Can AMD Make Gains Against Intel in 2014?

In the PC processing world, there's one uncontested leader, Intel (NASDAQ: INTC  ) , versus the rest of the pack. But Advanced Micro Devices (NYSE: AMD  ) has had its sights set on Intel for quite awhile and as we head in 2014 the company wants to make gains on the No. 1 leader -- but that's easier said than done.

A few steps behind
AMD has created some great competition for Intel's chips with its Fusion line. The Fusion chips combine graphics processing units (GPUs) and computing processing units (CPUs) onto one chip. The combined chips enjoy some graphics advantages over Intel's offerings, but so far AMD had yet to really benefit from this.

One of the main reasons for this is because of the sheer size and scalability of Intel's manufacturing and R&D. In the graph below, you can see just how much more Intel has spent in research and development compared to AMD since 2009, and how Intel's spending has shot up compared to AMD's slight drop off.

INTC Research and Development Expense (TTM) Chart

Source: INTC Research and Development Expense (TTM) data by YCharts

While R&D spending doesn't always compare dollar for dollar, it definitely matters when talking about chip development. In the processing space, faster is better and high-end devices bring the largest margins. Intel has the advantage in both and AMD has been left selling chips for lower-end devices.

In addition to outspending AMD, Intel has some of the most sophisticated semiconductor manufacturing in the world. Add all of this up and it means that Intel can use research to make better chips, build a superior product, and do it faster than AMD could ever hope to.

To stay competitive, AMD has moved further into the semicustom chip business. After just about a year in the space, the company said that its semicustom chips helped the company achieve 26% revenue growth sequentially last quarter. Semicustom chips allow original equipment manufacturers to build chips to their own specifications -- like selecting the central processing core or graphics core – without having to design their own chips from the ground up.

Foolish thoughts
Despite offering superior graphics on some of its chips and ramping up semicustom designs, there's nothing AMD is doing that could really give the company an advantage over Intel in the coming year. AMD's semicustom chips may help build up the company's revenues, but it's not likely to grab additional market share against Intel. As PC sales continue to slow down, AMD isn't looking like the best play at the moment, especially compared to the much stronger Intel.

3 surprising stock picks to watch
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multi-billion dollar industry. Our analysts have done it before with the likes of Amazon and Netflix. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.


Read/Post Comments (19) | Recommend This Article (0)

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 December 30, 2013, at 5:15 PM, ultra20099 wrote:

    You mention nothing about their revenue generation from XBox One, PS4, and the Steambox. You mention nothing about their video cards which are all selling out right now. You mention nothing about their contract with Verizon to be their supplier for their cloud services. You mention nothing about their contract with apple to be their supplier for their Mac Book Pro which are all sold out. What a piece of trash of an article.

  • Report this Comment On December 30, 2013, at 6:07 PM, KenLuskin wrote:

    Unbelievably naive article...

    The key differentiating factor in computing in the future is GRAPHICS.

    AMD's graphics are far superior to Intel.

    Intel's manufacturing lead has NOT allowed them to compete with AMD and Nvidia in the high end graphic market.

    Business people do NOT need faster CPUs from Intel, so they are NOT inclined to continue to spend more than necessary.

    The same holds for consumers, except for those people who are gamers.

    John Peddie Research estimates the PC gaming hardware industry at about $ 18 billion.

    What you do NOT understand is that because AMD graphics are in all 3 of the major consoles, ALL of the new games are being OPTIMIZED for AMD graphics.

    Almost ALL of the new games will be using the AMD created MANTLE API.

    So, the ONE thing that you do NOT understand relates to GRAHICS!

    The MANTLE API allows developers to directly access the GPU, and will ONLY work currently on AMD's GCN graphics.

    OXIDE games MANTLE youtube video http://www.youtube.com/watch?v=QIWyf8Hyjbg

    Shows the CPU being "DOWN clocked" from 4GHz to 2GHz, with NO degradation.

    What does this mean?

    It means that gamers NO longer need to purchase high end Intel CPUs, in order to get superior gaming.

    It means that gamers NEED AMD graphics to get superior graphics.

    MANTLE will allow AMD to take market share from Intel in the PC gaming area.

    Gamers will be able to purchase less costly AMD CPUs, while getting superior performance from AMD graphics.

    PC gamers have been a very important source of profits to Intel, because they have been willing to buy the most expensive CPUs.

    I estimate that Intel sold about $4 billion of high margin CPUs to gamers in 2013.

    MANTLE will greatly reduce these sales in 2014, and shift revenues to AMD.

    While Intel is willing to LOSE money on the Tablet space, AMD will take high margin CPU business away from Intel in 2014.

  • Report this Comment On December 30, 2013, at 6:39 PM, techy46 wrote:

    AMD's seen their heyday, now they're also ran.

  • Report this Comment On December 30, 2013, at 9:39 PM, alibabababa wrote:

    Not just no...But HELL no!

  • Report this Comment On December 30, 2013, at 9:54 PM, TMFAeassa wrote:

    Great article!

  • Report this Comment On December 30, 2013, at 10:17 PM, kjurden wrote:

    AMD is going to be taking market share form INTC in the micro server market, Just as they have akready dinbe wuth the new Verizon deal. Be looking to hear aboud Amazon, Google, facebbook very soon. Possilbly on Jan, 6th, 2014 at the CES convention..AMD has alreadyindicated that they have some important news to discuss on that dAY. So hang on, I think there is about to be some disdisruption going on between INTC & AMD.!.

  • Report this Comment On December 30, 2013, at 10:20 PM, kjurden wrote:

    If you haven't alreday doon it you may want to pick up some shares of AMD before their conference call /developers meeting on Jan 6th, 2014.

  • Report this Comment On December 30, 2013, at 11:29 PM, amota001 wrote:

    Wow... Chris how biased can you be? This is the 2nd article in a short period of time with the absolute attempt to down play AMD. Its reasons like this that I rarely make decision for picking stocks from so called analyst or contributors. So much noise about the "DEATH of the PC" from Goldman Sachs and "The Fool". That they seem to forget that they most likely use a PC/Laptop to write these article. The Cloud they say, well isn't AMD targeting to increase their size of server market (Key component of the cloud) Verizon already say value from AMD in this. Come on...Quit the madness guys

  • Report this Comment On December 31, 2013, at 12:57 AM, rav55 wrote:

    @Chris Neiger

    AMD has gained in x86 market share substantially due to their wins in the console market. This was a huge FAILURE for the all-mighty Intel. Call it what you want, semi-custom, imbedded, tablet, mobile, server or PC; ANY x86 sales that AMD records is market share gain against Intel.

    AMD has also recorded a huge gain in market share against NVidia as well. This will be noted due to the huge Apple design win as well as the effect that AMD's sudden popularity with the HPC and GPGPU crowd. It is now well documented that AMD Radeons have massively superior floating point integer performance over GeForce. Expect to see a huge bump in GPU sales from AMD as well. The GPU market is expanding so growth for both AMD and NVidia is likely. AMD preemptive strike this Holiday season resulted in sell-outs for almost ALL Radeon discrete GPU's. NVidia had too much already in the pipe to reduce their cost to match AMD immediately unless they provided rebates.

    Intel is also no more sophisticated than say TSMC, Chartered or UMC. So get your nose out of Intels sunless place just for a little bit okay?

  • Report this Comment On December 31, 2013, at 5:25 AM, bluesky64 wrote:

    Chris,

    AMD stock price will 2 fold out preform intc. All base on product performance and AMD turnaround story getting traction. Each day AMD has articles of positive results on the other hand intc has article telling reader were better than AMD. Sell intc and buy AMD.

  • Report this Comment On December 31, 2013, at 7:19 AM, rav55 wrote:

    @Chris Neiger

    How many listed companies have gross sales equal to 2x market cap?

    Intel sales equal less than 50% of it's market cap.

    Intel and AMD are both profitable.

    Why is Intel lagging AMD in sales/market cap ratio?

  • Report this Comment On December 31, 2013, at 9:28 AM, bluesky64 wrote:

    Chris ,

    My take from the comment section your completely wrong and the posters think AMD will gain and crush intc. Best go long AMD

  • Report this Comment On December 31, 2013, at 10:09 AM, rav55 wrote:

    @bluesky64

    I am long on AMD but I do not think that they will crush Intel. That's not the game.

    They will however gain substantial x86 market share.

  • Report this Comment On December 31, 2013, at 1:06 PM, kjurden wrote:

    AMD: Enabling Today, Inspiring Tomorrow!

    https://www.youtube.com/watch?v=_E83hOAdoIU

    Long AMD

  • Report this Comment On December 31, 2013, at 1:07 PM, KenLuskin wrote:

    Intel pumper says it has high short interest= 4.5% of float,

    Meanwhile AMD has Short interest of 20% of FLOAT

    Yet this pumper thinks that Intel can simply take all of AMD's market share in PCs......

    REALLY?

    Of course NOT!

    People have enough CPU juice for typical business uses!

    What consumers want is better GRAPHICS!!

    AMD has SUPERIOR GRAPHICS.

    AMD has successfully INTEGRATED their SUPERIOR GRAPHICS into APUs!!!

    A single chip with a LOWER price, and better performance, and LOWER power usage than an Intel chip combined with a discrete Nvidia card.

    For the average person KAVERI powered PCs will offer SUPERIOR graphics at a much lower price than Intel's offerings.

    For HARDCORE PC gamers, AMDs' discrete GPUs will offer SUPERIOR GRAPHICS because of MANTLE!

    Almost ALL the new games will be OPTIMIZED for AMD, and using MANTLE will supercharge that OPTIMIZATION.

  • Report this Comment On December 31, 2013, at 7:57 PM, cdkeli wrote:

    AMD has folded on the clocking issue probably as a result of continuing fab failures, but they're seeking to compensate by using more cores which can work but moves the development pressures towards designing an effective core and memory interconnect. It's not evident that the ATI acquisition provides any lasting guarantees against Intel improving in the graphics department. Though Intel may take their eye off the ball as they pursue the low-power domain and seek to compete more effectively against ARM. Time will tell.

  • Report this Comment On December 31, 2013, at 8:03 PM, cdkeli wrote:

    Probably the single biggest indicator of AMD's superiority in graphics (ie: $/Polygon drawn) has been Sony and Microsoft's decision to have both new Playstation and XBox console CPU's designed by AMD rather than pricey and arrogant Intel.

  • Report this Comment On January 01, 2014, at 5:38 PM, KenLuskin wrote:

    1) Consoles are much more profitable than you understand... But I guess you want to start a NEW year as UNeducated as you were last year?

    Consoles and semi-custom in general are NON Recurring Engineering (NRE) model businesses.

    They are incredibly profitable from a FREE CASH flow point of view.

    There is NO Sales, General, and Admin expenses after launch.

    The first quarter of the launch, which is the absolute worst from a profit margin standpoint was 15% .. that is NET profit. Profit margins on the Console business will increase continually.

    Sometime late next year or early 2015 they will move from 28 nm to 20 nm, which will produce even larger profits, even accounting for small price reduction to MSFT and Sony.

    During 2014 the NET profit margin of the console business will INCREASE to about 20%, and that is before the move to 20nm.

    20% NET profit margins are excellent! More importantly all that profit is FREE cash flow!

    What matters is FREE cash flow, NOT gross margin.

    AMDs' Console business will be spewing FREE CASH FLOW in 2014 and beyond.

    2) While Intel currently has a slight power advantage in laptops, AMD has a LARGE advantage in INTEGRATED GRAPHICS.

    3) People do NOT need any more speed for most PC applications. What they want is better GRAPHICS. Intel canNOT compete with AMD's INTEGRATED Graphics!

    The new Kaveri (about $150 wholesale) has better Graphics than a $650 i7 Iris Pro!!!

    4) MANTLE completely alter the requirement for super fast CPUs for PC gaming.

    5) PC gaming is estimated by John Peddie Research to be about an $18 billion hardware business in 2014. GPUs account for significant portion of this spending.

    6) ALL the new AAA games are being optimized for AMD Grapics! Wall st and the author are clueless about how AMD is at present INCREASING market share in Graphics from Nvidia.

    7) The PC discrete graphics business is over $3 billion a year. AMD will get OVER 50% of this market in 2014. This is extremely high margin business! Especially at the top end where AMD's GPUs are sold out! Are Nvidia's GPU's sold out? NOoooooooooooooo!

    8) In 2014 PC chips will be ONLY about 30% of total sales at AMD! Why would you want to focus on the only area that AMD is NOT emphasizing?

    9) AMD’S MICROSERVER CONFIDENCE

    http://www.datacenterdynamics.com/focus/archive/2013/11/amd%...

    >>>"“While others have more experience with ARM SoCs, none of them have an iota – I mean single. Shipped. Part. Ever – of the 30 IP blocks needed to build a server.

    That’s the differentiation that we bring as AMD,” he says. You do not get that kind of experience by building it right once, he adds."<<<

    10) Large cloud companies ARE able to create customized server chips by working with AMD.

    Feldman has said on numerous occasions that by using ARM, he can create customized 64 bit server chips for about $50 million. Whereas creating a similar chips on X86 would cost $300 million.

    CONCLUSION: Your analysis is simplistic and wrongheaded.

  • Report this Comment On January 01, 2014, at 5:41 PM, KenLuskin wrote:

    TSMC seeing pull-in orders from PC and smartphone chip clients

    Cage Chao, Taipei; Steve Shen, DIGITIMES [Monday 30 December 2013]

    Taiwan Semiconductor Manufacturing Company (TSMC) reportedly has landed a pull-in of orders from PC and smartphone chip clients for delivery in the second half of January 2014, according to industry sources.

    The short lead-time orders reflect a rebound of replenishment demand in the PC sector and an improvement in sales in the end market, stated the sources.

    Meanwhile, chipset vendors have renewed their solution orders for high-end smartphones as handset vendors are now ready to launch new models for the first half of 2014 as well as to unveil new models at the upcoming CES and MWC trade fairs, said the sources.

    Buoyed by new chip orders for PC, modem, wireless networking and finger encryption applications, TSMC is expected to see its capacity utilization rebound in the first quarter of 2014, commented the sources.

    Who's high end GPU's are sold out?

    AMD's!!!

    So, who has a reason to increase orders at TSMC?

    AMD!!!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2779311, ~/Articles/ArticleHandler.aspx, 10/31/2014 6:58:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement