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Research firm Smith Barney thinks AMD is not likely to achieve targeted levels of Athlon 64 supplies in Q4 2003 and Q1 2004 because of some background reasons. According to Smith Barney Citigroup Research, the Sunnyvale, California-based chipmaker still has problems with yields and may hardly achieve its shipment targets.


Smith Barney believes AMD shipped some 170 thousand of AMD Athlon 64 units in the fourth quarter of 2003. The chipmakers public target was “the hundreds of thousand”, though, according to the report, Advanced Micro Devices told channel partners to be prepared for 300 thousand of AMD Athlon 64 processors available in the market throughout Q4 2003.


“Since we believe demand for the new Athlon 64 products is good, the difference between 170 thousand and 300 thousand may be due to one of two reasons. First, it is possible that AMD is facing manufacturing constraints. AMD has made public statements that it is happy with the way the Athlon 64 ramp is unfolding, and 170 thousand of units might technically meet its public goal of “hundreds of thousand of units”. In that case, maybe the second possible reason is best: perhaps the 300K target was given to channel partners to create a sense of critical mass,” Smith Barney Citigroup Research suggests.


There are indications of 700 – 800 thousand of AMD Athlon 64 units available in Q1 2004, says Smith Barney. Though, in case 170 thousand figure for the previous quarter is accurate information, then, the projection for Q1 seems improbable. The analysts believe there will be some 500 thousand units of AMD Athlon 64 chips available in the first quarter of 2004 and higher figures are provided to channel partners with the intention to “create a sense of critical mass”.


“Our investment thesis for AMD largely hinges on the company’s ability to make Athlon 64 units in sufficient volumes, and our “Sell” rating is based upon the belief that AMD will struggle with yields for at least the next six months. While NOR flash is currently helping the company, it looks like the processor side may be a burden. We would get more positive on the company if evidence of Athlon 64 manufacturability were to come to light,” Smith Barney analysts Clark Westmont, Ramesh Misra and Craig Berger said in the report available over here.


Despite of the fact that Smith Barney Citigroup Research puts initial Athlon 64 shipments estimates of AMD and its channel partners under question, the company still models 350 thousand of Athlon 64 unit shipments for AMD in Q4, as the information is still “tentative”, but notes that the figure may be high. The analyst firm believes that the AMD’s NOR flash business is solid and might be able to offset the Athlon 64 difference.


According to Smith Barney estimates, AMD supplied 25.53 million AMD Athlon XP processors, 1.795 million AMD Duron chips, 365 thousand AMD Athlon 64 CPUs and 40 thousand of AMD Opteron microprocessors in FY2003. The firm thinks that ASPs for the mentioned products were $70, $25, $327 and $400 per unit respectively. For FY2004 Smith Barney projects AMD to supply 19.55 million of AMD Athlon XP devices, 9 million of AMD Athlon 64 processors and 500 thousand of AMD Opteron chips. The ASPs are likely to be $59, $146 and $383 per unit respectively for Athlon XP, Athlon 64 and Opteron product families.


Smith Barney’s target on AMD stock is $12. At press time AMD stock was quoted at $15.88 at NYSE.


AMD and other chip companies usually do not comment on yields and product mix.


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