AMD Cuts Prices, Reports Improved Yields

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May 17, 1999 (3:36 PM EDT)

By Mark Hachman,

Advanced Micro Devices followed Intel's lead in lowering the prices of its microprocessors, while confirming analyst reports that its manufacturing yields have vastly improved.

AMD confirmed that, like Intel, it had reduced prices across its entire microprocessor lineup. Prices of the K6-III fell as much as 45 percent, as the Sunnyvale, Calif.-based chip maker cut the 450-MHz and 400-MHz K6-III to $220 and $185, respectively.

AMD also reduced prices on its mainstream K6-2 processorline, although the cuts ranged from a more moderate 12 percent to 29 percent. High-end 475-MHz, 450-MHz, and 400-MHz K6-2's were reduced to $$152, $112, and $82, respectively. AMD will sell the mid-range 380-MHz and 366-MHz K6-2's for $71 and $61, while OEMs designing low-end PCs may purchase the 350-MHz and 333-MHz K6-2 for $56 and $51, respectively. As previously reported, an AMD spokeswoman confirmed that a 500-MHz K6-2 is sampling to OEMs.

AMD's prices reflect lots of 1,000 units.

Analyst reports and AMD representatives also indicated that Intel's May price cuts may not reproduce the events of AMD's disastrous February. At that time, Intel's impending price reductions on Feb. 8 prompted AMD to warn investors on Feb. 4 that the reductions would force AMD's own prices down and cause an operating loss for the first quarter.

But according to analyst Dan Niles of BancBoston Robertson Stephens, San Francisco, AMD's yields since March have "vastly improved," Niles wrote in a report released Monday. An AMD spokeswoman confirmed this, saying that "'vastly improved' seems like a good description."

Niles went on to say that industry sources have reported that AMD's K7 is performing at 600-MHz inside the company's test facilities. Although AMD chairman and CEO W.J. "Jerry" Sanders III has stated the K7 will run at 450-MHz, 500-MHz, and 550-MHz, the company spokeswoman would not confirm the existence of the 600-MHz speed grade.

But Niles also warned of a looming price war. The accelerated pace of Intel's shift to 0.18-micron technology, combined with AMD's improved yields plus the likelihood that National will dump its remaining inventory on the open market is a "mixed blessing," Niles wrote. "The good news -- one less competitor in the market for AMD. The bad news -- dumping by Cyrix in the current quarter to clear processors that all of a sudden have a very uncertain future."