Time Is Running Out for AMD's Mobile Ambitions

While Advanced Micro Devices (NYSE: AMD  ) missed the early days of mobile and has taken a beating in server chips from rival Intel, the company started to bounce back this past quarter with sales in its semi-custom chips division. Much of that was likely due to the millions of chips the company shipped for Microsoft's Xbox One and Sony's PlayStation 4, but AMD's semi-custom chips have much more potential than just console games -- if AMD can focus on mobile.

Turning the tide
The third quarter of this year was a monumental one for AMD's semi-custom chips, with the company earning about 30% of its revenue from its semi-custom chip designs. That's after only about a year after the company said it would focus its attention on semi-custom chips for customers. Semi-custom chips are processors that allow original equipment manufacturers to choose with type of central processing core, graphics processing core, or other cores a company wants in its chip design. It's a way for OEMs to build a chip to their own specifications, without having to pay money design the chips itself.

Both Sony and Microsoft tapped AMD for its semi-custom chips for their new consoles. So far, both the Xbox One and PlayStation 4 have sold at least two million units each. That's good news for AMD, and it comes on top of Gartner's projections that that the console gaming industry will grow from $44.3 billion in revenue this year to $55 billion by 2015. But AMD's semi-custom chip division, called Graphics and Visual Solutions, has much more potential than just living room games.

AMD said earlier this year that its semi-custom chips could be used in PCs, set-top boxes, mobile devices, smart TVs, servers, and more. As AnandTech recently pointed out, AMD could sell semi-custom chips to mobile device makers looking to compete more closely with Apple and Samsung's custom chip strategies. Apple is already shipping custom chip designs, and Samsung has custom processors in the pipeline. That level of development doesn't come cheap. By selling semi-custom chips to OEMs, AMD would be able to increase revenue for its Graphics and Visual Solutions division, while allowing device makers to create more-capable devices at a fraction of what Samsung and Apple invest in development.

But so far AMD has been relatively absent from the mobile market -- which is a very bad thing for a chipmaker these days. AMD said itself that it was hit harder than it expected in the past few quarters from slowing PC sales, so it's curious that AMD hasn't made a bigger push to get OEMs to adopt its semi-custom chips. Last quarter, the company's CEO and president, Rory Read, said in an earnings release that, "We achieved 26 percent sequential revenue growth driven by our semi-custom business and remain committed to generating approximately 50 percent of revenue from high-growth markets over the next two years." Reaching that 50% will be easier if OEMs are jumping on board with AMD. But at this point, it doesn't seem clear exactly what AMD's strategy for mobile is, and that should seriously concern investors.

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  • Report this Comment On December 17, 2013, at 8:29 PM, KenLuskin wrote:

    The author of this article is relatively CLUELESS!

    AMD does NOT compete to sell $30 chips with no margins, when they can sell ARM 64 bit SERVER chips with good margins, where they have 2 major advantages, with limited competition.

    There is more than one way to compete from mobile growth without competing head on with the superpowers of thin client chips.

    ALL mobile devices require CLOUD connections, or they are worthless.

    AMD will benefit from Mobile by taking back server market share, by selling semi-custom chips to CLOUD players.

    The CLOUD is the other side of the growth in mobile.

    Qualcomm does NOT have chips in the cloud.

    And AMD does NOT need to be in mobile devices, to profit from their growth.

  • Report this Comment On December 17, 2013, at 9:15 PM, smallormidcapman wrote:

    Thank God...I thought my AMD long position was in jeopardy. I look for FOOLish reverse confirmation so that I know I am right. Here is the deal...

    1. Beema, Mullins, Kaveri...performance per watt...cost...GRAPHICS power.

    2. 28nm APUs manufactured at GloFo...including 28nm semi-custom console chips. This means no risk to 2013 WSA and 2014 WSA to be signed and announced soon.

    3. Consoles appear to be 1 million units over projections in Q4

    4. PC sales are less bad then expected according to IDC & Gartner...maybe by as much as 5% in Q4

    5. ARM-64 via SeaMicro is a game changer and there are some BIG fish available to snag.

    Until you can understand these important items then you can't understand AMD...

    BTW, thanks for confirming my AMD long position!! The FOOLish seal of disapproval was the last step!!

  • Report this Comment On December 17, 2013, at 10:47 PM, opto50 wrote:

    All those millions of people ordering online or waiting in the freezing cold for a chance to buy AMD based PS4 and Xbox One game consoles...

    (Maybe a Motley Fool "analyst" should have stopped the millions of buyers and told them mobile is where all the cool realistic multiplayer games and apps are!)

    What is the total sell through? Over 4 million and counting still two weeks to go before the end of year. Next year, Japan and China and Korea along with the rest of the world will be ready for millions of more AMD based consoles.

    As the previous poster stated, these games are going online, playing and creating gigabytes of gaming and video data that has to processed on servers.

    Where will all those data center find new servers to handle the increased workloads from the millions of new gamers?

    Answer: AMD Seamicro Opteron X86-64 and the new power efficient ARM64 in 2014.

  • Report this Comment On December 17, 2013, at 10:50 PM, mbarhum wrote:

    i have one word bullshort!!!! Anyone writing anything bad about AMD is getting paid to bash or shorting the stock the save their arses!!!!

    The funniest thing is how quickly these articles, that are bashing AMD, get ripped quick for its nonsense!

  • Report this Comment On December 17, 2013, at 11:10 PM, 200380051 wrote:

    Amd graphics cards, especially the R9s, have been selling at a hefty premium this quarter because of the craze going on around BitCoins and altCoins. The shelves are empty everywhere. Having revenue and clearing inventory at this rate is always a plus.

    AMD has not announced an MSRP rise on any GPU, so the retailers are the ones making money i guess.

  • Report this Comment On December 18, 2013, at 5:44 AM, rav55 wrote:

    AMD's Read has repeatedly said that they were not going after the mobile phone market. x86 in a mobile is very unlikely. Tablet yes, phone, no.

    Is it likely that AMD will use a Radeon cored ARM APU for a mobile application? I really don't think so. The GUI experience on a mobile phone is hardly a reason to unleash the power of Radeon.

    I think that AMD does need however to reevaluate to apparently serendipitous discovery that Radeon is fantastic for memory intensive floating point integer applications such as bit-coin mining.

    That is an GPGPU and HPC application if there ever was one.

  • Report this Comment On December 18, 2013, at 5:53 AM, rav55 wrote:

    @ 200380051

    I'm not disagreeing with you just elaborating.

    "AMD has not announced an MSRP rise on any GPU, so the retailers are the ones making money i guess."

    This is a good thing. AMD needs the retailers to pump their products. I don't know how many time I've been in a Circuit City or Best Buy and heard the pimply faced, computer uber-geek pontificating on the virtues of Intel to some glazed over customer who just wanted to buy a computer that simply worked.

    If retailers are seeing stock fly off the shelf then they will want to stock more.

    There is also an association that NVidia runs on Intel as rarely do you see a discrete Radeon GPU in an OEM supplied Intel computer.

    Not only does NVidia loose out on this processing niche but Intel does too.

    Cryptocoin mining has gone mainstream. When will OEM's start white boxing AMD cpu's and Radeon mining machines?

  • Report this Comment On December 18, 2013, at 6:40 AM, bluesky64 wrote:

    Chris,

    You can do better. AMD is better than you lead on.

  • Report this Comment On December 18, 2013, at 7:32 AM, rav55 wrote:

    AMD will probably gain market share this quarter in GPU sales and some empty suit analyst will write 5000 words telling you why it doesn't count because they weren't sold for gaming.

    How much of NVidia's market share is sold for GPGPU and HPC?

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