Advanced Micro Devices: Can Gamers Bring This Chip Maker Back to Life?

It’s been years since Advanced Micro Devices (AMD) has been a leader in any market. First, it challenged Intel (INTC) in the battle for semiconductor supremacy - and lost, badly, watching helplessly as Intel’s superior technology reached 75% dominance of the microprocessor market by 2007. As Intel surged, AMD swooned, and made a fateful decision to diversify its business. The purchase of ATI Technologies in 2006 burdened the books to the tune of $5.6B - and investors punished the stock, which has dropped nearly 90% in the two years since.

The purchase of ATI gave AMD an inroads in the growing GPU industry - graphics processing units that render video games in a vivid three dimensions. But there is intense competition in that market, thanks to NVIDIA, which focuses exclusively on graphics chips. The market share statistics tell the story of AMD’s decline the rest of the microprocessor industry’s big three (including both computer processors and graphics chips) have thrived. 

Chip Makers Market Share, 2006-2007

But AMD has begun to gain gamers’ attention with its efficient business model - make chips that sacrifice a bit of speed but are easy to make and can be sold at lower prices. The company’s newest high-end graphics cards use two GPUs rather than one - and will start at $549, a serious discount over NVIDIA’s latest competing product, which debuted at $649 in June.

As the price of both products declines rapidly (NVIDIA’s (NVDA) GTX cards are already going for $449), the competitors will continue to pump research money into the development of their next product - and strive to capture the imagination of gamers, the niche audience for high end graphics cards. Consumers buy NVIDIA and AMD’s cards along with powerful gaming computers, and they often customize these products to meet their own specifications. Preferences in this market can be fickle forces, and investors looking for rebounding tech stocks in the slumbering bear market would be wise to keep track of the graphics gamers are using.

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Comments

[User 192104]

I agree with "watching helplessly" (since this is what AMD's complaint is all about) but with respect to "as Intel’s superior technology reached 75%" it would be far more appropriate to tell it as it is: "Intel's sales machine over-whelmed AMD's superior technology through heavy advertising and by out-shrinking AMD while simultaneously ballooning the CPU cache sizes to make up for the inadequacies of Intel's technology (not to mention a little bullying of OEM's at the retail end).

2008 Aug 12 10:08 AM

[TechPro]

AMD will be able to destroy Intel within the next 3 years in the notebook processor market, but only if they can get their latest chip out the door... They already have a uniq power saving feature in which they can disable the video cards completely and use the CPU for graphics when there is no load on the computer. They have also been working on a single chip that will in fact have up to 6 cores with 4 of them being for CPU and the remaining 2 be GPU cores using system memory. This allows for faster information transfer between the two components by eliminating the need for the PCI and instead using AMD's HyperTransport and 2Ghz FSB. It also allows users to upgrade Video Ram. The only problem they had had is with cooling due to the size, but with newer 65nm chips being the norm, those issues will be easier to fix. The new chip will have blazing fast performance and great power saving features. Some may argue that Intel has the "extreme graphics", but seriously no self respecting gamer is going to let the CPU do a GPU's job. ATi will have been a great purchase, but only if they can get this superchip ready to go, and then only if they make sure that they do not have a repeat of "Phenom".

2008 Aug 20 12:08 PM