Chips Ahoy!

Alternative chip makers are sailing into the mainstream PC market -- bringing more choices for computer buyers.
Magazine Contributor
6 min read

This story appears in the April 1998 issue of Entrepreneur. Subscribe »

See "Making Changes" for several computer models jumping on the alternative processor bandwagon.

Turn on your television, and you'll come across some rather unlikely advertisements for computer . In one James Bond-inspired commercial, for example, a bad guy plots to take over the world--only to be foiled by a slow-moving computer chip. The ad isn't for a movie. It's for the latest computer chip manufactured by Advanced Micro Devices Inc. (AMD), a direct competitor of .

If you've seen this marketing campaign--or gone shopping for PCs lately--chances are alternative chips from makers like AMD and Cyrix have entered your radar screen--or soon will. Off-brand computer chips are hitting the U.S. computer market with full force, having made considerable inroads with top-tier PC manufacturers like and . In fact, alternative chips are making appearances in some PC manufacturers' models in a big way, particularly in lower-end consumer desktop models.

One reason alternative chip manufacturers are gaining momentum is they're coming out with better products, says Michael Slater, principal analyst with MicroDesign Resources, an information services company in Sebastopol, California, which publishes The Microprocessor Report newsletter. Overcoming sales hurdles and boosting manufacturing capacities have helped many companies reach critical mass, as well.

Meanwhile, alternative chip manufacturers have gotten a boost from the burgeoning demand for inexpensive PCs. Consumer interest in low-cost computers, particularly in the sub-$1,000 range, is extremely high. And with Intel's competitors selling processors for 30 percent to 40 percent less, says Slater, their offerings have become quite attractive to PC manufacturers.

In 1997, alternative chip manufacturers grabbed about 15 percent of the PC microprocessor market, and they have aggressive plans to control 30 percent of the market by year-end, says Slater. If computers containing off-brand chips are well-received by consumers, this could create a snowball effect in which more PC manufacturers move to adopt them. In the coming months, alternative chip manufacturers challenging Intel's monopoly could provide computer buyers with an unprecedented array of choices.

Making Their Mark

AMD is among the leading alternative chip makers. In fact, its healthy position as a supplier of chips to PC manufacturers became even more stable recently when announced that all its new consumer desktop systems priced at less than $1,200 will include processors from AMD, not or even low-cost leader Cyrix. AMD chips have also been adopted by , Acer, Digital, Fujitsu and other computer manufacturers.

AMD's newest chip is the K6 processor. It's currently available at peak speeds of 233 and 266 MHz, with plans for a 300 MHz version. Benchmark tests on equally configured systems have shown the K6's per-formance is competitive with the Pentium II--at a significantly lower price. That's because the K6 is based on a new 0.25-micron that allows it to produce more processors per wafer, delivering cheaper chips that also consume less power. The K6 processor also includes MMX technology for enhancing multimedia and graphics applications.

By mid-year, AMD plans to release the K6 3D chip aimed at supplying greater realism for 3-D software and advanced graphics applications. This move probably won't impact your business unless you're involved in 3-D graphics and multimedia. If you are, the K6 3D chip promises to dramatically enhance your visual and audio experience with full-featured MPEG-2 video and AC-3 sound compatibility. By year-end, AMD will offer the K6+ 3D chip for even greater realism of 3-D software; AMD's next-generation processor, the K7, will be released sometime next year.

Meanwhile, Cyrix has begun to ship the latest version of its 6x86MX chip, which performs at 233 and 266 MHz. The 6x86MX offers Pentium II performance at a lower price and has full MMX compatibility to run the latest MMX games and multimedia software. The 6x86MX is primarily targeted at the sub-$1,500 desktop segment. In addition, Cyrix makes the MediaGX processor, with speeds of up to 200 MHz, which is mainly found in sub-$1,000 models.

Because of the low price tag, PC manufacturers looking to pump up profits are adopting non-Intel processors for their more affordably priced consumer models. Compaq, for instance, uses AMD K6 and Cyrix MediaGX processors in new lower-end models of its Presario line of computers; higher-end models contain Intel's Pentium II chip. Acer, one of the first larger PC manufacturers to put non-Pentium class processors in its machines, uses an AMD K6 processor in lower-priced systems of its Aspire line, while IBM is using AMD K6 processors in two new models of its Aptiva E series. Many of these modestly priced systems offer strong perfomance and the latest technology.

Navigating The Waters

Interestingly, AMD's primary markets are small and medium-sized businesses, while Cyrix is honing in on the SOHO market. These may prove to be smart moves, say experts, since these products are extremely well-suited for entrepreneurial environments.

For cost-conscious entrepreneurs, alternative processors typically offer a better price for a given level of performance. What's more, most perform best when using business productivity applications such as word processors, spreadsheets and e-mail, Slater says.

The key to evaluating whether alternative processors are for you and your business is to understand how their performance will hold up to your requirements. For instance, Slater says most alternative processors currently perform weakly in the area of 3-D graphics and multimedia. So if you're working with image processing and high-end graphics (or like to play 3-D games in your spare time), you'll need to carefully analyze the processor's performance results when they run these kinds of applications. "Look at the benchmark ratings typical for the applications you care most about," Slater advises.

Also, you must be comfortable with purchasing a processor that isn't a "name brand." Slater predicts that as the market continues to focus on price and value, consumers will become less and less brand-conscious.

Ultimately, the growing number of competitors means more choices for everyone. In the long run, having expanded options should prove advantageous for PC buyers, especially those looking to get more bang for their buck. In fact, experts believe this competition will drive PC prices even lower.

Contact Sources

AMD, 5204 E. Ben White Blvd., Mailstop 593, Austin, TX 78741, (512) 602-6882

MicroDesign Resources,


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