The chief executive officer of Advanced Micro Devices said at a conference that advantages brought by the next-generation process technologies will get less noticeable than previously. As a result, AMD will need to transit to new technologies more wisely than before and attempt to innovate using proven fabrication processes.

"Now, let's talk about 20nm and 14nm. I think that we really flying hard in the path of subatomic environments. The price advantages as we move down nodes are starting to wane. The ability to [quickly improve] yields and ramp up our products (which have fixed amount of time) is under exceptional pressure. It costs huge amounts of money. I think we have to be strategic and think about how quickly we go down the node," said Rory Read, chief executive officer of AMD, during IT Supply Chain conference organized by Raymond James.

Traditionally, both vertically integrated makers of semiconductors as well as contract makers of semiconductors, introduce new process technologies every 18 to 24 months. In the recent years the cadence changed a bit since development of new manufacturing processes and building new fabs became extremely expensive, but Intel Corp. keeps introducing new fabrication processes every two years and new product families every year proving the financial viability of Moore's law. The world's biggest chipmaker believes that the  new process technologies enable it to integrate more functionality into chips while keeping their prices relatively flat. However, Intel is among a few companies who produce so large amounts of chips that it can cover development costs.

AMD believes that it should reconsider its typical strategies and tactics. In particular, it needs to innovate within existing and proven process technologies and not wait till better manufacturing processors become available and mature.

"We have some of the best products now! Look at the Brazos chip, over 20 million sold, we think we have taken share in the emerging markets. [...] That's the 40nm process. It is small. It is a beautiful product, it has got great margin. That's the future! The ability to deliver, to execute," stressed Mr. Read.

The new chief executive of AMD implied that high process technology development costs eventually translates into high product prices. In case of economic downturn, it will be very hard to remain profitable if demand collapses. On the other hand, if transition to newer fabrication process takes a longer time, it will become easier from financial point of view.

"Huge set of investments [into new process technologies and their ramp up] is almost like a chain around your neck. You've got to sell gigantic price processors particularly to commercial segment when commercial is nearing the end of the corporate refresh. You've got consumerization spreading around the planet. Why are you going down that path? Sure, there are advantages in moving down the node [...],  there is a lot of profit and opportunity for us in terms of our business [with the currently available process technologies]. Why moving down the node too fast?" asked Mr. Read rhetorically.

Rory Read believes that the market of semiconductors will need to change drastically from what it is today. Even though AMD will inevitably adopt both 20nm and 14nm fabrication processes in the coming years, it will change its adoption approach and expects companies like Globalfoundries to change their pricing models so to make transitions to thinner processes viable for fabless designer of chips.

"Just go look at the cost of wafers as you move down those technologies, they are not going down, they are going up! If the yield does not go up, how do you get your return? You have to charge bigger prices. We will get there, we will move down [but ultimately there got to be different pricing model]," said the chief executive officer of AMD.

Tags: AMD, 14nm, 20nm, Semiconductor, Globalfoundries, TSMC