Bad News for AMD

When Advanced Micro Devices (NYSE: AMD  ) touted the launch of its low-power Kabini and Temash processors, many believed that these would finally be the products that helped turn the tide in the rather unsuccessful war against Intel (NASDAQ: INTC  ) in the PC space. While these parts weren't necessarily aimed at mounting an assault on Intel's high-end PC beachhead, the former was supposed to attack the fairly large mid-range PC market and the latter was supposed to gain the company a foothold in Windows 8.1 tablets. Contrary to positive fanfare at the launches of these processors earlier in the year, it seems that these products will ultimately do very little to change the competitive dynamics in either PCs or tablets.

Some background
AMD, like Intel, develops two lines of processor cores – a "big" core meant for higher-end notebooks, desktops, and servers, and a "small" core meant for low-cost PCs, tablets, and game consoles. AMD's "big cores" have continued to lose share across key market segments as the company's designs simply can't compare with what behemoth Intel is able to leverage. It's very tough to compete by cutting prices when your competitor can build faster, less power-hungry, and cheaper-to-make designs than you can.

On the small core front, AMD has actually done well. Years ago, AMD's "Bobcat" processor was a superior design to Intel's low-power Atom. A major part of this was likely due to Intel's unwillingness to risk cannibalizing its own "big core" sales, but another non-trivial part of this was that Intel did not leverage its manufacturing lead on the "small" cores. 

Today's Kabini and Temash system-on-chip designs are based on the successor to the Bobcat, known as Jaguar. While chips based on these designs seem poised to offer excellent performance/watt and performance/dollar, there are a couple of things that cannot be ignored here.

PC share gains unlikely
AMD's Kabini is a competent processor – it competes well with the very lowest end of Intel's processor stack, and offers competitive performance per watt. Unfortunately, while Intel has traditionally serviced the low end of the notebook market with cut-down versions of its larger Core processors, which are more power-hungry and more costly (due to being a two-chip solution against the single-chip Kabini), Intel is ramping up its next generation Bay Trail-M processor.

This chip is built on Intel's 22-nanometer process with FinFETs (that means lower power and a smaller chip than what AMD can do on TSMC's 28-nanometer planar process) and generally offers a performance and power advantage over its AMD brethren. While it had the low-cost/low-power PC space mostly to itself many years ago, Intel's push into the tablet space has also given it a weapon with which to aggressively fight in the lower end of the PC space. While Intel had yet to roll out these processors in early Q3 (yet AMD had for notebooks, which means that AMD was able to gain some share in the low end), the fear is that with Intel ramping up its Bay Trail-M products at the end of Q3 for sale in devices during Q4, that share gain will reverse and continue to worsen.

The tablet situation looks worse
While AMD could theoretically stave off share loss with extremely aggressive pricing in the low-cost PC space since its products are more or less substitutes for Intel's, the situation is different in the tablet space. AMD has been talking up a ~4 watt dual core Temash part, and there are fundamental barriers that belie this seemingly appropriate headline power consumption:

  • AMD's Temash does not include an integrated Image Signal Processor, which is an IP block that controls and provides functionality for the built-in camera.
  • Temash for tablets includes just two Jaguar processor cores running at 1GHz. Per core/per clock, Jaguar has some advantages over the Silvermont core in Bay Trail-T, yet the difference isn't close enough to make up for half the cores running at 42% of the frequency. Silvermont also has more aggressive power management.
  • In 3D Mark Ice Storm, a 3D graphics benchmark, AMD's tablet-oriented Temash scores 12,495, while Bay Trail-T has shown scores in excess of 13,000. This means that AMD doesn't even have a graphics advantage.
  • No tablet design wins have been announced in the 10" and smaller form factors.

In short, AMD is – as it is in the PC space – still not competitive enough with Intel to make meaningful inroads in the new era of mobility.

Conclusion
AMD's strategy to diversify outside of the traditional PC space cannot happen fast enough. Intel is far too potent a competitor with too much on the line to make life easy. That being said, AMD is the chip supplier for Microsoft's Xbox One and Sony's Playstation 4, so while this business isn't high margin, a successful console ramp up could help offset AMD's traditional PC woes. And, who knows, maybe the partnership with ARM to leverage its IP in future server chips could work out. Only time will tell, so AMD remains a high-risk speculative bet. 

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Read/Post Comments (21) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 10, 2013, at 10:08 PM, typecheck wrote:

    Where is the bad "news"?

    I mean the title clearly said "news" but I didn't find "news" here. Only your opinion.

    It is fine to say bad news in your opinion but don't give such a misleading title and then followed up with nothing substantially "new".

    Now to the substance of your "opinion". AMD is a very small company compared to Intel. The idea for AMD to succeed is to beat out Intel is ridiculous. AMD is fine just to eat the crumbs left by Intel's better and more powerful products.

    AMD doesn't make the fastest or most efficient processors but AMD does make APUs that have their own advantages and some consumers find attractive. That is how the story will play out.

    To say that AMD losses in terms of performance of the latest CPU front to Intel will mean bad news to AMD is the same as to say that because it will rain, everybody should stay in door. Who doesn't know that already.

    Give it a rest. Wait a few days and spill our negativity after AMD releases its 3rd quarter results.

  • Report this Comment On October 10, 2013, at 11:13 PM, Mike655mm wrote:

    The reality for AMD is that they've dropped off so much that Intel isn't even paying attention to them any more. These days, Intel is focused only on competing with ARM on the low end of the market while they totally dominate the high end market

  • Report this Comment On October 11, 2013, at 1:08 AM, ewro wrote:

    Too bad, I would like to see AMD do well. They really deserve it. They have done a lot of great things for the processor market with only a fraction of the budget that Intel has. AMD first with 64bit instruction sets, first to 1Ghz, first to have a dual core processor.

  • Report this Comment On October 11, 2013, at 1:56 AM, rav55 wrote:

    Ashraf all you do is speculate on old news. You have nothing to contribute. Your writing is just a big bag of douche.

  • Report this Comment On October 11, 2013, at 2:15 AM, rav55 wrote:

    There is no war against Intel. Intel can't compete in the GPU space. HD graphics are laughable. Intel has ZERO gaming exposure except in gaming pc's which are less than 1% of the ENTIRE pc market. I count a Gaming PC as a 1st gen discrete GPU.

    That is also the market that Valve is targeting. The last thing Intel wants is an open source o/s for performance pc's.

    Open source used to be the bottom of the market not the top end.

    Gaming is where AMD shines and Intel is just gas in a whirlwind with no option except nVidia which has already lost as ALL games will now be optimised for AMD Mantle.

    Everyone can blather on about individual chips, yawn....

    But what nobody is noticing is that AMD is becoming a graphics company that also has ARM and x86 licenses. Radeon is remaking the AMD brand.

    That's what Rory Read was talking about when he said the competition with Intel was over.

    He's going after nVidia! And so is Intel! Except Intel can't buy nVidia and Read doesn't want too. nVidia has sales because Intel doesn't want OEM's using AMD graphics with their processors.

  • Report this Comment On October 11, 2013, at 6:41 AM, mycardbrokedown wrote:

    Why is that whenever amd announces anything... I mean really anything... mothly foul highlights or invents some bad news about it... I mean come on! Are you really THIS biased?? "Bad news for AMD"?? WTF?? it scored 2 major wins one in the console area and one in the server area and you dare badmouth it? AMD is about to regain relevancy in the server area with this win and dominates the game industry atm. It doesn't have cometitive high end cpus but it has good mid-> low end cpus & apus. The apus destroy and I mean litereally destroy intels igp offerings and at the same time are competitive on ipc side(even when loosing to intel). I'm not blind to see that amd has less then 5% of the server space but with seamicro's fabric it can regain relevancy and the verizon win they are on the right track.

    The node difference between intel and the rest of the industry is atm big but the "arm camp" of companies is a 0.7 trillion big behemoth intel has to face - looking at it from this perspective intel is in big trouble. They are a conglomerate of companies and none of them alone is as powerful or as advanced as intel is atm... BUT with the kind of money they can burn together collaborating around amd &| arm.. intel is at a clear disadvantage.

    AMD is wise enough to know that it has to offer ARM as well as x86 chips(as of 2014)... Did intel get the memo?? If they don't get it they'll just loose relevance slowly but surely.

    Big chips are a dying breed in the server area. Even the lowlyest of cores from the modern era be it arm or x86 can do enough ... enough - because people are starting to finally write multithreaded applications for them... I know because I'm one of those guys.

    I should remind you that most applications and benchmarks for that matter are still compiled with the intel compiler with the "cripple amd instruction". There are compilers out there that produce similar performances with highest intel i7x cpus as with last amd fx - so I'm not that convinced of intels future as they are bound by their settlement with AMD to release compilers that are not intel biased(by 2015 or so) and offer refunds to any company claiming any because of this.

    AMD on the other hand has hit rock bottom(1st bulldozer installment, intels cripple amd instruction, Intels OEM deals/marketing budget, production issues with GF, overpriced ATI buyout etc...) and is pushing with all its strength up and seems to have learned it's lessons... intel is still floating on high sees but faces some serious storms... we shall see.

    Food for thought: in the tablet/phone space arm cpu's are anywhere from 25->45% more powerful at same powerdraw even when comparing an 1-2 years old chipt to intels best... so is it whise to play it coy with x86 in the hyperdense/cowd/microse server space or is it a good idea to invest in arm based chips too?? You tell me mister... mothley foul!

  • Report this Comment On October 11, 2013, at 8:15 AM, viperciara wrote:

    HERE WE GO AGAIN!! You are a short or trying to get the stock to drop! Your titles are so misleading a first grader would be questioning the content!

  • Report this Comment On October 11, 2013, at 8:18 AM, viperciara wrote:

    Omg I just realized you wrote yesterday the article "AMD’s Server Problems Worsen, But Is There Hope?" I then found out they are having no server problems! OMG LOL Stop you are to funny!

  • Report this Comment On October 11, 2013, at 9:04 AM, mycardbrokedown wrote:

    Now I see you OPENLY support Intel... The same intel that sees it as not a problem that one of the biggest oems on the planet made 70% of its profits due to intels marketing funds (read bribes) while keeping amd < 5% of sales?... Same intel that sees it as ok to introduce a new compiler that effectively cripples AMD performance by using the oldest instruction set possible instead of the advanced & new ones even if they're supported and much ... much faster... This led to the worst case scenario possible ... we the consumers are stuck with old hardware just because intel couldn't keep up technologically?? Is it really intels decision to make? Is this behaviour warranted when a big corporation like intel looses almost 30% of the market share in 2 years?

    So you, fool.com (motley fool / Ashraf Eassa ) agree to birbes & unfair competition? Is this the statement you want to make? I know money talks... but this is just... well you should know you need to live with yourself every day :).

    I know that from a financial pov intel is much more stable and valuable then amd atm... I get it! But this kind of articles?? I agree AMD stock is speculative atm... but I don't know how much speculation there is when amd secured the entire console pie(it will even be in the steam boxes), and reign havoc in embedded & gpu markets, and launch a full assault on the micro & high density servers? - how much speculation is there?? Amd is an unstable stock atm - true. But with time amd will start executing better and better thanks in large part to Rory Read & his "dream" team he has built around him.

  • Report this Comment On October 11, 2013, at 9:49 AM, Jberglive wrote:

    Folks, the author is a Basher/Pumper.

    http://www.investopedia.com/terms/s/stockbasher.asp

    Definition of 'Stock Basher'

    An individual, either acting alone or on behalf of someone else, who attempts to devalue a stock by spreading false or exaggerated claims against a public company. After the stock's price has dropped, the basher, or the basher's employer, will then purchase the stock at a lower price than what he or she believes it is intrinsically worth.

    It's what he does. I'm sorry. There is a thinly disguise vernier of simply biased opinion backed up by at best semi viable info. Do you think it a coincidence his two titles are so misleading, it's a game of psychology. If one Googles AMD and has this headline on top of the searche it makes an impact. So now there are two doom headlines in a week, few people check to see if the same author writes both of the the same irrelevant articles, and all of this a *week* before the quarterly report. I'm not in AMD, but I have to speak out against this because I dislike this sort of blatant manipulation. Best thing to do, which obviously I am guilty of not doing myself, is to just ignore, not comment and if possible, not even read. That way the article gets relegated back to the search results from lack of hits. Good luck to you AMD longs.

  • Report this Comment On October 11, 2013, at 10:54 AM, redhat206 wrote:

    I don't know, I just bought 10k shares of AMD.

    I just want to say, go AMD, yeah.

  • Report this Comment On October 11, 2013, at 12:16 PM, TEBuddy wrote:

    Did Seeking Alpha finally get tired of all of your biased articles?

  • Report this Comment On October 11, 2013, at 12:23 PM, TEBuddy wrote:

    AMD leads the way in open industry standards. Some people think that Intel doesn't pay attention to AMD, yeah right. Why do you think its now the best thing since sliced bread to put the GPU on the same die as the CPU? Or why Intel now has a decent GPU option, albeit overpriced? Why do you think Intel came out with secret new hardware instructions for HD encoding, conspiring with software makers behind closed doors to make its hardware perform better when its released? Because AMD was pushing open standards for GPU acceleration of this.

    So wait until next month when AMD's first legitimate update of its big cores happens in a few years. Lets see what AMD has to offer with the open architectures it promotes to enhance the entire industry. All signs point to great things for consumers.

  • Report this Comment On October 11, 2013, at 2:35 PM, mtechac wrote:

    Sorry, but within your comments, you just affirmed that AMD will do great and is doing great and that Intel is in shacky ground.

    Intel business model doesn't have a low cost business model. It is pouring billions of dollars to support higher end foundry processes, which is not a sustainable model.

    Second, Intel is just mainly a CPU companies, which are now obsoleted. Without high end GPU's, which Intel does not have the IP or technology to develop them, it will have a very hard time in the future, The last time Intel tried to build a high end GPU, it because one of the biggest fiasco in history (The project was called Larrabbee). Lots of marketing and publicly announcing that NVIDIA and AMD high end GPUs were dead, and suddenly Intel folded its effort because it found it is not an easy job and talking doesn't create high end technology).

    AMD diversification on the APU (it's the next generation of the obsoleted CPU technology where the processor can natively perform GPU and CPU processing), embedded processors, gaming processors on all major consoles, new generation of GPU's, Mantle, new gaming software development environments, A 64 bit ARM APU's for servers, laptops, etc.

    AMD will be clearly a winner. It will have 64 bit ARM APUs, 64 bit x86 CPUs, high end GPU's, high-end gaming consoles, at a great price, so it has the right business/cost model compared to the awful Intel cost model that will bring Intel to their knees when Intel loses their server, workstation, and other very profitable 64 bit processing businesses..

    AMD will begin a dramatic recovery this quarter, with the gaming console and the micro-server business and then the new incoming technology will re-ignite AMD's success.

    TSMC and GlobalFoundries will provide 20nm chips next year at ridiculous low cost compared to Intel, so Intel will have to pour 10's of billions to keep ahead.. That's a losing business model that AMD got rid when it found there is no way to win going in that business direction.

  • Report this Comment On October 11, 2013, at 2:40 PM, ecstubblebine wrote:

    "...while Bay Trail-T has shown scores in excess of 13,000. This means that AMD doesn't even have a graphics advantage."

    Are you insane!

  • Report this Comment On October 11, 2013, at 2:45 PM, ecstubblebine wrote:

    Face it AMD is the ONLY chip maker making an integrated parallel and serial processor. intel CAN'T.

  • Report this Comment On October 11, 2013, at 5:46 PM, StreetWolf wrote:

    Notably missing from this article is any semblance of "News". This is like a Huffington Post hit-piece where AMD is a Tea Party candidate. Did you know AMD hates children?!?!

    I know what the others are accusing you of doing, and I think you can do it better, Ashraf.

    Be less blatant, write less misleading titles. You can dump on a stock without insulting the reader.

  • Report this Comment On October 11, 2013, at 5:50 PM, StreetWolf wrote:

    "Omg I just realized you wrote yesterday the article "AMD’s Server Problems Worsen, But Is There Hope?" I then found out they are having no server problems! OMG LOL Stop you are to funny!"

    Yes, he is on a mission.

    None of us work for AMD or have a personal stake in what he writes about it (at most he will sway a couple entry-level retails). We just want to be able to click headlines about the stock without being Rick-Rolled.

  • Report this Comment On October 12, 2013, at 11:11 AM, BuyemHoldem wrote:

    I was in IT from 1967 to 2001. I have personally bought over $1 million in computer equipment during my life time. That includes several small mainframes, about a dozen CISC & RISC servers, maybe 100 desktops and probably a dozen laptops. I was in the corporate world and yes, I was an Intel Bigot too.

    Up until the A8 APU was released the only AMD product I ever owned was a 386/33MHz notebook which was probably in the late 80's.

    You see, after INTC had a recall on Pentium(?) I was afraid that if AMD had a recall it would break the bank. However, AMD hasn't had a recall and INTC has had 2... but they can afford it.

    I bought INTC in 1994 at around $3.50 (split adjusted). By 2000 I had 11,200 shares and dumped them all between $35 & $70... luckily. Take a look at a 15 year chart. I did well but wouldn't touch INTC again with a stick.

    The frustration with INTC over the years is that the ONLY thing they seem to do well, and they do it very well, is manufacture (not necessarily design & certainly not bleeding edge) x86 chips. Luckily for Intel they OWN the x86 patent (shame on IBM). They have NOT been able to expand into other LOBs within the electronics industry. They have repeatedly failed. Do your own research. I'm simply researching my aging memory bank.

    If they didn't outright OWN the x86 patent they would certainly not be in the monopoly position they are today. However, raw CPU power, where Intel excels, is not the future. Which is why I love my AMD A8 APU that I built a couple of years ago.

    Since I'm not a gamer and don't edit photos for a living, It has as much CPU power as I may ever need again. I don't compile 100,000+ lines of code anymore but most people would still consider me a heavy user. Better graphics is the only reason I can think of that would make we want to upgrade this APU... and it will certainly be with another AMD product.

    For the masses, It's GRAPHICS dummy, where AMD excels. THAT is the future, so why don't you get off your ridiculous INTC bandwagon, take a look at a 15 year INTC chart and stop bashing AMD just to promote INTC.

    I am long 41,503 shares of AMD. AMD RULES!!!

  • Report this Comment On October 14, 2013, at 12:20 PM, rav55 wrote:

    Hey Ashraf, do you feel a tad bit unappreciated here? Maybe you should just bugger off.

  • Report this Comment On October 17, 2013, at 5:28 PM, TMFAeassa wrote:

    @ rav55

    Looks like my call was spot on - MPU sales down 15% Y/Y, with INTC's PCG revs down only ~3% Y/Y. Facts and sound analysis triumph over hope.

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