…they will probably be extremely competitive with Barcelona, and expected price cuts on the older Clovertown processors will give Intel's customers two options for quad-core technology.
Plus, Intel's plan for 2008 is to mimic the design characteristics that made AMD's Opteron chip a winner. The Nehalem generation of processors will come with integrated memory controllers and point-to-point interconnects, design characteristics that allowed AMD to enjoy a significant performance advantage from 2003 until last year.
"One board maker we met with suggested that their tests indicated that AMD's 65nm Barcelona only bridges the gap between Intel's 65nm Clovertown," Citigroup's Glen Yeung wrote in a recent research note. "The release of 45nm Harpertown [Nehalem] is expected to re-establish the lead for Intel, emphasising the importance of any delay by AMD."
AMD will face a number of challenges generating revenue over the next 18 months while up against a solid (on paper, at least) road map from Intel. And AMD chief executive Hector Ruiz and his management team might have to re-examine the cost side of their company to turn things around.
In April, Ruiz began dropping hints about changing AMD's cost structure in what has come to be known as "asset light". He hasn't said much more beyond that, but a few scenarios seem most likely.
AMD could expand its use of third-party chipmakers. It already uses Chartered Semiconductor's factory to make some processors, but could expand its use of other factories such as Taiwan Semiconductor Manufacturing Company (TSMC) or United Microelectronics Corporation in Taiwan, which make the graphics chips AMD acquired along with ATI Technologies. Citigroup believes that AMD is almost ready to announce that TSMC will manufacture certain low-end processors for AMD, freeing up capacity at AMD's own Dresden, Germany, facility to make more profitable chips.
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The company could also enter into new manufacturing partnerships like the one it has with IBM. Figuring out ways to make ever smaller transistors is a dauntingly expensive proposition. The joint partnership with IBM allows AMD to face those problems with a little help from its friends. This could involve a company like IBM taking a partnership stake in one of AMD's Dresden plants or a proposed facility in upstate New York, nearby IBM's own East Fishkill facility.
It's very unlikely, however, that AMD would get out of the chipmaking business altogether, McGregor said. Notwithstanding company founder Jerry Sanders' famous quote — "Only real men have fabs" — there's a cost advantage to in-house manufacturing, so long as the factory stays full, he said.
AMD's biggest strength at this point in its history is that it's no longer just an upstart chip company best known among gamers. AMD can now count the four largest server makers among its customers, and companies across the Fortune 500 have shown a willingness to put AMD products at the heart of their systems.
But, while the company has spent much of the past few years emphasising its power-efficient designs, it must finally back up all that talk with a true mobile processor design if it wants to pull off its ambitious Fusion project, McGregor said.
AMD has unveiled plans for this mobile processor, code-named "Griffin", but it's not expected until the middle of next year. AMD's current Turion mobile processors are really just power-optimised versions of its Opteron chips, while Griffin would follow Intel's approach of designing for low-power applications first and increasing power for systems designed to handle larger amounts of power consumption — like servers.
"Fusion is only going to be successful if they have a new mobile core to go with it," McGregor said. AMD wants to integrate graphics technology from ATI into its processor designs with the Fusion project. The obvious upside is for PC gamers, but the high-speed processors used today mostly for graphics could have all kinds of other applications should programmers be able to find a way to take advantage of that horsepower.
Before AMD gets to Fusion, however, it has to repair the current state of its business. Executives spoke about a restructuring plan in April that would help the company regain its footing, but few details about that plan have emerged.
That doesn't change the fact, however, that Ruiz needs to light a fire under AMD — and soon, McGregor said. "Intel got a sense of urgency, and AMD needs the same sense of urgency."
