The Duron chip, which has a clock speed of 1.1 gigahertz, will be available in the fourth quarter, Sunnyvale, California-based AMD said, and will cost $103 each in quantities of 1,000.
No. 1 chipmaker Intel (INTC.O), AMD's rival in Santa Clara, California, already is selling a 1.1 gigahertz Celeron chip and it, too, sells for $103 each in lots of 1,000.
AMD is also gearing up to introduce next week its long-awaited line of processors for high-performance PCs with its Athlon XP line, previously code-named Palomino. Those chips will compete with Intel's Pentium 4 chips, analysts have said.
But AMD has had a run of bad news lately, with direct PC seller Gateway Inc. saying on Sept. 25 that it will phase out using processors from AMD and instead use those from Intel, as the PC maker looks to cut costs amid flagging demand.
International Business Machines Corp. earlier this year dropped the Athlon chips from its PCs sold in North America and Europe.
This year AMD has gained market share from the No. 1 chipmaker, but Intel has clamped down, especially in the third quarter. Intel slashed prices on its chips, squeezing profits and forcing AMD to respond in kind.
Shares of AMD fell 35 cents, or 4.3 percent, to $7.80 in midday trading, while Intel stock declined 51 cents, or 2.5 percent, to $19.93. Both stocks have shed 35 percent this year amid weak demand for personal computers, slowing economies and a recession in the high-tech sector.