AMD, officially Advanced Micro Devices Inc.,plays the role of Number Two in the computer microprocessor market. The Sunnyvale, Calif.-based company’s share in the PC market hovers at or below 10 percent, depending on the analyst or quarter. And recent quarters have sagged more than usual.
“Both quarters this year have been negative,” says Brian Matas, vice president, market research, for IC Insights. “They lost $1.2 billion in 2012, and now have dropped out of the Top 20 semiconductor vendors.”
Multiple trends created difficult times for AMD, and a few of its own decisions didn't work out. Desktop and laptop sales lost ground over the last few years to tablets. The low-power push caught AMD (and Intel, for that matter) by surprise, but Intel corrected course with some market success. And while AMD developed some nice application processors for mobile devices, Matas says the company has yet to break through against vendors established in mobile such as ARM Ltd., Qualcomm Technologies Inc., and Broadcom Corp.
But all is not lost, says Charles King, principal analyst at Pund-IT Inc. “Its APU solutions deliver considerable value in price/performance. While AMD has achieved some high-profile data center wins, especially in high-performance computing [HPC], it continues to struggle to find footing in broader commercial markets. In desktop and laptop markets where it goes up against Intel, AMD generally delivers good value for cost, and the same can be said in graphics solutions where it goes head to head with Nvidia [Corp.],” he says.
The question for King is whether financial struggles at AMD mean the company’s technology will fall too far behind competitors that have the funds to invest in next-generation technologies. “Over the short term, I expect the company will leverage current-generation technologies to support key partner efforts. The new solutions it recently announced for Microsoft Windows 10 are a good example of that. Its CPU/GPU assets also offer AMD opportunities in the embedded systems space and related Internet-of-Things markets. I also expect the company to continue pursuing and scoring wins in HPC,” continues King.
But product success may not mean profit. “The company got some good wins in semicustom processors for game consoles,” says Matas. “Microsoft and Sony were both about 13 percent of [AMD’s] 2014 revenue. Unfortunately, both companies have hinted this may be their last hardware game consoles as gaming moves to the cloud.”
Advice for AMD resellers? Matas suggests a backup supplier, meaning Intel. King says, “System builders should probably be cautious but not especially fearful. Longer-term issues are harder to predict, but even if an extreme situation [like AMD being acquired by another company] comes to pass, new owners would be at pains to maintain positive relationships.”
The Chinese Question
Recent purchase rumors mention Chinese companies as probable suitors, since about 42 percent of AMD’s sales come from China. “China generates the largest sales for AMD,” says Matas. “A Chinese company could acquire AMD to get control of technology used heavily in that developing market.”
Of course, the United States government might object, as when Micron was pursued last year by a Chinese company, notes Matas. “But the government may allow the sale to a Chinese company because Intel will still be around.”
And new products are coming, says Matas. “They are working on a 64-bit ARM core which might be helpful. Their new processors for mobile devices seem to work well, but can't seem to get traction against competitors like Apple, Samsung, Qualcomm, and the rest.”
Having an alternative source for x86 processors makes many system builders happy, says Matas. But AMD's sweet spot hits the lower end of the market where value pricing matters most. Missing out on high-end system sales means a lower profile and lower profits. Both AMD and Intel focused on the computer segment and are now having a hard time transitioning to the faster-paced, lower-margin mobile processor market.
JAMES E. GASKIN is a freelance writer and former reseller based in Mesquite, Texas.