Good things come in small packages, Advanced Micro Devices executives told investors Thursday at the company's annual shareholders meeting.

AMD disclosed that the first of several forthcoming processors, code-named Clawhammer, will be only 105 millimeters square--about the same size as a current Athlon chip and half the size of Intel's current Pentium 4 chips. But it will deliver more than three times the clock speed of the first Athlon, and its small size will help AMD hold down capital expenditures.

Intel surprised the chip industry last year when it revealed that initial Pentium 4 chips would be more than double the size of previous processors, increasing manufacturing costs. The Pentium 4 will shrink significantly, however, as Intel shifts to a new manufacturing process around the same time Clawhammer hits the market.

It's all about value, CEO Jerry Sanders said at the New York meeting. By employing a new manufacturing process, using design innovations such as silicon on insulator (SOI) technology and holding down the physical size of the chip, AMD believes it can keep costs in check and deliver higher performance at a lower cost than Intel can. To that end, AMD will use a new 0.13-micron manufacturing process to build the new generation of chips. AMD will also include SOI, a performance-enhancing manufacturing technique licensed from IBM. SOI adds a layer of oxide material between the transistor and silicon it rests on inside a chip. The oxide insulates the transistor from the silicon, reducing the amount of energy lost. The transistor, therefore, can run faster and at the same time consume less power. Sample versions of Clawhammer will be made available to PC makers in the fourth quarter.

At the same time, "We will get a very substantial performance increase from architectural enhancements" to the chip, Sanders told investors.

AMD is developing its own chipsets to accompany Clawhammer, he said. However, the company will also license them to third-party chipset makers. Chipsets connect the processor to other PC components such as memory and network cards.

Chips in the Hammer family--which also includes the Sledgehammer server processor-will also have the ability to process data in either 32-bit or 64-bit chunks, increasing performance for applications that are tuned for 64-bit.

Intel's forthcoming 0.13-micron Pentium 4 chip, code-named Northwood, is expected to be about 116 millimeters square, much smaller than current 0.18-micron chips' 217 millimeters square.

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