Here's Where AMD's ARM Strategy Makes Sense

At Advanced Micro Devices' (NYSE: 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.

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.

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  • Report this Comment On May 26, 2014, at 10:11 PM, raghu78 wrote:

    Ashraf

    "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."

    The major theme at AMD is IP reuse, SOC design methodology and efficient leveraging of design efforts. Jim Keller said that high performance core design has a lot of common features. The ISA is important but a lot of leverage can be had from the parallel design of the x86-64 and custom ARMv8 K12 core. In fact Keller stated that designing K12 gave ideas for improving the x86-64 cores which will be useful for future iterations. Both the x86-64 and ARMv8 core are likely to share the same uncore (L3, memory controller, on chip communication logic) and also the same technology for MP systems (Hypertransport). Also the SeaMicro fabric is common to both systems for dense servers.

    You saw how the Jaguar core and GCN graphics is driving not just PC products but also gaming semi-custom and embedded products. AMD was clear that it will continue to invest adequately in the core jewels. But the major theme was choosing the markets wisely. AMD was clear it will not venture into smartphones. AMD's opportunity lies in executing well with the cores - CPU and GPU and going for a significant chunk of the lucrative server market. There is no reason why AMD cannot regain its past glory days when it captured 25% of the server market share.

  • Report this Comment On May 27, 2014, at 4:52 PM, ta152h wrote:

    This is typical Intel-centric thinking, and naturally foolish.

    I wish someone would stop being a fanboi, and see things as they are. I ridicule AMD investors for seeing everything as the best, and equally find the dull-witted Intel-centric idea that since Intel is bigger, it can do everything better.

    Even when it's patently false, and proven so.

    I have just two words for you. The first is Bay, the second is Trail. How did that product come out, from the magnificent Intel? LOL. It's a terrible design, bad at everything.

    Let's see, despite being 22nm, it's almost the same size as the 28nm based Puma. Except it gets easily outperformed in CPU, and destroyed in GPU. Ouch! How did they make this thing so bad?

    Oh, but you say, it's better in phones! Yes, agreed, but then, how does it do against other phone processors? Well, it's certainly not looking good against Apple. No, indeed.

    But, then again, it's clearly a very desirable tablet processor. Except it's so bad, Intel has to pay people to use it. And it still isn't selling, and has failed in both tablets and phones.

    But, but, but, it's Intel! It's great, because Intel made it, and they have so much money! It's got to be great, even though it sucks. And has been proven to have failed in every market. But, it's still great, and Intel can always make something better than AMD, even when they don't.

    Please, get over this type of naive thinking. You just demean yourself with it. Money can't always buy a great design, because after a certain number of dollars, it doesn't matter much at all.

    Of course, even though you're largely incorrect, there is some truth that AMD designs do get delayed a bit. Jaguar probably would have been Puma a year ago, with enough design resources. So, there are costs, but it's nothing nearly as drastic as imply. Just look at their products. Kaveri sucks, but Jaguar, Puma, and GCN have been very well designed products. Far better than the failed Bay Trail. Despite who makes them.

  • Report this Comment On May 27, 2014, at 6:39 PM, rav55 wrote:

    @Ashraf

    "is fighting rather mightily to make X86-64 a first-class citizen on the Android platform. "

    A recent artical on The Register disagrees with your pitiful obervation.

    "ARM tests: Intel flops on Android compatibility, Windows power

    Cambridge lab rat's verdict: 'We're still beating 'em'"

    http://www.theregister.co.uk/2014/05/02/arm_test_results_att...

    More of the same rubbish from you.

  • Report this Comment On May 27, 2014, at 6:57 PM, rav55 wrote:

    @Ashraf

    "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,"

    Hmm... AMD does compete with Intel in x86-64 cores . As Intel is not selling ANY tablet soc at a profit. Intel has to dump siliocn in the space to get OEM's to buy it.

    AMD however does make money and with a FAR SUPERIOR graphics solution than Intel's HD junk.

    And since Intel does not build a "big" ARM core then I would say that AMD is competing with Intel and succeeding quite nicely on that front as well.

    Intel is running scared. Or wouldn't be wasting shareholder value at trying to BUY the x86-64 Tablet market at ANY cost.

    And here is why Intel is scared shyteless.

    If AMD starts to achieve real growth in servers, especially with SeaMicro mesh tech that allows upgrading across the hardware platform and AMD APU's HSA initiative begins to bear fruit with both ARM and x86 then AMD starts to have value as a acquisition beyond just an x86-64 design house.

    The Justice Departments amendment to the AMD-Intel settlement agreement ORDERS Intel to negotiate in good faith a transfer of x86 license to the acquiring entity. So that means the license transfers.

    But say it doesn't transfer. That means that x86-64 instruction set is DEAD to the Intel and Microsoft market. AMD new entity simply withdraws it.

    WHat will Intel do then IA64?? That turkey was stillborn.

    What is very afraid of is AMD developing enough intellectual property of it's own that makes it very attractive to someone like Samsung or Apple who would have vitually unlimited R&D funds and the means to bring it all to market.

    That's why Intel is desperately spending $BILLIONS to earn $MILLIONS to head off AMD.

    nVidia also made a similar play but nobody took them up on their offer. Right after AMD announced it's acquisition of an ARM license nVidia announced that it's crown jewels were up for grabs to anyone who wanted a license.

    Funny thing is, nobody took them up on their offer. That's how relevant nVidia is. Unfortunately though nVidia can't afford to give away Tegra.

  • Report this Comment On May 27, 2014, at 9:33 PM, TMFAeassa wrote:

    rav55

    Thank you for your views. I hope that with this level of conviction in Intel's demise that you are shorting as much as you can and then using the proceeds to purchase AMD shares.

  • Report this Comment On May 27, 2014, at 11:06 PM, prginww wrote:

    @Ashraf

    "the risk here is that AMD does play in all of these segments"

    The dilletant here is you Ashraf.

    I would suggest that AMD is making rather good use of a limited R&D budget. They are far more innovative than Intel ever thought of being ever.

    Purchasing ATI was a risk that proved to be sound and was the stimulus for reinvigorating a stagnate cpu design that had nowhere to go really for improvements other than shrinking the die with better lithography. AMD is putting 28nm silicon out that is least competitive if not absolutely first rate. What will they be doing with 14nm fin-fet? That day is coming soon and Intel is already there and still has to dump silicon.

    AMD is bringing silicon to market that is far superior to Intels over-priced offerings and the proof of that is that Intel has to sell at a loss to get the OEMs to buy. That is a fact.

    Intels solution inelegant, as it is is, is to throw money at the problem and if the problem persists then sell it for a loss and call it a victory.

    Afterall it's not what it is that counts, but rather what you can spin it to be.

    Ashraf Eassa: Intel apologist and spin-meister.

  • Report this Comment On May 28, 2014, at 8:06 AM, raghu78 wrote:

    Ashraf

    "These "losses" (which are significant) are done so that long-term Intel is relevant in computing. Without all of the assets that a modern SoC needs (that is being reflected in that Mobile loss), which includes everything from low power CPU/GPU, on-die fabric, imagine signal processors, video decode/encode blocks, cellular modem, and connectivity, Intel will eventually be made irrelevant by the likes of Qualcomm."

    Intel will not be made irrelevant but certainly its dominance is going down in the future. More than the mobile market which is cutthroat with razor thin margins the bigger risk is the encroachment of the server market which Intel dominates with 97%.

    As for Intel's mobile efforts time will tell. I am of the opinion that this will be a long and brutal war with the casualty being Intel's gross margins. There is also the risk that Intel underestimates the threat of a resurgent AMD. AMD has nowhere to go but up from the rock bottom server market share. With two high performance cores in 2016 (x86-64 and ARMv8) AMD is likely to bring back renewed competition to the server market.

  • Report this Comment On May 28, 2014, at 11:56 AM, rav55 wrote:

    @Ashrah

    "No, what you are actually trying to do is bully me..."

    Stop your whining, you stuck your neck out now man up when someone DEBATES you with the facts. You opinions are carefully considered distortions of the truth. You are obsessed with AMD. You refuse to see ANYTHING good about this company. Even the Intel fanbois no longer show up.

    "...into believing what you believe..."

    This is not about belief or any matter of faith, this is about facts and you distort them to the point where you have become laughably irrelevant. You are an obsessive Intel apologist and your bias against AMD is widely discussed in places beyond this miserable excuse for a journalistic endeavor.

    "..and hope that by insulting and taunting me that I will change my very carefully considered opinion."

    I'm not taunting you and I am not insulting you I am disgusted with the biased slant to your writing. So consider me as a vigorous and disgusted editor.

    I am challenging you to write the undistorted truth. And you are unable to rise to that challenge. You are not writing from the moral high ground here Asraf. You are indeed a yellow journalist. Look it up, it does apply to you.

    Intel for years has illegaly blocked AMD from competing in the x86 market and now Intel in order to sell anything in the Tablet market has to give away silicon and it's costing them BILLIONS.

    Everyone but you sees the irony. All you see is a rationalization.

    "...hefty upfront investment is required."

    Giving away silicon is NOT an investment. There IS NO return, just wasted shareholder value. An investment is when you hold something tangible. Intel has given away value. And has nothing to show for it.

    I would suspect that Warren Buffet would disgree with you here.

    The tablet market is "cheap chips". Intel can not make cheap chips.

    The cost of the Tablet silicon will continue to reside at a level far below Intel's ability to produce it.

    Because NOBODY CARES ABOUT BENCHMARKS ANYMORE. Get it?

    All folks want is a high res screen, additional storage and extended battery life.

    Like I said earlier, man up, stop your whining and write the truth.

  • Report this Comment On May 29, 2014, at 12:23 AM, ToxyFool wrote:

    Biased is an understatement. It is really sad they allow you to write anything under TMF. You damage their credibility, Eassa. Badly.

  • Report this Comment On May 29, 2014, at 11:42 AM, bigtechs wrote:

    rav55, thank you for taking the time and effort to put AE in his place. although he is hardly relevant anymore....

  • Report this Comment On May 30, 2014, at 8:21 PM, rav55 wrote:

    @ASHRAF

    WHy do you change the author of one of my posts to "prginww". The fifth post up I wrote yet TMF or you changed the author.

    Are you trying to dilute my postings by altering them.

  • Report this Comment On June 02, 2014, at 9:25 AM, rav55 wrote:

    @Ashraf

    What did you do with the post where you accussed me of "Bullying you". Did you erase it?

    And why did you you change my name from the post above to "prginww"

    Or did your editor tell you that you came off like a whining little girlie man?

    Somebody call the Whaaaaambulance!!!

    RTFLOL !!!

    Not only can't you write worth a damm, you are such a wuss!

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