It has been a tough year for Advanced Micro Devices, the company that supplies nearly a quarter of x86 microprocessors available. In the most recent four quarters it has lost $1.6 billion and it is now unclear when the chipmaker will return back to profitability. On the 13th of December the company will host a meeting with financial analysts, where observers expect the chip manufacturer to announce its cost-cutting strategy.
AMD has not announced any specific details regarding its meeting with analysts, but its spokesperson is reported to have said that the presentation will offer specific guidance on research and development as well as roadmaps for future products.
No Light at the End of the Tunnel?
At present, various observers do not expect AMD to release a breakthrough product in the foreseeable future and claim that issues with quad-core design as well as 65nm process technology will continue to negatively affect AMD’s performance in the short-term.
“It now appears to us AMD may not have a competitive alternative to Intel’s barrage of 45-nm CPUs through 2008. […] AMD’s 65 nm process and/or architecture continues to generate poor yields limiting the introduction of higher performer server, desktop and notebook CPUs. AMD’s lack of execution in the process node transition could potentially lead to significant market share loss in 2008,” said Thomas Weisel Partners analyst Kevin Cassidy in a note to clients, reports Barron’s Online web-site.
Revenues from AMD processors sales dropped substantially this year as AMD could not introduce chips competitive against Intel Corp.’s Core 2-series central processing units (CPUs). In addition, AMD lost substantial part of former ATI’s revenue in graphics and consumer electronics markets.
While AMD recently started to ship its quad-core AMD Opteron and AMD Phenom processors, those shipments still represent a relatively minor fraction within AMD’s processor revenue. Moreover, AMD has found an erratum in its quad-core products and sales of the chips are likely to slowdown because of that. Additionally, AMD also started to ship its ATI Radeon HD 3800-series graphics processors, but it will also take some time before those new chips gain popularity on the market and bring substantial revenue and profit streams to AMD.
As a result, there is no surprise that certain analysts and investors would like AMD to talk about more dramatic changes and plans apart from presenting its product and R&D roadmaps.
“Asset-Lite” Under Investigation by Analysts
Many analysts would like to hear more about AMD’s “fab-lite” or “asset-lite” strategy at the forthcoming conference, especially, in the light of recent rumours regarding potential sell-off of a foundry to a third party and AMD's inability to establish volume production of the latest K10 chips amid substantial investments into manufacturing operations.
Since Taiwan Semiconductor Manufacturing Company (TSMC) is projected to have 45nm process technology ready in 2008 and considering that AMD is usually somewhat late with development of its own process technologies, it can truly be expected that AMD may be interested in using manufacturing capacities of TSMC for its low-end products going forward. Currently AMD has to use the same 65nm process technology to manufacture its single-core and dual-core K8 (AMD Athlon 64 and AMD Opteron) as well as its quad-core K10 (AMD Phenom, AMD Opteron) chips) and even AMD’s president admitted that the chipmaker had issues with “wedding” the design of K10 with 65nm SOI process tech for “high-volume ramp”.
“The minor issues we’ve been experiencing have nothing to do with the process technology or the manufacturing capabilities. It is all a matter of wedding the design to the technology so as to be able to ship in volume,” said Dirk Meyer, chief operating officer and president of AMD, during the company’s most recent conference call with financial analysts.
Since in late 2008 or early 2009 the company will start to manufacture its Fusion processors that combine graphics and x86 cores, it may be expected that the company would not like to experience similar “minor issues” with adjusting design and process technology. But since “asset-lite” strategy is not something that can be performed overnight, analysts expect AMD to start revealing details about the initiative at the forthcoming conference with analysts.
“Fab-light can’t be executed overnight, and as a result it could take much longer than anticipated to convince investors that fab-lite is the right path for AMD to take and not just a move out of financial desperation,” wrote Doug Freedman, an analyst with American Technology Research, in a research note to investors, reports eWeek web-site.
To cut a long story short, it still remains to be seen whether AMD plans to present any initiatives that will cut down its operating costs and show a path that would return the company to profitability, or will still rely on its products to get back to profits.