It's a portion of the market that we in the financial and tech press take for granted - the embedded, special purpose CPUs that power everything from our cable boxes to our one-armed bandits. But, it's a huge market and, in the consumer electronics portion of it, set to grow at CAGRs that the general purpose home PC can only remember wistfully - think more than 9% annual growth to $222 billion through 2018 according to GIA's latest report on the industry.
It is an industry traditionally dominated by SoCs based on ARM Holdings (NASDAQ:ARMH) or MIPS (NASDAQ:MIPS) designs. But, beginning last year with its G-series SoCs based on the very successful Brazos line of APUs and now with its Jaguar-core-derived update of the G-Series, Advanced Micro Devices (NASDAQ:AMD) is putting paid to all of its management's talk of having embedded and semi-custom chips rise to 20% of its revenue by year end and as much as 40-50% of the firm's revenue in the future.
For the embedded market, working with real-time operating systems (ROTS) is a requirement and AMD partnered with Green Hills software (Integrity RTOS) and Express Logic (ThreadX RTOS) in the last two years to lay the foundation in that space.
AMD, I think, is much better positioned to exploit this market because of the greater flexibility that Jaguar offers over Bobcat in terms of power usage. We've known for months that the APUs code-named Kabini/Temash would operate in a thermal envelope of 3.6-25W and the new G-series APUs are based on similar architecture with SKUs ranging from 9 to 25W. What this release gives us is official confirmation of the specs for the top end Kabini APU. These SoCs have GCN 1.1 CPU cores and the north bridge integrated, similar to Kabini/Temash and the top of the line model will clock up to 2GHz, with the GPU running at 600MHz.
At this point, AMD is not releasing an analogue to the Temash 3.6W TDP APU but that is likely because it will be introducing 64 bit ARM core-based variants in the 1-3W TDP range in 2014 and because there simply may not be enough supply at the present time. Temash is simply so far ahead of anything Intel can offer for the next 6-9 months that AMD should be able to sell every chip they make into the tablet/hybrid channel.
Even the specter of Intel's (NASDAQ:INTC) Bay Trail looming on the horizon should not be much of a concern, for while it will be a sincere improvement over Clover Trail it will still lag AMD on the graphics front. A refresh of Kabini with any of the following - GCN 2.0 cores, GDDR5 support, or process optimization that brings clock speeds well over 2 GHz - would up the graphics ante even more. There is no doubt that the 22nm FinFET process will give Intel a number of advantages but price will not be one of them.
Prices for these are far higher than the typical $10-30 for an ARM SoC at $49-72, but these chips are far more powerful and the GPU's potential for parallel processing with OpenCL 1.2 support is a huge advantage here. They give us an idea of what AMD can and will be selling Kabini for and which confirms exactly what I've been saying about product and performance for specific market segments for months.
At ~$60, AMD can hand you a 15W TDP APU with graphics capability comparable to a 35W Llano A6 and CPU performance that is comparable to a 35W TDP Core i3 Sandy Bridge running at ~80% of the clock speed capable of utilizing 1866 MHz memory. The strength of the Jaguar core will begin to show itself across a wide range of markets at these prices.
Competition in the embedded processor space will be intense, but AMD's lead in CPU/GPU integration and superior GPU compute performance give it a clear advantage in capturing market share. The success in working with Sony (NYSE:SNE) on the 8-core SoC for the Playstation 4 should make winning similar projects a lot easier.
Now that the chips have been announced and the official release of Kabini/Temash is right around the corner, I would expect to hear a number of announced contract wins in this market as was alluded to by management during the earnings call.
There's simply a lot to like about AMD's potential here as the market shifts its way.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.