Intel (NASDAQ:INTC) recently launched Skylake, its sixth generation of Core processors and claims that the new chips will significantly boost graphics performance and reduce power consumption across a wide variety of PCs. Intel claims that Skylake chips offer "30 times faster" graphics performance and enables laptop manufacturers to use all-day batteries, which are half the thickness and weight of current ones. It also supports next-gen features like wireless charging and facial recognition logins.
AMD (NASDAQ:AMD), Intel's only meaningful competitor in the x86 chip market, doesn't plan to launch its seventh-generation Zen chips to challenge Skylake until next year. The Zen chips are designed by Jim Keller, a former iPad and iPhone chip designer whom AMD hired three years ago -- they also focus on delivering high performance with low power consumption. Many analysts see the Zen as AMD's last chance to make a meaningful stand against Intel, which has marginalized it in the PC market over the past decade.
The mistakes of the past
A rising AMD claimed nearly half the worldwide market for PC CPUs back in the first quarter of 2006, according to PassMark Software. AMD didn't just make cheaper chips, it launched 64-bit processors before Intel, while its dual-core processors received superior reviews. When it acquired graphics card manufacturer ATI later that year, it seemed like its integration of superior GPU technology into its CPUs (known as APUs) would crush Intel as it expanded into NVIDIA's backyard.
But then Intel struck back hard with new processors. The Bulldozer microarchitecture, which AMD launched in 2011, couldn't keep pace with Intel processors in terms of single-threaded performance. Reviews at the time claimed that Intel's processors had up to 50% better single-threaded performance than Bulldozer. Subsequent revisions to Bulldozer (Piledriver, Steamroller, and Excavator) gradually improved performance but failed to close the performance gap with Intel. As a result, AMD controls less than a fourth of the PC CPU market today.
Why Zen must be perfect
With the Zen microarchitecture, AMD will finally leave the troubled Bulldozer family behind and address its single-threaded weakness. To boost single-threaded performance, AMD can either boost the clock speed or increase the number of instructions per cycle (IPC). Since doing the former would inevitably increase temperatures and power consumption, it would be preferable to do the latter. AMD claims that Zen will offer a 40% IPC boost over Excavator with support for simultaneous multi-threading.
The first line of Zen chips will be the FX ones, which will have a high core count and support the newest DDR4 memory. These chips are expected to be marketed toward hardcore gamers, who flock toward CPUs with the highest performance. After that, AMD will launch the Zen chips for laptops, which will support DDR3 and DDR4 memory while focusing on power efficiency. AMD CTO Mark Papermaster has also hinted that the Zen architecture could eventually be used in everything from smartphones to high-end servers.
But it might not be enough
AMD hasn't set a firm launch date for Zen yet, but Taiwanese tech site DigiTimes recently claimed that it won't arrive until the fourth quarter of 2016 "at the earliest".
Such a late launch would put AMD at a huge disadvantage against Intel. First, Intel will get more than a year to promote Skylake to OEMs and consumers. Intel also plans to refresh Skylake with the "Kaby Lake" revision in the second half of 2016. This means that by the time Zen finally arrives, it will have to compete against both Skylake and Kaby Lake. The 14nm Zen could even end up competing against Intel's 10nm Cannonlake, which is expected to launch in 2017.
Intel has much deeper pockets than AMD. The company's marketing, general, and adminstrative expenses last quarter were almost equivalent to the last two quarters of total AMD revenue. With a much smaller marketing budget, it could be tough for AMD to effectively promote Zen against Intel's offerings.
Storm clouds ahead...
For now, AMD investors are likely hoping that Carrizo, the new APU based on Excavator, which launched in June, can prop up its CPU sales throughout the rest of the year. Carrizo boosts graphics performance and battery life in laptops, but it sounds like the same promise Intel just made with Skylake.
In the meantime, AMD remains crushed between Intel in x86 chips and NVIDIA in high-end GPUs and reducing prices hasn't effectively boosted sales. Last quarter, AMD's Computing and Graphics revenue plunged 54% annually, and its operating loss widened from $6 million to $147 million. The launch of Zen could be AMD's last chance to strike back against Intel, but its delayed arrival and limited marketing budget could doom the chip before it gains any ground.
Leo Sun has no position in any stocks mentioned. The Motley Fool owns and recommends Intel. The Motley Fool recommends NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.