• Article
• Discussion
• Edit
• History
• Bookmark

Flash Player 9 or higher is required to view the chart Click here to download Flash Player now See all Bulls Reasons Bulls: Reasons To Buy AMD's Opteron processor has been well received and gained customers for AMD 0% agree AMD's Opteron processor has been well received and gained customers for AMD AMD's Opteron processor has been well received and gained more customers for AMD. View or Edit Reason 0 votes 0% agree ATI will allow AMD to compete with Intel on platform technology 0% agree ATI will allow AMD to compete with Intel on platform technology The acquisition of ATI will allow AMD to compete with Intel on another front: platform technology. View or Edit Reason 0 votes 0% agree AMD has narrowed the technology gap 0% agree AMD has narrowed the technology gap AMD has gained market share over recent years by narrowing the gap in technology that Intel has enjoyed in the past. View or Edit Reason 0 votes 0% agree Add your own Bulls Reason See all Bears Reasons Bears: Reasons To Sell Moody's downgrades AMD 0% agree Moody's downgrades AMD In lieu of 4th quarter results appearing weaker than expected, Moody’s Investors Service has downgraded Advanced Micro Devices Inc.’s corporate rating, from B3 to B2, which is considered poor. http://www.bizjournals.com/albany/stories/2008/12/08/daily36.html?ana=from_rss View or Edit Reason 0 votes 0% agree At current levels of operating expenses, profitability is impossible 0% agree At current levels of operating expenses, profitability is impossible At the current level of operating expenses it is almost impossible for the company to return to profitability.[1] View or Edit Reason 0 votes 0% agree Intel advanced to 45nm technology several months ahead of AMD 0% agree Intel advanced to 45nm technology several months ahead of AMD Intel advanced to 45nm technology several months ahead of AMD. View or Edit Reason 0 votes 0% agree Add your own Bears Reason Send the authors a comment or suggestion AMD has long since cemented their reputation as a second-fiddle rival to Intel. Even their much ... more [Dismiss] [Done] See All Suggestions

Top Contributors Dave Cleveland Michael Luddy Jane Jiang Related Articles Intel (INTC) Semiconductor Cyclicality NVIDIA (NVDA) Commoditization of PCs Microsoft (MSFT) Related Blog Posts » See All Related Posts powered by Wikinvest Wire

Intel has been in the industry longer than AMD and, with 75% market share, Intel maintains a significant lead over its smaller rival. Intel released a new line of processing technology (45nm). Chips using this technology are faster and consume less power. AMD will not be rolling out its own 45nm release until the 4Q of 2008. In the short term, the company will probably suffer from lower sales as demand for previous generation products slackens. However, AMD is expected to close a deal for a joint venture with Advanced Technology Investment Company, a venture capital firm from Abu Dhabi, by the end of 2008 which would create a separate company that owns AMD's fabs. The new company would assume all manufacturing debt, operate AMD's two fabs, and construct another fab in upstate New York. The joint venture gives AMD much needed cash and allows it to focus on chip design so it can most effectively compete with rival Intel.

In 2006, AMD bought the graphics chip company ATI Technologies for $5.6 billion. This acquisition and intense competition from Intel are attributable to the considerable losses AMD has experienced in the last two years. In the last two years AMD's market value has dropped $16.50 billion to its current level of $3.95 billion. AMD suffered total losses of $3.38 billion for 2007 and, to add insult to injury, AMD stated that ATI was worth about 44% less than what they bought it for. There is light at the end of the tunnel though for AMD. Problems with the AMD's Opteron chips seem to be resolved and AMD has gained 2.2% market share on Intel since July 2007.^[1] AMD is starting to see some value from its acquisition of ATI because AMD is outperforming Intel in the low end graphics department and bringing stiff competition to Nvidia in the high end market.

[edit] Business Segments

[edit] Products

• Computation Products
  
  • Microprocessors: Essentially the brain of a computer, these products are found in all personal computers. AMD produces both single- and dual-core processors, which run both 32- and 64-bit computing.
  • Servers and Workstations: The single- and dual-core Opteron processors are AMD's server and workstation microprocessing units, similar to their standard microprocessor cousins but made for larger computing projects including business processing (supply chain management, for instance), engineering and web servers. AMD released a new line of dual-core Opteron processors in August 2006.
• Embedded Products: these are processors that are designed for devices in non-PC/computer markets. These products are made to meet particular consumer needs that may be outside the scope of PC processor units, like significantly smaller size, higher mobility, or tolerance of harsh environments.
• Graphic & Chipset Products: these enhance a computer's graphics capabilities, and can be either stand-alone graphic cards or chipsets that are integrated into motherboards. These products are used in systems designed for gaming or high-level graphic display.
• Memory Products: Until its IPO in October 2006, Spansion was a subsidiary of AMD that produced and sold flash memory products. Since its sale, AMD has discontinued its production and sale of flash memory products.
• Consumer Electronics: this segment includes processors for gaming consoles, digital televisions and handheld devices. These processors are specialized to fit the needs of a given product line. AMD's processors can be found in Microsoft's Xbox 360, the Nintendo Wii and Nintendo GameCube gaming consoles. (Related: Game Consoles Wars: Xbox 360 vs. PS3 vs. Wii.)

• Computers

AMD has announced that it will be producting business class desktop personal computers. They are primarily being aimed at small to medium sized businesses, but AMD says it will eventual market to the major enterprises as well. Notebook PC's are planned to unveiled in mid 2008. Acer, Dell, Lenovo, Fujitsu-Siemens, and Hewlett Packard all will be selling AMD's computers.

[edit] Customers

• Original Equipment Manufacturers (OEMs) and Original Design Manufacturers (ODMs) are companies that produce computers, handheld devices, and telecommunications and network communications products, and who are among ADM's chief customers. The products that these manufacturers produce rely on the processors that AMD makes.
• Third Party Distributors:AMD also sells its products to companies that distribute to smaller OEMs and ODMs.

[edit] Research and Development

AMD spends a large portion of its money on R&D ($1.85 billion, about 31% of revenue in 2007.) Still, this is far less than Intel's spending in the same area--the industry giant is very aggressive about innovation. The above charts show R&D spending and net revenues for AMD over recent years.

[edit] Industry Metrics

[edit] Process Technology and Architecture

• Process Technology: this is the technology used in creating microprocessors. AMD's 65nm process technology is considered to be superior to Intel's, but Intel went one step further than AMD when it announced its new 45nm process technology. These numbers (65nm, 45nm) refer to the thickness of the insulation on the transistors inside the microprocessors--with thinner insulation, the density of circuits on a processor can be increased, so processors can be made both smaller and more powerful. Intel's 45nm processor was introduced in early November, while AMD is introducing its own around six months after.

• Architecture: architecture refers to the chip design--how many individual processors can be crammed into one single chip. How the chip functions depends on its architecture, and changes in architectural design usually stem from attempts to create more efficient or more powerful processors. Currently, AMD uses both single-core and multi-core architecture for its processors.

[edit] Performance Metrics

Microprocessors are typically rated on a number of characteristics that measure their performance. These measurements are the most important factors for determining the success of a specific line of products, and as such they are the focusing points for creators of these chips. Some lines of chips will focus more on one factor than another in an attempt to predict what the market prefers (i.e. faster chips vs. more energy efficient chips, etc.)

• Clock Speed: Microprocessor speed is an important indicator of how powerful the product is. In this ultra-competitive industry, Intel and AMD compete to produce the faster processor, even if the difference is very minimal. While clock speed is not the only performance factor that determines how good a processor is, it certainly plays a significant role.
• Power Usage: processors that can provide the same computing power while using less energy are more efficient and more valuable. Here too, AMD and Intel race to create the most power-desirable chips.
• Performance Per Watt: This measures the computing power of a microprocessor per single watt of energy consumed. In 2005, this metric proved to be very important for server processors: AMD's performance-per-watt focused processor was more appealing to the server market than Intel's clock-speed-focused processor because of the significant difference in power usage. AMD's was much more energy-efficient, lowering energy bills for products using its chips. As a result, AMD saw an 18.5% jump in its share of the server market between 2005 and 2006.

[edit] Trends and Forces

[edit] Semiconductor Cyclicality

The semiconductor industry is deeply cyclical. Demand in up cycles is so high that chip manufacturers have trouble keeping up. Similarly, if electronic sales, particularly PC sales, are slow, demand for chips can plummet. The fact that the semiconductor industry is more subject to the whim of consumer demand more than corporate demand, also adds to the overall volatility. The backdrop of this high market volatility, however, has been continual growth. Over the last 20 years the semiconductor industry has seen about a 13% average annual growth rate.

Semiconductor sales have shown about an 80% correlation with GDP growth trends, meaning a downturn in GDP growth could very likely be accompanied by a downturn in semiconductor sales.

[edit] Increasing Product Demand

The demand for products that use AMD's processors is a significant factor in the success of AMD. Demand for computers has been decreasing growth since the mid 1990s, and as a result, microprocessing companies have seen decreasing growth in profits. However, notebook and cell phone sales as well as potential growth from netbooks are driving the growing demand for microprocessors as desktops drop off.

[edit] New Platform Technology Business

With the acquisition of ATI Technologies in October 2006, AMD was able to begin supplying 3D graphics, video and multimedia products for all types of computers, as well as products for consumer electronics. Before this acquisition AMD was unable to compete with Intel in platform technologies. AMD has developed a notebook platform, called Puma. This platform is designed to be compatible with consumer, business, and high end notebooks, making it a very attractive platform for OEM's. The high end graphics provided by ATI gives AMD's platform a significant advantage over Intel's competing platforms.^[2] However, this advantage comes partly from the fact that Intel has had problems with the graphics aspect of its platform, known as Montevina. If Intel can get this chip working then the competition for AMD would increase.

[edit] Competition

AMD competes directly with Intel (INTC). Intel has been in the microprocessor industry longer than AMD and enjoys a significant lead in market share, but in recent years AMD has been able to gain some of this market share, however.

With the acquisition of ATI Technologies, AMD hopes to increase its ability to compete with Intel on all levels. However, with the loss of Spansion, AMD's flash memory subsidiary, there are even more areas in which Intel has the outright advantage. Intel's advance to 45nm technology is estimated to be about 6 months ahead of AMD's equivalent, a sure blow for AMD.

Intel has an enormous amount of power in the microprocessing industry and as a result is able to leverage its market share to gain more customers. This has been a difficult obstacle for AMD to overcome in the past. However, AMD does boast a reputation for better service, making it popular among certain groups of consumers. Lower price points also make certain AMD products preferable to Intel's equivalents. But these recent price wars between the two competing firms have proven to be costly for AMD. Because Intel is so much larger than AMD, it is able to cut costs more effectively and as a result the losses in profit margins (from price cuts) does not affect Intel as severely.

There is another market where AMD has yet to develop a processor. Greater demand for mobility drove the increase in notebook popularity, and now that trend has sparked the rise of netbooks (aka Mobile Internet Devices, or MID's). Intel has released its Atom processors for this market and NVIDIA has released a competing processor called the Tegra. AMD has yet to develop a processor for this up and coming market, and if netbook demand really starts to take off then AMD could be left trying to make up ground once again.

In the graphics chips world, the major competitors are Intel and Nvidia. AMD's Radeon line of graphics processors have turned out to be better than expected and are delivering stiff competition to Nvidia in the high end market. AMD executed a differentiating strategy for its high end graphics cards by developing mid range chips but then bundling those chips into its high end graphics cards.^[3] Nvidia and Intel, on the other hand, generally develop a high end chip and then move that chip down the value chain over time. AMD's strategy poses possible execution problems over time because it requires advanced inter processor communications, but the design is able to dramatically decrease power consumption.^[4] AMD released a dual processor graphics card, named the HD 4870 X2, in August 2008. The is aimed at gaming and is capable of 2.4 trillion operations per second. ^[5] This card marks an important step in gaining market share from leading graphics producer Nvidia. In 2Q 2008, Nvidia's market share for laptop graphics dropped 3% to 24% while AMD increased its market share 1% to 18%.^[6]

[edit] References

1. ↑ AMD Chipping Away at Intel
2. ↑ AMD shakes PC Notebook Status Quo
3. ↑ Nvidia: Intensifying Competition and Execution Challenges
4. ↑ Nvidia: Intensifying Competition and Execution Challenges
5. ↑ Informationweek.com, AMD Unveils Latest Dual-Chip Graphics Card
6. ↑ Bloomberg.com, Nvidia has first loss in 6 years, Buyback lifts stock