AMD: Three Roads


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There’s an article over at the Inquirer which points to a Business Week article which has bad things to say about AMD.

To a limited degree, the Business Week article is good because it at least notes AMD’s economic weaknesses, something propeller-heads often ignore. However, it also shows how stupid beancounters can be, too. They pretty much get everything else wrong, or see a tree here and there, but not the forest.

For instance, they get the hots for 300mm wafers, which is a good thing to have, but when you consider that it will save Intel maybe $10 a CPU, it’s hardly a crushing economic blow, and wouldn’t be unless CPU prices were a lot lower than they are now.

The article is rife with inaccuracies, irrelevancies, overemphasis and omissions, with a few close-but-no-cigar observations. Nonetheless, in general, they’re right for the wrong reasons.

Over the course of time, we’ve pointed out that AMD is faced with a short-term and long-term financial crisis. The short-term crisis was getting Hammer up and going while trying to live off aging Athlon sales.

While there’s still some doubts about AMD being able to do this, an upsurge in CPU demand and lack of pricing pressure from Intel has at least relieved much of the immediate pressure from AMD and bought it some more time.

However, the long-term financial problem still remains.

Fab costs keep escalating, and require more and more CPUs to be made per fab to pay for those costs. Manufacture itself is getting trickier and trickier as the architectures get smaller and smaller and plain old silicon no longer can hack it.

It is economies of scale that will eventually doom financially weak companies like AMD from operating like a little Intel. Indeed, it is hard to see how the big Intel can keep up business as usual for more than a few more generations if current trends continue.

The key phrase is “operating like a little Intel.” AMD doesn’t have to follow that route.

This article outlines three alternative routes they could take.

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The A Way and The V Way…

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