(AMD) - Overhyped or Overlooked?
Advanced Micro Devices was founded May 1, 1969, by Jerry Sanders. They are an American semiconductor company based in Santa Clara, California, which specializes in the development of computer processors and related technologies to be used in business and consumer markets. AMD is best known for their microprocessors however, they also manufacture motherboard chipsets, embedded processors, graphics processors for personal computers, workstations, and servers. As the second-largest supplier of CPUs, the only significant rival in this market is, Intel. Since their acquisition of GPU competitor ATI in 2006, AMD has only had to contend with Nvidia in the GPU market.
Lisa Su – New leadership – New Era
On October 8th, 2014, AMD had announced that Rory Read, CEO at the time, had stepped down after serving for the past three years. His successor, Lisa Su, had been serving as Chief Operating Officer since June. Moreover, Lisa brings a strong background in engineering to the table that Read did not have. Before she worked at AMD, Lisa worked at Freescale Semiconductor and IBM. During her time at IBM, she was a vice-president in the Semiconductor Research and Development Center. According to her bio, Lisa was “responsible for the strategic direction of IBM’s silicon technologies, joint development alliances and semiconductor R&D operations.” Before her time at IBM, she worked at Texas Instruments’ Semiconductor Process and Device Center. Because of her more technical background, we believe Lisa is much better suited to direct the evolution of AMD’s technologies as CEO.
Shortly after her induction as CEO, on October 16th, 2014, AMD released an announcement of a new restructuring plan along with its Q3 results. AMD reorganized into two distinct business groups: Enterprise & Computing/Graphics, which includes desktop and notebooks processors and chipsets, discrete GPUs, and professional graphics. On the other hand, Enterprise primarily includes server and embedded processors, dense servers, engineering services, and royalties. Sadly, as part of this restructuring, AMD also announced that 7% of its global workforce would be laid off by the of 2014.
AMD – Moving up, and out of debt
AMD has been able to significantly reduce it’s debt over the past two years. Since 2010, AMD hasn’t been hit with the massive losses it has seen in the past. The chip company wasn’t very profitable in many of those years however, it has become much more stable over the past 5 years. This is largely in part due to their recent resurgence into the server market which should help AMD remain on the path to closing the EPS gap.
AMD Zen 2: EPYC ‘Rome’ 7nm – Battling its way to more market share
In the past, AMD has been able to successfully claim 24% of the server chip market. But, Intel came roaring back and took back its lost market share over the next decade. Which left AMD with almost no market share whatsoever by 2015.
With the expected upcoming release of their Epyc 2 chip, AMD projects to at least approach 2004 or 2005 market share levels. The difference this time is that AMD doesn’t need the server market for it to become profitable. Therefore, any market share gained in this sector will lead to a substantial improvement in their already solid profits. On the other hand, Intel’s recently removed CEO, Brian Krzanich, made some very interesting comments to an analyst from Instinet;
“Shah relates that Krzanich “was very matter-of-fact in saying that Intel would lose server share to AMD in the second half of the year,” which is not news, but he thought it significant that “Mr. Krzanich did not draw a firm line in the sand as it relates to AMD’s potential gains in servers; he only indicated that it was Intel’s job to not let AMD capture 15-20% market share.” (emphasis added).”
The fact that, Mr. Krzanich indicated the long-term goal is to retain 15-20% market share. Therefore, the internal projections at Intel could suggest losing up to 80% of the server market to AMD over the next few years.
AMD – Slaying The Server Giant
How likely is it that AMD will be able to overtake Intel? Currently, AMD is being very secretive about it’s Zen 2 ‘Rome’ EPYC processor. However, an alleged benchmark of the 7nm based EPYC Rome server processor has recently leaked out which is presumably from the next-gen Rome processors, and looks as if the chip is an engineering sample.
These benchmarks display incredible CPU performance which the new lineup would definitely pack. The chip seems to have been tested using Cinebench R15 running a multi-thread benchmark, and the chip scores an astounding 12,587 points blowing any current-generation XEON processors out of the water. AMD’s Ryzen Threadripper 2990WX scores roughly 5,500 points in the same benchmark with 32 cores running up to 64 threads. Also, there’s the EPYC 7601 which scores around 6,000 points due to the octa-channel memory support compared to the quad channel utilized by Threadripper CPUs.
Because the new EPYC Rome 7nm processors will also be using octal channel memory as well as feature better IPC from the enhanced Zen 2 cores which have better cache latencies and an improved core-to-core interconnect, we can see the performance being close to what is shown in the leaks. In addition, the clock speeds should get a decent boost from the new 7nm lithography architecture over the current 14nm based EPYC chips which could be why we see such an increased performance in the leaked benchmark.
AMD 5nm lithography architecture
Currently, intel is struggling to produce their 14nm chips and expects they will be back on track to produce 10nm chips in April of next year, AMD is preparing for 5nm chips, or at least TSMC (AMDs chip manufacturer) is. TSMC expects to begin it’s 5nm risk production possibly as soon as April of next year. While second-generation 7nm manufacturing is already underway. To produce chips, TSMC uses a process known as Deep Ultra Violet (DUV) lithography for it’s 7nm chip production. They are beginning to produce a 7nm chip that will utilize EUV in four non-critical layers to speed up learning and production of it’s 5nm chips.
It’s clear that AMD has a much more stable fundamental standing as a company than it has over the past few years. Due to their reduced debt, laser-focused business strategy, and it’s projected growth in the data center market, we believe that the AMD trend has just begun. In addition their partnership with Microsoft and Sony to power gaming consoles is another key driver for GPU market expansion. For all of these reasons, we feel as though AMD is set for continued growth if they continue to properly execute their business strategy.