Digital Equipment Corp. last week confirmed that Motorola, Inc. has offered to buy Digitals Alpha AXP semiconductor plant in South Queensferry, Scotland.

Digital Chief Executive Officer Robert Palmer has been encouraging offers from other chip manufacturers to help his company deal with its money-draining overcapacity problem. The South Queensferry sale would solve that problem and net the company some much needed cash anywhere from $100 million to $200 million.

Digital does not have the volume to support large-scale fabrication, but Motorola, the world's second-largest semiconductor manufacturer, does, said Andrew Allison, editor of the newsletter ``Inside the New Computer Industry'' in Carmel, Calif.

Mass consolidation

Details of the possible sale are sketchy, but the most likely scenario, according to Terry Shannon, an analyst at Illuminata in Ashland, Mass., is that Digital will consolidate its Alpha chip production into its state-of-the-art, $425 million plant in Hudson, Mass.

That facility is testing Digital's newest generation of Alpha chips, the EV-6, with full production slated for 1996. The South Queensferry plant and an older plant in Hudson produce the current EV-4 and EV-4/5 chips.

When Digital launched Alpha two years ago, the company said it was vital that the chip become an industry standard so semiconductor manufacturing could become self-sufficient through the sale of chips to other companies. ``It obviously hasn't transpired the way they'd like,'' said George Elling, an analyst at Merrill Lynch & Co. in New York.

Digital's Alpha sales this year increased 164% over 1993. And Alpha sales have surpassed VAX sales, according to the latest quarterly results.

The sale of the South Queensferry plant is not expected to impact Digital's ability to meet Alpha demand. But one possible wrinkle in the plant sale involves Advanced Micro Devices, Inc. (AMD), which has a contract with Digital into 1996 for 486 chips produced at South Queensferry. A sale would have no effect on the contract, said Jim Lochmiller, an AMD spokesman.

Too fast for its own good

The contrast between Motorola's and AMDs thirst for chip manufacturing space and Digital's overcapacity raises the larger question of why Digital has been unable to generate sufficient interest in Alpha's 64-bit technology. Two years after the company introduced Alpha as the cornerstone of its comeback strategy, the chip is in danger of becoming just a house brand.

The irony is that while everyone agrees that Alpha is a fast, powerful chip, it might even be too fast.

``It's like starting an auto company and coming out with an automobile that does 200 miles an hour. If you don't have the roadways to take advantage of it, and if the primary use is commuting, then you don't need the extra performance,'' said Franc Romano, an analyst at Aberdeen Group in Boston.

He said Alpha has the potential to become a major force in the growing fields of multimedia and video imaging.