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Excerpt from our One Page Barron's Summary (receive it weekly by email by signing up here):

PLUGGED IN: In Chips, What Price Loyalty? by Mark Veverka

  • Highlighted companies: Advanced Micro Devices (AMD), Intel (INTC), Texas Instruments (TXN), Freescale Semiconductor (FSL), Analog Devices (ADI), Linear Technology (LLTC), Microchip (MCHP), Xilinx (XLNX), Sony (SNE)
  • Summary: A paradigm shift in the semiconductor industry: In the past, speed and price were everything; today innovation and customer service are becoming increasingly important as companies vie for customer loyalty. Chip customers, recent studies highlight, are far less concerned with price and power than development tools, technical design, support, and product features. The shift away from raw power has allowed AMD to grab market share from Intel, who had become used to consistently trumping its competitor in the speed-race. In wireless — where up to 40% of total phone cost is in chips — price is still king. A closer look at customer loyalty: • Eight chip makers were among 53 loyalty leaders in a recent study: TXN, FSL, ADI, LLTC, MCHP, XLNX, SNE, and the private Avago. • The average annual growth rate for 'loyalty leaders' was 82%, compared with an average 15% for 'loyalty laggards.' • Automotive and medical chip makers had the highest loyalty factor. Barron's conclusion: The industry leaves so much room for improvement in the eyes of customers that there's ample opportunity for chip makers to get a leg up on competitors — the trick is to go beyond price and speed.
  • Quick comment: Glenn Curtis sees both INTC and AMD, who will continue to be an integral part of technological advancement, as long term buys . In a recent earnings conference call, AMD CEO Hector Ruiz said, "We continue to show the capacity to achieve significant share gains in our industry's most important competitive arenas, reflecting a growing loyalty to the AMD brand. Imagine what we could do with without the daily interference of monopolistic practices in an environment of fair and open competition." See recent earnings conference calls transcripts for all highlighted companies: INTC, AMD, TXN, FSL, ADI, LLTC, MCHP, XLNX, SNE.
Source: AMD: Chipping Away at Customer Loyalty