AMD’s Reinvention ContinuesAugust 8, 2011
Author: Kevin Krewell
This year, AMD has made its most important set of product introductions since Opteron and Athlon 64 (code-named “Hammer”) in 2003. But will this be enough to make the company relevant again? We believe that it will be, but AMD must still do more to break out of the low-profit rut in which it is currently trapped.
AMD is now shipping its Brazos and Llano Fusion processors and preparing its Bulldozer-based Zambezi processors, making 2011 a critical turning point for the company. These processors are expected to fulfill the promise of the Fusion program, which the company announced shortly after it bought graphics vendor ATI Technologies. The Brazos and Llano processors add to AMD’s lineup products that are designed specifically for mobile applications rather than simply being adapted desktop processors. These processors are well suited to mobile PCs and have superior graphics compared with Intel’s Atom and Sandy Bridge chips. In 2Q11, the company gained market share and improved its profitability.
Although AMD is currently on the rise, the company has had problems sustaining market-share growth. But the recent changes at AMD extend beyond products: the company has undergone a radical restructuring of its business model over the last decade in its pursuit of a profitable and sustainable share of the x86 market.
In the 2000s, AMD changed from a follower to a technology leader: it was first to ship a 64-bit x86 processor, the first x86 processor to integrate the north-bridge memory controller and scalable processor-to-processor links. Limited resources and spotty product and process execution, however, prevented it from taking full advantage of these breakthroughs. Later, in 2006, the company hoped to push itself to the forefront of the industry by offering the first x86 processor to integrate a full on-die GPU. But once again, product delays blunted the effect of this innovation.
Being free of the capital-funding requirements of a fab and having an improving product line, AMD is moving toward a sustainable, profitable business model. As a fabless company, it has lower capital expenses and the flexibility of choosing between two foundries. The company’s short-term challenge is to improve the average price of its Fusion processors while maintaining or reducing die costs. If AMD wants to take on new markets beyond the PC, however, it still needs additional resources.
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