveil branding strategy for new chip

Advanced Micro Devices will officially launch its new Athlon processor next week, along with an Intel-type branding strategy designed to help the company target different segments of the computing market, sources close to AMD have said.

Athlon, formerly known as the K7, will compete initially with Intel's Pentium III processor. The new chip is seen by many as AMD's big hope for breaking into the profitable high-performance desktop and workstation markets, and eventually taking a slice of the market for powerful servers.

Athlon will debut at 500MHz, 550MHz and 600MHz, AMD has said, matching the clock speed of Intel's fastest Pentium III processor that was launched this week. Top-tier PC makers are expected to offer the first Athlon systems in mid-August.

To help position its new processor, AMD will unveil the Athlon Professional brand for high-performance business PCs and the Athlon Ultra brand for workstations and servers. For consumers, the Athlon Select will power low-cost systems, while a chip simply called Athlon will serve the high-end consumer PC market, a source within AMD said.

"These aren't just different names; we're offering differentiated features for the customers in those various segments," the source said. The sub-branded Athlons will be distinguished from each other by variations in clock-speed, bus speed, cache size and other features.

However, AMD's "sub-brands" won't be used right away, the source said. Initially, AMD will offer its existing K6-3 and Athlon chips for the high-performance segment, and the K6-2 for value PCs. As the older processors reach the end of their life cycle, the sub-branding strategy will kick in, the source said.

The strategy mimics Intel's method of aiming distinct chips at distinct markets: the Xeon for workstations and servers, the Pentium III for high-performance desktops, and the Celeron for low-cost PCs.

Besides steering customers towards the right chip for the job, such branding strategies allow the chipmakers to make more money from their products, noted Nathan Brookwood, principal analyst with Insight64.

"If you're a producer, you want to make sure each customer who buys a product pays you what it's worth to them, and not what it cost you to make. ...Server customers may be prepared to spend a little more if (you) optimise the product to make it more suitable for their needs," said Brookwood, without commenting on any specific plans from AMD.

AMD will also make public next week the first official benchmark tests for the new chip. The company is calling Athlon a "seventh-generation" processor because it features several architectural improvements designed to boost performance. Analysts familiar with Athlon have said it may outperform an Intel Pentium III running at the same clock speed, and one analyst has described the product as "a barn-burner".

However, the same analysts note that AMD faces significant marketing and technical hurdles before the chip vendor can break out of its low-cost consumer niche.

For starters, AMD's manufacturing history has been spotty: most notably, the company had difficulty meeting demand for its K6 and K6-2 processors because of production woes. Transitioning to a brand new chip architecture is no easy task, analysts say, and later this year AMD also plans to move to a more advanced 0.18-micron manufacturing process. At the same time, the company is starting up a new manufacturing plant in Dresden, Germany, where next year it will start using copper, rather than aluminium, wires in its processors.

In addition, Athlon doesn't work with the same motherboards as Intel's processors, and requires a new type of chipset to support its seventh-generation architecture. AMD initially will offer its own chipset for Athlon, and is working with partners to ensure that the related hardware which PC manufacturers need to use its chips will be available.

AMD also faces a substantial marketing challenge, which partly explains the switch to the Athlon name. Because of its past manufacturing troubles and market position, some customers associate AMD with "cheap chips," Insight64's Brookwood said.

"They're trying to break out of that mold and position themselves as (a company) that can provide a high-performance, industrial strength product," he said.

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