The heat is on for AMD chips

AMD's continued war with Intel stepped up a gear last week when the chip clone manufacturer moved the launch date of its K6-3 to beat the shipping of Intel's Pentium III.

At the same time, AMD announced that it was expecting an operating loss in the first quarter of the year, due to its continuing price battle with Intel. AMD operates on a policy of pricing its chips 25 per cent lower than Intel, based on speed capabilities.

Jerry Sanders, chairman and chief executive of AMD, said: 'In the light of Intel's recent pull-in of its 28 February price reductions to 8 February, as well as its pending product announcements, AMD is reassessing its competitive response.

'The likely outcome is that we will be unable to increase our microprocessor average selling prices in the current quarter. This will put additional pressure on our gross margins.'

AMD had initially stolen ground from Intel in the low-price PC market, but Intel responded with cheaper and faster chips.

Due to Intel's huge market share, AMD has found it very difficult to compete.

Intel has also been cutting prices of chips as it tries to clear the way for the launch of its more expensive Pentium III chip.

The chip giant had originally planned to launch the Pentium III at the end of the month, but brought the date forward to a week before the K6-3 launch. AMD's response was another tit-for-tat move. Although exact dates are not yet known, AMD is believed to be planning a 'preview' event before the Intel launch.