Intel wants to "break away" from AMD

At a time when most chipmakers are curtailing expenditures on new plants and
equipment, Intel is barreling ahead with its $7 billion investments that were
projected for this fiscal year. According to one company executive, this
aggressive investment program is part of what is internally referred to as
Intel's "break-away strategy."

Breaking away from AMD that is. If successful, Intel would create a new large
microprocessor performance gap with AMD's best chips. The gap would be in such a
dramatic fashion that AMD, which has already fallen behind by some 400 MHz in
the high-end desktop performance race, would not be able to catch up and be
relegated, once again, to competing in the market for entry-level computers.

Intel is trying to mover to vastly smaller chip geometries quickly, both on
200 and 300 mm wafer fab lines. Processors with 2 to 3 GHz performance levels
are likely to be brought to market over the next 12 months and sold at prices
that are in line with current 1.1 to 1.7 GHz chips.

In the short turn, steep price cuts are also a key part of the break-away
strategy as Intel is expected to announced steep price cuts on Pentium 4 chip in
the weeks ahead.

Intel vice president of architecture and marketing Anand Chandrasekher said
that the long term Intel will benefit from the investments the company is making
today in producing higher yields and lower material costs. Those efficiencies
will help stabilize Intel's profits amid the price war with rival Advanced Micro
Devices.

Chandrasekher spoke at a technology conference hosted by US Bancorp Piper
Jaffray in Boston. He reiterated Intel's goal of replacing all Pentium 3 chips
in the desktop PC market with the Pentium 4 by the end of this year. "Our
goal is to make the Pentium 3 obsolete. During the past 20 years, history has
proven that computer users will continue to want semiconductors with better
performance."

Whether Intel will be able to succeed will depend on how AMD will be able to
respond to Intel's aggressive moves, which appear to have failed to stop AMD
from growing its share of the processor market. AMD will have to responds soon
with new high-performance Athlon chips to compete with Intel's 1.7 and 1.8 GHZ
processors.

Unlike much of the past two years when AMD's latest processors outperformed
Intel's best, Intel now seems to have the upper hand in being able to answer
just about anything AMD brings to the market.