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.
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.
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.
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