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AMD Outlines Processor Road Map

The No. 2 chipmaker plans to roll out more advanced chip designs, faster processors for servers, and cooler ones for notebooks.
Advanced Micro Devices, the No. 2 chipmaker, kept pressure on its larger rival Intel last week, saying it would step up the transition to even more advanced chip designs, unveil faster processors for servers and cooler ones for notebooks, and let other chipmakers interface more easily with its products.

Combined with a big increase in manufacturing capacity over the next three years, the company hopes the moves will push its share of the processor market to 30% or more by giving technology buyers new reasons to invest in AMD's technology.

"We're fully positioned to service one-third of the market by 2008," AMD VP of Manufacturing Daryl Ostrander said during a presentation to investors and analysts at the company's Sunnyvale, Calif., headquarters last week. AMD held 21.4% of the overall x86 chip market at the end of last year versus nearly 77% for Intel, according to Mercury Research. It will invest $2.5 billion to increase manufacturing capacity at two plants in Germany. Ostrander reaffirmed plans to move from 90-nanometer chip technology to better-performing 65-nanometer technology by the end of this year and pushed up the schedule for shipping chips with 45-nanometer components to 2008.

Mark Edelstone, a managing director at Morgan Stanley, says AMD's "excellent execution" will allow it to continue pricing its chips on a cost-of-performance basis on par with Intel, which holds inherent cost advantages due to its size and manufacturing prowess. And a move by AMD to license technology that lets makers of specialized chips interface with AMD CPUs at higher speeds could push AMD's share of the chip market to more than 30%, according to his estimates. "The game has changed, and AMD is no longer the dog you kick around in the marketplace," he says.

Shares of AMD, which rose 50 cents June 1 to close at $31.39, could rise to $50 within a year and a half, Edelstone predicts. Shares of Intel, which are trading at about $18, could rise to $24 as the No. 1 chipmaker undergoes a $1 billion cost-cutting plan.

AMD has captured market share from Intel by turning out products with better performance as the computer industry transitions to 64-bit computing on standard x86 hardware. Intel two years ago had to reverse course from a 64-bit plan that would have required IT departments to rewrite their companies' software applications. AMD has also beat Intel to market with dual-core chips.

Now AMD is pressing its advantage. Hector Ruiz, chairman and chief executive, said last week the company is designing a new wave of chips that next year will yield a dual-core processor for the fast-growing notebook computer market that improves battery life, as well as a four-core server chip that will deliver higher performance-per-watt than similar Intel products. Chief Technology Officer Phil Hester said the design would let IT departments run multithreaded applications on a single chip rather than adding CPUs to symmetric multiprocessor systems, which have performance limitations. The quad-core design could also help companies decrease their number of servers, he said.

AMD executives also showed benchmark test results they say show its dual-core processors consuming less power than comparable Intel products, which is important as companies' power costs associated with data centers are rising.

But an Intel spokesman accused AMD of "cooking the books" on its benchmark tests, saying AMD uses a nonstandard motherboard configuration in the tests. Intel plans to deliver chips for desktops, notebooks, and servers this summer based on a new architecture called Core that the company says will outperform AMD chips on performance-per-watt on standard business applications. "Our Core microarchitecture product, server down to mobile, will be by far the leader in energy efficiency and performance," Intel's spokesman said.

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