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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

Discussion

Comments currently: 27
Discussion started: 12/16/11 11:14:51 AM
Latest comment: 12/20/11 10:14:36 PM
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1. 
bigger prices?? Hmm...What for? An ATI HD 5850 card can play all games nowadays at max quality with no glitches, high price for what??
4 3 [Posted by: TAViX  | Date: 12/16/11 11:14:51 AM]
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Try to play battlefield3.
2 4 [Posted by: skalderis  | Date: 12/16/11 02:23:04 PM]
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BF3 is crippled by inefficient use of MSAA. Otherwise an overclock HD5850 can easily get you 50-60 fps on Ultra without it.
6 3 [Posted by: BestJinjo  | Date: 12/16/11 06:17:22 PM]
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Stereo 3D gaming requires a far more beefy GPU.. even a GTX 580 has a hard time playing some of the newer games maxed-out in 3D at 1080p. AMD plans to push HD3D support more, but I expect it to still "suck". You'd just be needing it for Surround (Eyefinity) gaming, or you're stuck with just 1 monitor (probably 1920x1200 or less). As more and more of us start to try out either 3D or surround, or both combined, for GREATLY enhanced gaming experiences, there is still a reasonable need for "bigger" GPUs.
0 1 [Posted by: Bo_Fox  | Date: 12/16/11 08:40:49 PM]
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2. 
Tell me something that I dont know already. Typical executive talk. Talk trash without actually explaining how you are going to overcome the problem. Reality of the situation is that AMD has very less margin in Brazos that they have to keep selling hundreds of millions of them hoping there is not much competition. They can't expect much money from desktop/notebook due to low yield of Llano and server is pretty much hosed. Rory has no clue what he is talking
2 0 [Posted by: jollyjugg  | Date: 12/16/11 12:01:09 PM]
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3. 
AMD now have a very wise CEO:1) Having ROI in mind.2) Knowing diminish of return.3) Focusing on what market wants, but not following the far- distance #1's footsteps which is an assurance for failure.4) Knowing sense of urgency for market.5) Getting rid of bragging, incompetent marketing and product management people.
2 0 [Posted by: libra4us  | Date: 12/16/11 12:35:58 PM]
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4. 
AMD now is a fabless company w/o fab overlead, like Nvidia, but not only bas x86 right but also is able to port x86 products to TSMC (This is why Intel just pay AMD $1.25B to settle). If Nvidia can make profit, why not AMD? Maybe laying off more incompetent employees is needed.AMD should combine the strenth of both Intel (x86) and Nvidia (GPU and leaner), not the weakness of the both companies.
4 0 [Posted by: libra4us  | Date: 12/16/11 12:56:48 PM]
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5. 
I agree with libra4us, this CEO seems to know what he is doing. Intel brute force with money and process their performance, AMD won't beat Intel at their own game. The only time AMD has surpassed Intel is when they innovate, something Intel isn't that great at. If AMD wants to do well, they got to do what they do well, innovate. I just hope that AMD continues to innovate in their core markets of x86 CPUs and GPUs now and move into mobile markets while doing the same thing.
1 2 [Posted by: amdme127  | Date: 12/16/11 04:19:54 PM]
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6. 
I see this Rory's speech as an excuse. Intel dictates the speed of node pace. If AMD wants to stay competitive in x86 market, she will must follow Intel not very far behind.
0 1 [Posted by: Azazel  | Date: 12/17/11 02:48:30 AM]
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7. 
The future for AMD in 3 years time will be this - combined chip x86 + ARM + AMD graphics. This will be their unique product containing their IP for tablets and ultraportables. Evidence of this possibility lays in the fact that the Linux kernel developers are near to being able to execute different processor binaries simultaneously - eg x86 and ARM. ARM will never license their technology to Intel because it would annihilate the other license holders in manufacturing/ price. But I can certainly see it selling a license to fabless AMD.
0 1 [Posted by: linuxlowdown  | Date: 12/17/11 03:34:25 AM]
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Intel already have Arm licences, although it is for the older Cortex A8.
0 0 [Posted by: parkerm35  | Date: 12/17/11 04:29:39 AM]
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True @parkerm35. I will rehash what I said. ARM ought never again sell their license to Intel because it could annihilate the other license holders in manufacturing/ price competition, putting them out of business with an end purposeful result of destroying ARM architecture in favour of x86. However, I can see ARM selling a license to AMD (again) in the future because they are not a threat to their business model.
1 1 [Posted by: linuxlowdown  | Date: 12/17/11 06:04:37 AM]
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8. 
AMD has a tough road ahead. They have ceded the higher end cpu market and the pro graphics market where margins are high and thus innovations are being funded and developed. They need a product that will bring in NEW customers badly.
0 0 [Posted by: beck2448  | Date: 12/17/11 02:03:25 PM]
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What an absurd comment... as is fanbois jmixq's

AMD is selling every APU, FX and BD based Opteron CPU they can produce, they have standing orders for more from the likes of Cray super computers, they are still selling Phenom II CPUs well, they have carved out a niche with APUs that Intel is struggling to match, are shipping 7000 series 28nm GPUs in Jan., months before Nvidia and yet you think they "need a product to bring in new customers". Really?

What they need is GloFo and TSMC to get their Fab production sorted out so AMD can supply even more of what consumers are voting for with their wallet - AMD's current and in pipeline products like Trinity and Vishera.

Fools have been writing AMD's obituary for forty years and it ain't happened yet.
5 4 [Posted by: beenthere  | Date: 12/17/11 03:07:58 PM]
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9. 
I don't care how small the chip will be, just do some magic and give us good CPUs and don't let intel be a monopoly, we need you AMD to keep the competition up and running and the prices down!
3 0 [Posted by: nitro912gr  | Date: 12/17/11 03:10:50 PM]
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