Is AMD a Serious Threat to Intel and Qualcomm?

Intel (NASDAQ: INTC  ) and Qualcomm (NASDAQ: QCOM  ) have been fiercely competing in the mobile segment in recent years. The growing number of competitive downmarket processors and slowing growth rate of tablet shipments, however, has limited their growth.

In 2014, there is reason to believe that the upcoming offerings from Advanced Micro Devices (NYSE: AMD  ) will further intensify competition and make it even harder for Intel and Qualcomm to grow.

Performance gains
Intel's current-generation 22nm Bay Trail system-on-chip range was unveiled in September last year. In terms of raw processing power, Intel chips outperformed Qualcomm's latest offerings and were at par with AMD's 28nm Kabini processors. This was a big achievement for AMD, as it was able to match Intel's performance using a relatively older fabrication process. 

At this year's Consumer Electronics Show, AMD teased us with its upcoming Beema and Mullins processor lineup targeted at mobile devices like ultra-thin laptops, tablets and 2-in-1s. Although the chips still use a 28nm process, architectural improvements boost its performance significantly. Compared to Kabini processors, the iGPU and CPU performance of AMD's new processors have improved substantially -- up 20% and 35%, respectively. 

Speaking about the performance gains, the general manager of AMD noted:

What you will see is that on graphics performance, it is substantially better. We're talking about 250% better than the comparable Bay Trail products. What is different is on the compute performance, where we had traditionally been not as strong, we see significant performance improvements.

Source: Cpubenchmark.net

These claims are corroborated by actual benchmarks. As illustrated in the table above, AMD's Beema and Mullins processors clearly outperform Intel's Bay Trail. What's interesting is that AMD's performance gains follow a relatively older 28nm process, as opposed to Intel's latest 22nm.

Pricing threat
In the overall mobile processor industry, Qualcomm leads the pack with a gigantic 64% market share. Intel comes in third, with an 8% market share. 

But low-end offerings from MediaTek and Allwinner have been fiercely competing with Intel and Qualcomm in the downmarket industry. In fact, Allwinner recently became the second largest downmarket processor manufacturer, while MediaTek retains its top spot. Qualcomm and Intel are currently placed at third and sixth in that industry, respectively. 

Heading into 2014, IDC estimates that sales of sub-$150 tablets will surge by 36% this year and further strengthen the foothold of these low-end processor manufacturers. In this case, AMD has a tremendous growth opportunity. 

Historically speaking, AMD has priced its products competitively. If the company offers Beema and Mullins processors at aggressive price points, downmarket tablet manufacturers might feel compelled to use AMD processors. This will open up a whole new growth avenue for Advanced Micro Devices.

Words of caution
While AMD presents an optimistic outlook, there are a few factors that can limit its growth:

  • We have seen that AMD's Mullins and Beema processors outperform Intel's Bay Trail. But for its rapid adoption, AMD will have to price its offerings competitively.
  • AMD will also have to move its product rapidly, as Intel's Cherry Trail is slated for release in the second half of 2014. The latter will reportedly use 14nm process nodes. 
  • Investors should also note that AMD hasn't yet announced whether its low-power APUs will support Android, which commands a 78.1% global market share. In case AMD doesn't add support for Android, its growth will be fairly limited; Intel's Bay Trail and Qualcomm's Snapdragon support Android. 

Investors should keep a close eye on key metrics -- like Beema and Mullins release dates, their pricing patterns, supported platforms, and technological improvements in Intel's Cherry Trail processors -- and expose their portfolio accordingly.

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Read/Post Comments (9) | 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 March 27, 2014, at 1:15 PM, techy46 wrote:

    The only thing AMD's a threat to is AMD!

  • Report this Comment On March 27, 2014, at 1:43 PM, longtbt wrote:

    AMD poses no threat to Intel or Qualcomm.

    Basically, the play on AMD, from my perspective,

    is a possible turn-around as new management

    tries to find alternate markets for their products.

    They were one step away from oblivion when they bagged the game console market.

    That buys them some time, but from here moving forward looks like an uphill battle to gain market share in other segments.

    I haven't looked at AMD for 5 or 6 years.

    I bought some calls last year and when the options doubled, I sold them. I am waiting on the sidelines until after the quarter announces in April. I see no reason as a trader to jump in ahead of earnings.

    AMD has to prove to me, quarter by quarter, whether I can use it as a short term options trade vehicle.

    I have no interest in owning the stock as an investment.

    I think they have a chance to survive, but as what, exactly....

    who knows?

    I never place a trade over 5% of my holdings in any given stock. Mostly, I prefer long term options to increase leverage if I think a stock might pop.

    I'm looking for beta and leverage,

    which eliminates having to ask questions like,

    "Can AMD compete with Intel?"

    Who cares?

    Can they give me some price action,

    that's all that matters.....

    if they can show me a roadmap to $6/sh in 2014, I'll get back in. So far, I'm not convinced.....

    April earnings is key. If they beat estimates by a wide margin, great.

    I think they are going to lose this quarter.

    I hope I'm wrong. Either way, I won't take a position

    in the blind.

    Happy trading!

    :D

  • Report this Comment On March 27, 2014, at 2:19 PM, TreyAnas wrote:

    The data in your chart are insufficient and your conclusion is incorrect.

    There is a performance / power consumption trade-off at all technology nodes. Atom Z3770 is a 2W part intended for tablets. A 25W part wouldn't work in a tablet at all. An 8W part would have miserable battery life.

    To draw meaningful conclusions, compare laptop parts to laptop parts, tablet (or phone) processors to the same. Include CPU performance and wattage at a bare minimum. Better, include pricing, GPU performance, and other features as well.

    The irony here is that it's Intel that (in the past) measured CPU's mainly on performance while ignoring other metrics that are important to users. You made the same mistake.

  • Report this Comment On March 27, 2014, at 2:27 PM, TEBuddy wrote:

    TreyAnas, he provided Kabini/Temash data. The Beema/Mullins data will be much better, they both have more than 100% gain in performance per watt. That is what the author is missing. The performance was increased 20-30%, but the power draw was cut in half. So at 4W it will still score more in those benchmarks than the 8W part. And there are 2W variants.

  • Report this Comment On March 27, 2014, at 3:03 PM, TreyAnas wrote:

    Fair enough. Then the table of data are even less meaningful.

    My point, and I assume you agree, is to do apples-apples comparisons (same target markets, same periods of time) and use a more complete range of metrics.

  • Report this Comment On March 27, 2014, at 3:13 PM, mtechac wrote:

    Intel's biggest problem is that they do not have the business model to survive in a low margin product profit world.

    The latter means that no matter how good or average Intel products are, they will lose money or not maintain the normal profits level that Intel needs to survive.

    Now that the ARM 64-bit chips are coming out, Intel will begin to lose its high profits areas: 64-bit servers, workstations, laptops, etc.

    AMD, who was the inventor of the 64-bit x86 instruction set, has an incredible CPU/GPU IP that is beginning to fall into the 64-bit ARM area..

    AMD profits and can survive with low profit product margins, Intel will slowly but steadily die if it does not do a drastic restructuring of its entire business.

    If Qualcom buys AMD, for whatever reason, Qualcom will become bigger than Intel, since AMD is the first company in history to come up with the first functional hybrid HSA/hUMA APU chip. Intel will love to have that but it doesn't have the GPU/CPU IP to pull that one. Intel failed miserably to build a high end GPU, with the failed Larrabbee project.

    If Intel buys AMD, it can use its high-tech chip foundry business to build low power HSA/hUMA APU chips, which Qualcom would not be able to match.

    In short, AMD recent release of its high end CPU/GPU/software technology is the catalyst that will make Intel (continue) or Qualcom become one of the major chip companies in history.

    In the absence of a buy, AMD itself may raise itself to become the next Intel and/or Qualcom since its technology is unique in the industry, and Intel and Qualcomm are a couple of years from releasing something similar.

    NVIDIA, unluckily is mostly just just a GPU company, and it does not have the IP for high end 64-bit CPUs and servers like AMD has.

    AMD is already achieving some big wins and that is just the beginning. I am long for AMD and with its current prices, it is a no brainer..

  • Report this Comment On March 27, 2014, at 3:59 PM, fearandgreed2005 wrote:

    If the author has to make unfair comparisons to make AMD look good compared with Intel's 22nm process then the 14nm process which is now in volume production is going to crush AMD. It is simply dishonest to show the chart in this article without the power dissipation numbers. The Intel 14nm parts are faster, consume less power, and they are cheaper. AMD is going to be in a very tough spot.

  • Report this Comment On March 27, 2014, at 5:25 PM, mtechac wrote:

    You need to disect any advantages from Intel to AMD and/or AMD to Intel.

    First Intel does not own any high-end GPUs, so it is just a mediocre laptop company without a high-end GPU.

    Unless you install an NVIDIA or an AMD high end GPU, the Intel CPU workstation/laptop is just a brick. How can Intel crash AMD if Intel does not own any high-end GPU technology..

    Intel marketing is making some people believe that their high-end systems are the most powerful in the world but they don't say that only if they use an NVIDIA and/or AMD high-end GPU.

    TSMC and Global Foundries are a little behind chip process, but they are getting their act together and their 3d transistors based chips are around the corner. That will cut Intels advantage by a big margin.

    In the interim, Intel is pouring billions of dollars trying to keep their chip foundry processes ahead of the competition. That is a dead sentence in the future, which is why AMD sold their Foundries.

    Intel does not have high-end GPUs and does not have native HSA/hUMA hybrid processors, so AMD has a couple of years advantage on Intel.

    AMD lost business over the last years because it took more time than planned to come up with their HSA/hUMA chips, but now the HSA/hUMA chips are here and they will regain their old market and will gain a lot more than they lost.

    Again Intel is just bleeding money left and right over the last years and the bleeding will be worst with time until they deeply reorganize the way they do business and profits.

    Intel without a high-end GPU and an HSA/hUMA architecture is just a laptop company no matter what some people want to belief for their investments..

  • Report this Comment On March 28, 2014, at 9:10 AM, rav55 wrote:

    @LONGTBT

    "I haven't looked at AMD for 5 or 6 years."

    If what you say is true then you have absolutely no clue about what you are talking about.

    And anything that you write is rubbish.

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