AMD Outlines Processor Road Map, Predicts 30% Market Share

Advanced Micro Devices kept pressure on its larger rival Intel last week, saying it would step up its move to more advanced chip designs, unveil faster processors for servers and cooler ones for notebooks, and let specialized chips connect more easily with its products.

The No. 2 chipmaker hopes these changes, combined with a big increase in manufacturing capacity over the next three years, will push its share of the processor market to 30% or more by giving tech buyers new reasons to invest in its wares. "We're fully positioned to service one-third of the market by 2008," VP of manufacturing Daryl Ostrander said during a presentation to investors and analysts at AMD's Sunnyvale, Calif., headquarters last week. It held 22% of the overall x86 chip market at the end of last year versus Intel's nearly 77%, according to Mercury Research.

AMD plans to 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.

AMD's "excellent execution" will let it continue pricing its chips on a cost-of-performance basis on par with Intel, says Mark Edelstone, a managing director at Morgan Stanley, even though Intel has cost advantages from its size and manufacturing prowess. Also, AMD last week said it plans to license technology that lets makers of specialized chips work with AMD CPUs at higher speeds. That could push the company's share of the chip market to more than 30%, Edelstone 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 just over $31, 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 it undertakes a $1 billion cost-cutting effort.

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 also beat Intel to market with dual-core chips.

Offensive Move
Now, AMD is pressing its advantage. It's designing a wave of chips that next year will yield a dual-core processor for the fast-growing notebook market to improve battery life and a four-core server chip that will deliver higher performance per watt than similar Intel products, Hector Ruiz, AMD's chairman and CEO, said last week. The design will let multithreaded applications run on a single chip rather than forcing IT groups to add CPUs to symmetric multiprocessor systems, which have performance limitations, CTO Phil Hester said. The quad-core design also could help companies decrease the number of servers IT groups have to run, he said.

AMD executives also shared benchmark test results that they say show the company's dual-core processors consume less power than comparable Intel chips. This distinction is becoming more important as companies' data center power costs rise.

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 Intel says will outperform AMD chips on performance per watt for standard business applications. "Our Core microarchitecture product, server down to mobile," Intel's spokesman said, "will be by far the leader in energy efficiency and performance."