Will Intel’s Braswell Destroy AMD's PC Business?

The plain and simple fact is that Advanced Micro Devices (NYSE: AMD  ) , the last player standing in the fight against Intel (NASDAQ: INTC  ) for Windows PC processor dominance, has been in a pretty rough spot. The high end of the PC chip market, including corporate buyers, has gone to Intel at this point, leaving AMD with the low end/value chips.

AMD's low-end niche is already at significant risk
One of the principal reasons that AMD has fared so well in the low end is that Intel largely exited that market around 2010. Intel's Atom products, targeted for this space, were not terribly competitive, and AMD's execution in this space was quite good. Intel's share in many of these sub-segments -- addressed principally with cut-down versions of its high-end PC CPUs -- is sub-50% per the General Manager of Intel's PC Client Group, Kirk Skaugen.

Unfortunately, while Intel's high end has managed to hold stable, the mainstream and value segments of the market have faced a number of secular headwinds. The biggest problem, by far, has been the cannibalization by tablets. This affects both Intel and AMD, but the effect is more pronounced for AMD given its much larger exposure (as a percentage of its PC revenues) to the low end versus the mid-range/high end. However, if you thought it was bad for AMD before, it gets worse.

Bay Trail-M already taking share, Braswell could finish the job
I've been calling for share gains at the low end on Intel's part as a result of Bay Trail-M for quite a while, and Pacific Crest's checks seem to confirm this. This platform is significantly cheaper than any of Intel's prior low-end attempts and, at the same time, has a much better cost structure that leverages Intel's tablet efforts. It also appears to offer a significant performance/watt and, quite possibly due to Intel's favorable cost structure, performance/watt/$lead.

Lower power, higher performing, and cheaper to implement. What's not to like about Braswell? Source: Intel.

Things get worse during the back-to-school season and into 2015, as Intel refreshes the Bay Trail-M line for back-to-school, and then launches a next generation part known as Braswell -- which lowers platform bill of materials and dramatically increases performance -- built on its 14-nanometer manufacturing process.

This should give Intel a decisive performance/watt lead over anything AMD will have in the market during that time frame. AMD could try to compete on price, but it's likely that Intel will also be very aggressive on pricing these parts, as well, especially since AMD has to pay an external foundry while Intel gets to "keep" that foundry margin.

Is AMD's PC chip business finished?
At this point, it's hard to see AMD's PC business as remaining long-term viable. As long as it's losing share in a declining market, the financial impact will be quite severe, especially as the company still has significant exposure to PCs. Should the market stabilize/return to growth, then AMD is still faced with a share loss story that will become increasingly difficult to overcome, especially in light of Intel's structural advantages (manufacturing lead/scale, better funded R&D, stronger brand).

Things just don't look good for AMD's PC business and, unless AMD can generate material revenues in non-PC businesses that compete in segments that Intel (and some of the larger ARM based players) aren't already interested in, things just don't look good for AMD as a whole, either. 

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Read/Post Comments (14) | Recommend This Article (3)

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 April 09, 2014, at 10:25 AM, HoerthCM wrote:

    Hey Ashraf! I see you're over here as well! Nice!

  • Report this Comment On April 09, 2014, at 11:15 AM, keeperoftheq wrote:

    Million more game consoles are being sold than forecasted. Sony can not keep up with demand. This is added revenue we did not have in 2013.

    The Xbox One launches in 25 countries in September and will need million of chips made. That is what Global Foundries were added as a second source for these chips. This is added revenue we did not have in 2013.

    The GPU sales are on fire. Again that is why GF was added as a second source. No back orders on GPU's or console chips.

    The Apple Mac Pro is selling like hot cakes. This is revenue we did not have in 2013.

    HP sold over 1 million more laptops than forecasted. AMD was expecting the PC sales to continue to slide. This shows stabilization.

    Everything is pointing to a strong Q2

  • Report this Comment On April 09, 2014, at 12:03 PM, rav55 wrote:

    Another lame, obsessive compulsive, AMD bashing story by Ashraf.

  • Report this Comment On April 09, 2014, at 12:54 PM, Patapuf wrote:

    14 nm has a lot unsolved issues in area of yield. It is too soon to state anything about the costs of Braswell. Parameters (real) are not known yet. Very speculative article, based on wishes, lack of arguments/facts which can support authors conclusion.

  • Report this Comment On April 09, 2014, at 3:39 PM, FolioBilow wrote:

    Ashraf Eassa - I used to respect your opinions- back when you were calling for AMD to hit $8 per share in 2012 - your were so dead wrong then- dead wrong now too- your bashing biased articles are becoming irrelevant - keep pumping Intel as your manipulative articles are blatant - too bad you don't have enough $$ to manipulate the stock otherwise - I could do without your continual biased bashing.

  • Report this Comment On April 09, 2014, at 6:50 PM, TEBuddy wrote:

    The answer to your inflammatory title is a clear cut NO!

    Intel cannot build something good enough to make AMD irrelevant, period.

  • Report this Comment On April 10, 2014, at 12:14 AM, techy46 wrote:

    I'd say AMD is going to end up a niche player but has seen it's best PC days.

  • Report this Comment On April 10, 2014, at 2:09 AM, raghu78 wrote:

    Ashraf is back to his usual self. The fact that the article came on the day when AMD launched AM1 Kabini is even more interesting.

    http://www.anandtech.com/show/7933/the-desktop-kabini-review...

    http://www.tomshardware.com/reviews/athlon-5350-am1-platform...

    the Athlon 5350 beats the Baytrail based Celeron J1900 in CPU performance while crushing it in GPU performance.

    AMD's upcoming Beema 15w is 20% faster than A6-5200 in both CPU and GPU performance. A6-5200 and Athlon 5350 are similar except for 50 mhz higher CPU clocks on the latter

    http://www.anandtech.com/show/7514/amd-2014-mobile-apu-updat...

    Your articles are always inflammatory and you are emotionally invested in Intel. Here is an article which is quite balanced and you can learn from it

    http://seekingalpha.com/article/2134173-amd-the-new-puma-chi...

    AMD's Beema / Mullins is going to make you look silly. btw Intel's manufacturing lead is shrinking. TSMC 16FF / 16FF+ is 12 - 15 months behing Intel 14nm.

    https://markets.jpmorgan.com/research/email/-kjegkq4/GPS-133...

    read the JP morgan research article to know how wrong you are.

  • Report this Comment On April 10, 2014, at 5:00 AM, tely1 wrote:

    Do you notice how many of Ashraf Eassa articles are stated as questions?

    Will Intel’s Braswell Destroy AMD's PC Business?

    Answer:NO

    Is Samsung Suffering From Apple Syndrome?

    Answer:NO

    Intel Corporation: Are Tablets on the Way?

    Answer:NO

    Could Intel Deliver an Earnings Blowout?

    Answer:NO

    Seems like Fox News reporting to me. Asking a question, when you know the answer is no. But still asking the question and trying to prove unrealistic views of reality.

  • Report this Comment On April 10, 2014, at 8:13 AM, Dresdenboy wrote:

    Predicting stock prices based on deep insights into the market and companies still has such a big error margin over longer time frames that I stay with trading based on market behavior on short time frames. This has the additional positive effect that I don't need to predict more or less random events (no GARCH model needed here) and how market participants view certain aspects of the companies or opinions like expressed in this article. :)

    Nevertheless I like to deep dive into technology and how it improves.

  • Report this Comment On April 10, 2014, at 10:09 AM, RCM0102 wrote:

    Good Lord, this writer pollutes the Seeking Alpha board with his half baked BS and now they allow him to post his drivel here too.

    He's been calling for AMD's failure for ,well, years now and AMD just keeps chugging along winning ALL the game consoles, partnering with Apple , introducing best in class chips.

    Pull up your prayer rug and move on Ashraf.

  • Report this Comment On April 10, 2014, at 10:12 AM, RCM0102 wrote:

    Ashraf is an article pimp. He writes crap without concern for fact, honesty or integrity. He's realized he can scribble garbage and get paid for posting it. It saddens me to think the low life will earn a couple pennies from my comment

  • Report this Comment On April 11, 2014, at 2:58 AM, raghu78 wrote:

    yeah its a shame that he is allowed to write trash. I think he mostly got the boot at Seekingalpha after a trash article

    http://seekingalpha.com/article/2099473-amd-looks-finished

    but he continues elsewhere (like here) to continue to write trash. He has become a laughing stock as far as readers are concerned. He is an Intel uber bull with no sense of balance or factual analysis.

  • Report this Comment On April 14, 2014, at 1:22 PM, H2323 wrote:

    Good news is he is done at SA and seems to get less traction here. That said like any real investor that actually moves AMD's price would ever take anything this guy says seriously. He is obviously desperate to cover a short, or burnt on a bad buy. Maybe just a fanboy.

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