Here's Where AMD's ARM Strategy Makes Sense

AMD has been touting an "ambidextrous" strategy with its support of both the ARM and X86-64 instruction set architectures.

May 26, 2014 at 12:30PM

At Advanced Micro Devices' (NASDAQ:AMD) recent Core Innovation Update presentation, the company announced that it will take ARM Holdings (NASDAQ:ARMH)-based intellectual property much more broadly into its product portfolio. In particular, the company indicated that it will attack the client space with both X86-64 compatible CPUs as well as ARM-compatible processors. Believe it or not, this strategy actually makes a whole lot of sense.

Project Skybridge is an easy and cheap way onto Android
Right now, Intel (NASDAQ:INTC) is fighting rather mightily to make X86-64 a first-class citizen on the Android platform. To date, the company has done a really good job, but there is still work left to be done -- although that work should accelerate as its tablet penetration increases. While AMD could rely on the trailblazing that Intel is doing for X86-64 on Android, it can fairly cheaply buy its way onto Android without needing to piggy-back on Intel's enablement efforts -- ARM.

Ambidextrous

Source: AMD. 

What AMD is doing with Project Skybridge is building a common system-on-a-chip with two flavors available to the customer: an X86 variant, based on AMD-designed low-power X86 cores, and an ARM-based variant, which uses off-the-shelf ARM IP. Indeed, AMD executive Lisa Su indicated at this event that the client-based ARM products would be based on ARM's own IP core roadmap. (AMD's custom K12 ARM core is aimed at different performance/power segments.)

This, in a nutshell, allows AMD, once all of the driver work is done for Android, to play in the Android space with an ARM part differentiated from whatever other IP blocks the company does in-house -- and in this case, graphics could potentially be that big selling point. It's an interesting strategy in theory, but of course it comes with caveats.

Jack of all trades, master of none?
If you look at the trend in AMD's R&D spending, you'll see that it has been down quite significantly over the past five years. In turn, AMD's competitors in both the X86 and ARM space, although it's all really the microprocessor space, have been ramping up R&D significantly.

AMD Research and Development Expense (Quarterly) Chart

AMD Research and Development Expense (Quarterly) data by YCharts.

Indeed, AMD's R&D budget is about a tenth of Intel's, yet it is going to attempt to compete with Intel head-on in the development of an X86-64 core as well as a "big" ARM core, along with a bevy of SoCs around those cores and IP targeted at a number of different segments. With fingers in this many pies -- tablets, PCs, servers, graphics, and such --  the risk here is that AMD does play in all of these segments and has a theoretically large total addressable market, but ultimately fails to capture a meaningful portion of it.

Foolish bottom line
AMD is smart to offer essentially the same SoCs with both ARM and X86 varieties, particularly if it wants to have a viable tablet story. While it really does look like Intel is opening the door wide open for X86-64 on Android with an aggressive enablement effort, AMD appears to be unwilling to bet its tablet strategy on that.

Further, while AMD's "ambidextrous" strategy does indeed open up a large total addressable market of essentially all performance-focused microprocessors, the distinction between "ARM" and "X86" is really quite arbitrary, as there are very few markets -- for example, Apple's iOS devices, relevant to AMD where a merchant ARM chip can go where a merchant X86-64 chip can't.

Leaked: Apple's next smart device (warning -- it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and to see Apple's newest smart gizmo, just click here!

Ashraf Eassa owns shares of ARM Holdings and Intel. The Motley Fool recommends and owns shares of Apple and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers