AMD looks for fix during rough year

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"One board maker we met with suggested that their tests indicated that AMD's 65-nanometer Barcelona only bridges the gap between Intel's 65-nanometer Clovertown," Citigroup's Glen Yeung wrote in a recent research note. "The release of 45-nanometer Harpertown (Nehalem) is expected to re-establish the lead for Intel, emphasizing the importance of any delay by AMD."

AMD will face a number of challenges generating revenue over the next 18 months while up against a solid (on paper, at least) road map from Intel. And AMD CEO Hector Ruiz and his management team might have to re-examine the cost side of their company to turn things around.

In April, Ruiz began dropping hints about changing AMD's cost structure in what has come to be known as "asset light." He hasn't said much more beyond that, but a few scenarios seem most likely.

"Intel got a sense of urgency, and AMD needs the same sense of urgency."

--Jim McGregor, analyst, In-Stat

AMD could expand its use of third-party chipmakers. It already uses Chartered Semiconductor's factory to make some processors, but could expand its use of other factories such as Taiwan Semiconductor Manufacturing Co. or United Microelectronics Corp. in Taiwan, which make the graphics chips AMD acquired along with ATI Technologies. Citigroup believes that AMD is almost ready to announce that TSMC will manufacture certain low-end processors for AMD, freeing up capacity at AMD's own Dresden, Germany, facility to make more profitable chips.

The company could also enter into new manufacturing partnerships like the one it has with IBM. Figuring out ways to make ever smaller transistors is a dauntingly expensive proposition. The joint partnership with IBM allows AMD to face those problems with a little help from its friends. This could involve a company like IBM taking a partnership stake in one of AMD's Dresden plants or a proposed facility in upstate New York, nearby IBM's own East Fishkill facility.

It's very unlikely, however, that AMD would get out of the chipmaking business altogether, McGregor said. Notwithstanding company founder Jerry Sanders' famous quote--"Only real men have fabs"--there's a cost advantage to in-house manufacturing, so long as the factory stays full, he said.

AMD's biggest strength at this point in its history is that it's no longer just an upstart chip company best known among gamers. AMD can now count the four largest server makers among its customers, and companies across the Fortune 500 have shown a willingness to put AMD products at the heart of their systems.

But while the company has spent much of the past few years emphasizing its power-efficient designs, it must finally back up all that talk with a true mobile processor design if it wants to pull off its ambitious Fusion project, McGregor said.

AMD has unveiled plans for this mobile processor, code-named Griffin, but it's not expected until the middle of next year. AMD's current Turion mobile processors are really just power-optimized versions of its Opteron chips, while Griffin would follow Intel's approach of designing for low-power applications first and increasing power for systems designed to handle larger amounts of power consumption--like servers.

"Fusion is only going to be successful if they have a new mobile core to go with it," McGregor said. AMD wants to integrate graphics technology from ATI into its processor designs with the Fusion project. The obvious upside is for PC gamers, but the high-speed processors used today mostly for graphics could have all kinds of other applications should programmers be able to find a way to take advantage of that horsepower.

Before AMD gets to Fusion, however, it has to repair the current state of its business. Executives spoke about a restructuring plan in April that would help the company regain its footing, but few details about that plan have emerged.

That doesn't change the fact, however, that Ruiz needs to light a fire under AMD--and soon, McGregor said. "Intel got a sense of urgency, and AMD needs the same sense of urgency."

[ColdMast]

AMD problems started when...

... they Purchased ATI

both companies struggled through the merger and AMD took a big risk to gain more resources, then out of almost no where, Intel drops core, then core 2.

I remember criticizing Apple for not going with AMD, boy was I wrong.

I agree with this article, AMD has to innovate and they has to do it quick, if they get the ball back in their court they have to take it and run for another 4 years to recover.

Intel before had to resort to FUD and AMD had to undersell their chips so companies would buy them, now Intel actually has a great product, and AMD has to respond with a greater one.

[hounddoglgs]

Hope they can get it together

Intel's Core 2 Duos are definitely a better product, but I really hope AMD (and ATI) can get it together again. I think AMD's competition was a windfall for consumers at a time when Intel was not giving their best effort (anyone who know's anything about it can tell you the initial Pentium 4 architecture was NOT a step forward), and maybe helped to drive prices down a bit. The same can be said for ATI (remember the Radeon 9800 Pro?).

[Mister Winky]

Quad Core is Key -- AMD Made a Major Strategic Mistake

AMD seriously screwed the pooch when they didn't match Intel's quad core offering. Maybe AMD's quad core chip will be faster...when it arrives. Maybe it is a better long-term strategy...when it bears fruit.

AMD can't afford to launch products 3-4 quarters behind Intel and tell their major customers, "just wait, our product will be better than what they offer right now." The simple truth is, Intel offers quad core chips right now that significantly outperform AMD's fastest offering and Intel is working on even faster designs while AMD is stuck selling dual cores -- that's all that matters in the performance and pricing game (especially since the latest and greatest chips generate the most buzz and profit), not the internal architecture of how the cores communicate across the bus.

Sorry, AMD -- you only have yourself to blame for this strategic blunder.

-Mister Winky