Originally created 07/21/98

Motorola, AMD announce technology agreement

SAN FRANCISCO -- Semiconductor manufacturers Motorola Inc. and Advanced Micro Devices Inc. announced a wide-ranging cross-licensing agreement Monday that could help each company compete more effectively in key markets.

A central element of the agreement gives AMD access to Motorola's technology for producing copper-based microprocessors. Industry experts say that the copper technique should enable less expensive and more powerful processors with smaller circuitry than those based on today's aluminum technology. AMD, based in Sunnyvale, needs the copper methods to keep pace with industry leader Intel Corp.

Chief Executive W.J. Saunders III said AMD spends $500 million a year on research and development, a huge outlay for a company with revenues of $2.4 billion in 1997. This agreement should ease that burden by reducing AMD's development costs for copper chips.

"We do not expect our R&D spending to go down, but it may increase at a slower rate," Saunders said. "The cost of developing these technologies is so high that if you can get to the market faster without greatly increasing R&D spending, that's a huge advantage.

"We'll have production volumes of 1 gigahertz K7s in the year 2000," Saunders said. This refers to the speed of AMD's next-generation K7 microprocessors, the central brains of PCs. The company's current flagship chip, the K6, runs as fast as 350 megahertz -- about one-third as fast as AMD says the copper-based K7s will operate.

Saunders predicted that the K7 will offer both price and performance advantages over the fastest Intel microprocessors available at that time.

Michael Feibus, a chip analyst with Mercury Research in Scottsdale, Ariz., called the agreement "a natural fit" for both companies, but remains skeptical about AMD's ability to overtake Intel. "Intel has copper on its agenda in about the same time frame," Feibus said. "This (alliance) basically keeps AMD in the ball game for the longer term."

AMD's prospects are looking up, however, given that it recently beat Intel to market with a set of specialized 3-D features, and now can move aggressively into copper technology, said Linley Gwennap, editorial director of the industry newsletter Microprocessor Report.

But Gwennap cautioned that copper might offer only a 10 percent speed advantage over comparable aluminum-based chips. "AMD is going to have to execute better in all phases, including design and manufacturing, to really get ahead of Intel," he said.

Saunders said that by 2000 AMD also will develop PC-on-a-chip products, which consolidate most standard PC functions on a single microprocessor.

For its part, the agreement gives Schaumburg, Ill.-based Motorola a superior flash memory technology for its embedded processor division.

Embedded processors control a wide range of information appliances, such as cellular phones and set-top boxes, as well as specialized functions in cars and other products. Flash memory, unlike some other forms of memory chips, retains its programming information even when the device is turned off. Flash chips also can be upgraded using software -- while other memory chips require replacement to upgrade their functions.

C.D. Tam, Motorola's Transportation Systems Group senior vice president and general manager, predicted that the combination of AMD and Motorola technologies will soon allow the production of automobiles with processors that custom-tune engine performance to reflect the environmental conditions of the car's geographic location.

"The car of the future begins here," Tam said.

On Monday Motorola shares rose 63 cents to $54.31 and AMD shares rose 81 cents to $17.38. Both traded on the New York Stock Exchange.


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