"AMD Moves Away From PCs Amid Steep Losses"

[exar333]

I beg the differ,

Steamroller and Excavator are not written off, they are alive and will come next year(Steamroller) with FM2 Kabini APUs and Opteron Processors for the Server. The only part that we havent seen or heard anything yet is the Desktop products after PileDriver.

But, since they(AMD) will produce Steamroller and Excavator for the server it is only logical that they will continue to produce CPUs for the Desktop as well.

But regarding IDC's point, where exactly do they match-up to the new AMD plan on the right part of the slide? They don't.

 

[mrmt]

Steamroller and Excavator are not written off, they are alive and will come next year

Written off =! Cancelled

It is just that AMD does not have high expectations for them. They would not shrink the company if they were expecting those projects to turn the tables.

 

[AtenRa]

But regarding IDC's point, where exactly do they match-up to the new AMD plan on the right part of the slide? They don't.

The slide is for 2014 and beyond, SteamRoller and Excavator designs are ready and they will be produced next year and in 2014. The new strategy will not take effect from today, you need a couple of years to design your new products

 

[AtenRa]

Written off =! Cancelled

It is just that AMD does not have high expectations for them. They would not shrink the company if they were expecting those projects to turn the tables.

I know what written off means, thank you

So let me ask you this, what product do you actually believe they will produce next year ??? Jaguar only ??? They need to continue producing parts for APUs, Desktop, Server etc untill they will be ready to change to the new strategy.

You cant stop producing the designs you already have because you will change your strategy in 2-3 years from now. You need to produce what you have now in order to sustain your company until you will be ready with your new strategy designs in 2-3 years.

 

[pelov]

But regarding IDC's point, where exactly do they match-up to the new AMD plan on the right part of the slide? They don't.

They're still bound for release, though.

I think in the future, AMD will only release APUs for the desktop and push them hard in server as well. With HSA improvements, the servers already using GPUs can potentially benefit greatly from Kaveri and whatever follows it. It doesn't make sense for them to continue with 3 separate designs, though. Unlike Intel who can afford it, AMD just can't. What works for server doesn't work well for laptop or mobile. And what works for mobile doesn't work for smartphones/tablets.

I wouldn't be too worried about Haswell's 10W TDP chip. Considering it's going to be priced higher than Ivy is today, AMD still has quite a nice gap to market their products and chips using Kabini. $200-300 Intel chips against $400 tablets. AMD can offer better-than-atom performance at higher power consumption and it should be significantly cheaper than Haswell.

 

[mrmt]

So let me ask you this, what product do you actually believe they will produce next year ??? Jaguar only ??? They need to continue producing parts for APUs, Desktop, Server etc untill they will be ready to change to the new strategy

I didn't say that they would not produce Steamroller and Excavator. I said that they wrote off both products, or in other words, they know performance of both chips will be bad and won't make too much money for the company. That's why they decided to axe the workforce, to deal with margins far smaller than those they had in the past.

 

[mrmt]

I wouldn't be too worried about Haswell's 10W TDP chip. Considering it's going to be priced higher than Ivy is today

Haswell pricing should be higher for those SKUs with Cristalwell, for obvious reasons, and for the SoC versions, which will need cheaper PCBs to work. So I don't really think that overall prices will be higher than those we see now.

 

[AtenRa]

That's why they decided to axe the workforce, to deal with margins far smaller than those they had in the past.

Completely wrong,

They axed the workforce in order to be dead even with 1.3 Billion(per quarter) Revenues. Margins has nothing to do with it.

 

[pelov]

I didn't say that they would not produce Steamroller and Excavator. I said that they wrote off both products, or in other words, they know performance of both chips will be bad and won't make too much money for the company. That's why they decided to axe the workforce, to deal with margins far smaller than those they had in the past.

I'm not sure they axed the workforce due to Steamroller and Excavator. From the rumors, it looks like the GPU side looks to be taking a big hit, and it's no wonder as the sales of GPUs will keep dipping. Its the fastest shrinking market of which AMD has its foot in, at least as far as discrete products go.

They primarily want to focus on building reusable IP blocks which should help lower development costs as well as streamline the development process and improve AMD’s speed of execution. Using these IP blocks, AMD wants to design new products to attack adjacent markets. The CEO specifically mentioned APU graphics-oriented opportunities which are clearly one of the strengths of AMD’s current portfolio. He specifically mentioned the upcoming Kabini APU, a 28nm quad-core successor to the hugely successful 40nm Bobcat-based products, which is out due in the first half of 2013. According to AMD’s CEO, the upcoming APU chip has already been taped out.

So they're streamlining their product line and using reusable IP blocks. If that's the case then it makes little sense to use the modular cores of Excavator for anything, really. With their SeaMicro purchase they still stand to make money on selling Intel chips or their own alternatives based on Jaguar/Kaveri.

 

[pelov]

Haswell pricing should be higher for those SKUs with Cristalwell, for obvious reasons, and for the SoC versions, which will need cheaper PCBs to work. So I don't really think that overall prices will be higher than those we see now.

That's the pricing of the entire product, but bear in mind that Ivy is expensive and Intel has refused to trim their profits on these chips that are paved for Ultrabooks, instead opting to decrease the BoM any way possible so long as it doesn't mean they decrease the price of their CPUs. Ivy is already too expensive for that market, but then you've got to add PCB costs and NB as well. Haswell will trim that, but not by much, as the chip itself will still cost more than Ivy. We might see equal pricing if you consider the PCB and NB of Ivy, but that's still too expensive. Intel want to operate on 60%+ margins, but they're now competing in an area where that's just impossible.

 

[mrmt]

I'm not sure they axed the workforce due to Steamroller and Excavator. From the rumors, it looks like the GPU side looks to be taking a big hit, and it's no wonder as the sales of GPUs will keep dipping. Its the fastest shrinking market of which AMD has its foot in, at least as far as discrete products go.

I don't know what rumors are these but they are wrong. It is the CPU sales that are causing the missing revenues and margins targets, it is CPU that fell around 30% YoY. CPU is the fastest shrinking market for AMD, not dGPU. It is on the CPU division where the problem lies.

ATI is doing what it always did for AMD. bringing small, but steady sums of cash.

 

[mrmt]

We might see equal pricing if you consider the PCB and NB of Ivy, but that's still too expensive. Intel want to operate on 60%+ margins, but they're now competing in an area where that's just impossible.

Ultrabooks problem aren't really limited to the price of the processor. There is battery, displays, SSDs, plus windows 8. None of those items are really cheap enough as of now.

What Intel could do is to shave 50-100USD from the final price, This money probably wouldn't make ultrabooks affordable, plus it would kill the entire price ladder of their notebook line up and that would shut AMD out of the market, as we would see mobile Pentium/Celerons at 40-60USD range, effectivelly killing the viability of AMD entire mobile line up.

 

[pelov]

I don't know what rumors are these but they are wrong. It is the CPU sales that are causing the missing revenues and margins targets, it is CPU that fell around 30% YoY. CPU is the fastest shrinking market for AMD, not dGPU. It is on the CPU division where the problem lies.

ATI is doing what it always did for AMD. bringing small, but steady sums of cash.

The CPU (desktop and PC) market has slipped for the first time since 2001 while discrete GPUs have been steadily sliding for 2 years, with a >8% decrease in GPU sales recently. That market is going to keep trimming down as both AMD and Intel improve their on-die GPUs. Consider too that most PCs sold are laptops and GPUs are generally unwieldy component-death-machines in such a small form factor. The GPU improvements that AMD need to make have to be done on-die

Furthermore, we were witness to an increase in Discrete GPU market, growing by 2.7% from Q4 2011, which was one of weakest in discrete market history. However, it was still 11% down over first quarter of last year.

Read more: http://vr-zone.com/articles/jon-ped...a-share-loss-reduced/16037.html#ixzz2A2HoINwI

A good chunk of discrete cards that are sold are on the low end because OEMs plop those into prebuilt machines. On the laptop side, discrete graphics are going to fade away as soon as its feasible, and most inroads are already in that space. Trinity performs roughly on par with a GT540m which was a mid range GPU last generation (for notebooks).

According to the market research firm, overall discrete graphics cards shipments during Q2 2012 were seasonally down in line with previous years. But unit shipments were also lower on a year-to-year comparison and on a quarter-to-quarter comparison -- total AIB shipments decreased from the previous quarter by 6.5% and 7% from the same quarter last year to 14.8 million units.

http://www.techspot.com/news/49946-discrete-gpu-shipments-down-in-q2-amd-regains-market-share.html

 

[mrmt]

The CPU market has slipped for the first time since 2001 while discrete GPUs have been steadily sliding for 2 years, with a >8% decrease in GPU sales recently.

I don't disagree that the dGPU marketing is slowly dying. But the reaction for that isn't an across the board cut as AMD is doing now. They would simply rellocate the engineers or cut those GPU teams specifically. But are they doing that? No, they went for a full, across the board cut.

Have a look on what happened at the Q&A:

http://seekingalpha.com/article/934...sses-q3-2012-results-earnings-call-transcript

Christopher J. Muse - Barclays Capital, Research DivisionI guess first question, running through the numbers on your new breakeven at $1.3 billion and $450 million OpEx, it would appear that your target here, gross margin-wise is 35%, 36%. So I'm curious, are we seeing a permanent reset on the gross margin side or how should we think about that?
Devinder Kumar - Interim Chief Financial Officer, Senior Vice President and Corporate ControllerLet me answer that. That's not true. We are not giving guidance either and that's not a statement on either profitability or gross margin. It is really putting in place an expense structure that allows us to break even at the operating income level at $1.3 billion by Q3 2013.

What do we see here? Despite the moronic answer from the AMD executive, we can see that the company is expecting lower margins from now on, and that they are answering to a new marketing condition.

What market condition? The dGPU market that is slowly shriking since 2010, or the huge plunge in CPU sales that started in Q212? There is definetly not a chance that the cuts are caused by weakness on AMD GPU division.

 

[pelov]

What market condition? The dGPU market that is slowly shriking since 2010, or the huge plunge in CPU sales that started in Q212? There is definetly not a chance that the cuts are caused by weakness on AMD GPU division.

No, the lower margin has affected Intel too and they're even further back with respect to GPU performance. The 'market condition' is the slipping PC sales and the booming of mobile. If AMD want to compete in mobile, they'd better get used to operating at lower margins. Being fabless actually benefits them -- and so does the severing of obligations with GloFo. Intel, too, is going to learn this lesson, if they haven't already.

People won't pay outrageous prices for Ultrabooks and laptops with tablets offering nearly as much at nearly half the price, if not even lower.

 

[sontin]

The discrete graphics market is booming right now. And it's not dying. Trinity can not even beat a GT640 and in the mobile market the GT640m is between 30-100% faster than Intel's or AMD's offer.

And who knows but it seems that nVidia will be the company which will post a growth in Q3 over Q2 - the only company without a x86 processor.

 

[mrmt]

No, the lower margin has affected Intel too and they're even further back with respect to GPU performance.

If lower margins affected Intel too, and Intel does not produces dGPU, then the problems were with CPU sales, not GPU sales, then shrinking CPU sales, are responsible for the job cuts at AMD, correct?

If AMD want to compete in mobile, they'd better get used to operating at lower margins.

Wrong. Qualcomm posts very interesting margins. Samsung isn't really unhappy with its chip developments, and Apple wants to come to the party too, and those two wouldn't do that if it would lower their margins. Just because you are going mobile you don't need to operate on low margins. AMD operates on low margins because nobody wants to pay too much for AMD processors. Had AMD good products, they could charge more, and get better margins.

Being fabless actually benefits them -- and so does the severing of obligations with GloFo. Intel, too, is going to learn this lesson, if they haven't already.

Intel IS a foundry, the best on the market if you didn't realize. It is easier for Intel starting to manufacture chips for others than to spin off their fabs like AMD did. You can bet that the day this happens there will be customers queuing at Intel fabs to make chips there. Same cannot be said about globalfoundries. Not even AMD wants to make chips there.

 

[ShintaiDK]

http://www.wikinvest.com/stock/QUALCOMM_(QCOM)/Data/Gross_Margin

Qualcomm got huge gross margins. And shows why Intel is there.

 

[pelov]

If lower margins affected Intel too, and Intel does not produces dGPU, then the problems were with CPU sales, not GPU sales, then shrinking CPU sales, are responsible for the job cuts at AMD, correct?

uh... Both? They both slipped. Both GPU and dGPU sales are down. At least on CPU sales AMD can make some headway, granted in different markets. In dGPU they're not going anywhere but down further.

Intel IS a foundry, the best on the market if you didn't realize. It is easier for Intel starting to manufacture chips for others than to spin off their fabs like AMD did. You can bet that the day this happens there will be customers queuing at Intel fabs to make chips there. Same cannot be said about globalfoundries. Not even AMD wants to make chips there.

Intel is currently only a foundry for Intel. Unless Intel keeps selling at an accelerating pace, and I want to reiterate accelerating, they won't be Intel only. It costs a lot of money to operate fabs, and Intel's PC market isn't looking very healthy. Unlike the others, Intel needs to operate on high margins in order to maintain their current business. Qualcomm can just pocket the cash instead of investing it into the foundry. If TSMC fumbles 28nm they can threaten to go GloFo or Samsung, with other customers helping with cost of improving cutting edge processes. Although they're paying higher prices for the wafers, they've also got more freedom with respect to fabs and cash reserve. In contrast, Intel needs to spend billions on their fabs

 

[ViRGE]

http://www.wikinvest.com/stock/QUALCOMM_(QCOM)/Data/Gross_Margin

Qualcomm got huge gross margins. And shows why Intel is there.

Holy cow. I had never seen Qualcomm's gross margins before. They damn near put Intel to shame.

 

[ShintaiDK]

Holy cow. I had never seen Qualcomm's gross margins before. They damn near put Intel to shame.

Also destroys the misconception of ARM.

 

[pelov]

Holy cow. I had never seen Qualcomm's gross margins before. They damn near put Intel to shame.

Qualcomm LTE and their respective patents.

Also destroys the misconception of ARM.

Not really. It's still dirt cheap compared to most of Intel's chips. The Atom line is really the one to compare it to, but those are roughly the same price. We're talking chips costing $15-to-$40 bucks for the entire SoC.

 

[ShintaiDK]

Intel is currently only a foundry for Intel. Unless Intel keeps selling at an accelerating pace, and I want to reiterate accelerating, they won't be Intel only. It costs a lot of money to operate fabs, and Intel's PC market isn't looking very healthy. Unlike the others, Intel needs to operate on high margins in order to maintain their current business. Qualcomm can just pocket the cash instead of investing it into the foundry. If TSMC fumbles 28nm they can threaten to go GloFo or Samsung, with other customers helping with cost of improving cutting edge processes. Although they're paying higher prices for the wafers, they've also got more freedom with respect to fabs and cash reserve. In contrast, Intel needs to spend billions on their fabs

Qualcomm essentially pays more than Intel for fabs. You make it sound like its basicly just free for Qualcomm. But the money is still spend and the stockholders in the other companies are still making a profit.

TSMC for example got a gross margin around 45%. Thats Qualcomm paying.

 

[pelov]

Qualcomm essentially pays more than Intel for fabs. You make it sound like its basicly just free for Qualcomm. But the money is still spend and the stockholders in the other companies are still making a profit.

TSMC for example got a gross margin around 45%. Thats Qualcomm paying.

They don't pay billions and billions of dollars, no. They're not paying more than Intel. The costs are split between all of the foundry's customers. So while each of them pays more than Intel pays for its own (for the sake of the argument), because the foundry signs several WSAs, the costs are split between them.

So that fab advantage that Intel has built is going to require Intel selling at higher margins (currently their margins are actually slipping) and improving sales at an accelerating pace in order to maintain the fabs and not sign WSAs with big competitors, or they're going to have to put a beatdown on everyone else like they did with AMD if they wish to maintain that fab advantage with respect to node sizes and power advancements. Then you have to ask if they can provide the volume as well.

 

[mrmt]

uh... Both? They both slipped. Both GPU and dGPU sales are down. At least on CPU sales AMD can make some headway, granted in different markets. In dGPU they're not going anywhere but down further.

CPU sales didn't slip, they plunged. They fell almost 25% in two quarters. Q4 should shave another 5 to 10%. Q1 and Q2 won't fundamentally change that and Q313 revenues should be on par with Q312, IF they can get into embendded market. Can you point out when AMD GPU division posted results as atrocious as these or could I convice you that AMD CPU division is in dire straits?