Competitive Analysis

of AMD
Group D F2
Alessandro
Maysoon
Andrew
Diogo
Claire
Luca
 Table of Contents

I. Industry Background, Market Boundaries, & Page 3-

Trends 9
II. AMD Competitive Analysis Page
10-17
III. Custom vs Non-custom Markets in Depth
Achievement
Award.
TVs Blended
Index for USs
Page
top-selling Fixed
Index Annuity. 18-20
IV. Recommendations Page
21-27
V. Backup Slides Page
28-30
I. Industry Background, Market Boundaries,
& Trends
 Outlook on the Semiconductor Industry
Global Semiconductor
Consumption Shares
(2014) Global Semiconductor Market $335 Billion
56.60%

Consumer; 13% Automotive; 10%

Industrial/Government ; 13%

Communications; 34%

11.40% SoC
9.00% Combines CPU &
GPU with
Memory
Controller

Customizable
PC/Computer; 30%

Source: Statista (2016), SIA (201

 Semiconductor Industry: Business Models

IDMs (INTEL, SAMSUNG)

Foundries (GF, Fabless (AMD, OEMs

TSM, UMC) NVIDIA, (MICROSOFT, HP,
QUALCOMM) LENOVO, HP,
TOSHIBA)
Custom Design
Manufacturing Device
and Functionality
of Integrated Manufacturers
Added, Software
Circuits from Incorporate ICs
Embedded,
Raw Materials for Various
Combine ICs for
Products &
Different
Services
Purposes
(APPLE)
 Defining Business Boundaries based on Technological
Customization
END MARKETS END MARKETS
Video Game Consoles Less Commoditized Highly Smartphones
Virtual Reality Commoditized Tablets
Servers Less Competitive Desktops
Casino Gaming Rivalry High Competitive Laptops
Medical Devices Rivalry Servers
Automobiles Memory
Smart Home Devices
Military or Industrial Use

CUSTOM/SEMI- NON-
CUSTOM CUSTOM

<50% of >50% of
AMDs AMDs
Revenue Revenue
 Industry Characteristics & 5 Forces Analysis
Buyer Power Availability of Substitutes Competitive Rivalry
(Med-High) (Low-Med) (High)
Pay
For AMD and many major players, the
Because of the high R&D costs that go The semi conductor industry is
License into advancing a firms technology in
majority of revenues derived from a highly concentrated given the
certain market usually come from a
this industry, there are very few WTA dynamics. Firms compete
Fee to substitutes that can compete with
few customers. This makes AMD highly fiercely based on technological
superiority, rather than merely
dependent on
Acquire the
these customersperformance and quality of
(Microsoft for example) and reduces its
established players. This is due to the price. In the custom category,
x86 or degree of customization that requires
ability to increase prices for fear of specificity of certain products
may prevent many smaller
losing the customer. significant technical know-how and
ARM human capital. players with more modest
product portfolios to even
technolog enter the bidding process.
Supplier Power Threat of New Entrants
(Med-High) y (Low)
For Fabless firms like AMD, there is a The industry is characterized by high
high level of dependency on foundries R&D costs, steep learning curves,
for IC production. Since there are so few and brand name recognition. While
foundries that supply most of the the threat of reverse engineering is
market, the foundries are in a present, customers in the custom
position to pick and choose the category value proven track records
most profitable contracts. This is and solid expertise.
regardless of the category. IMDs, which
have their own manufacturing
capabilities, are much less vulnerable.
 Evidence of Commoditization in the Semiconductor Industry
DEMAND HAS BECOME
PREDICTABLE
The industry has always been highly
cyclical. After 2004, there was a
sharp decrease in the volatility of
industry sales growth meaning
that demand has become more
predictable. This is a key indicator of
a commoditizing industry. This year,
the global market will only grow by
0.3% to a value of roughly $341
billion.
INCREASED M&A ACTIVITY MOORES LAW IS ENDING
PE firms are attracted to firms that Moores Law states that the number of
produce predictable cash flows with transistors in each integrated circuit will
low amounts of debt. These double every two years. Until recently
this has been true, yet the costs to
characteristics are more commonly
achieve it have skyrocketed in recent
found in firms in a commoditizing
years. This has resulted in Intels longer
industry since these industries than normal doubling time. Many
experience a wave of consolidation in industry experts believe that by 2022 it
response to declining margins. will be uneconomical to fit more
SoftBank just acquired Arm for transistors on a single IC.
24.3 billion.
Source: EE Times Europe (2016),
Futures Market for Parts of the Semiconductor Industry
II. AMD Competitive Analysis
 Snapshot of Advanced Micro Devices Inc.
We are a global semiconductor company primarily offering:

x86 microprocessors, as a standalone central processing unit (CPU) or as incorporated into

an accelerated processing unit (APU), chipsets, and discrete graphics processing units (GPUs)
for the consumer, commercial and professional graphics markets; and
server and embedded CPUs, GPUs and APUs, and semi-custom System-on-Chip (SoC)
products and technology for game consoles.
-AMD Annual Report

2015 Revenue of July 15 2016 Stock S&P Credit Rating Over $2.24bn of
$3.99bn, Net Loss Price of $5.14 Per of CCC+ Total Debt & a
of ($660m) Share High Yield Negative Book
Value
AMDs Financials: No Room for Manoeuvre

Source: AMD Annual Report 201

 AMDs PC Market Share & Main Competitors

30 20
% %

PC Graphics PC CPUs
Cards

70 80
% %
Nvidia AMD Intel AMD

Computing & Graphics (shown above) account for roughly half of AMDs revenue. These markets are
dominated by Intel & NVidia. AMDs other revenues come from a series of niche custom markets
like casino gaming for example. AMD also makes a considerable amount of revenue from video game
consoles. Currently, AMD is the sole provider of semi-custom chips for PlayStation, Xbox, and
Nintendo Wii. Source: Mercury Research (2016), Bloomberg
 AMD SWOT Analysis, Resources & Capabilities vs Competitors
-ARM & x86 Technology -Highly Leveraged, No
Liquidity
-Asset Lite Business
Model -Difficult to maintain R&D
Investment
-Specialty in Graphics
Capabilities -Console Market has Poor
Margins
-Monopoly in Console
Market -Inferior x86 Tech Compared
to Intel
-Strong Product & IP
-Server Market
Portfolio, Suited for
with Custom -Currently
-Nvidia a Minority
Re-enters Market
Console
ARM
Production Capabilities Share
MarketPlayer in
(Cold Storage Especially) Commoditizing Markets
-Intel Obtains ARM
-Growth in Video Game Technology
Industry
-AMD Unable to Stay
-Growth in VR Current on Debt

-Well Positioned for -Margins Deteriorate in

Custom Designs Consoles

-Opportunity to License IP -Not able to Secure

& Tech Financing Source: WCCF Tech (2015)
 AMDs Completive Strategy Over Time

Towards the second half

In the early 2000s AMD
of the decade AMDs
would try to directly compete
technology portfolio
with Intel and Nvidia in
began losing
terms of technology +
competitiveness
quality.
dramatically.

200
6
Contesting Fast
Technologic Follower
al Cost
Leadership Leadership
 AMDs Lack of Product Differentiation Against INTEL in the PC
Performance of PC Related Products Market

Technological
juggernaut

Price of PC Related Products

 AMDs Lack of Competitiveness Against NVIDIA in the Gaming PC
Performance of Gaming PC Market
Related Products

Focused business
model

Price of Gaming PC Related Products

III. Custom vs Non-Custom Markets
in Depth
 Non-Custom Markets Custom & Semi-Custom Markets (Less
(Commoditized) Commoditized)
Mobile Devices Other Custom
PCs Laptops & (Smartphones, Servers & Gaming Consoles & VR (Casino, Medical,
Desktops Tablets, Datacenters Industrial,
Wearables) Automotive, POS,
A & E Series APUs AMD PRO G Series SOC Platform CPUs: Zen
CPUs: Zen x86, K12 ARM etc.x86, K12 ARM
CPUs: Zen x86, Proccessor FirePro GPU Liquid VR GPU FirePro & Radeon GPUs
K12 ARM Durango GPU (Xbox)
Seattle 64-bit ARM SOC R Series APU & CPU
FirePro & Radeon Server Fabric IP GCN CPU (PS4) G Series SOC Platform
GPUs (SeaMicro) Jaguar CPU
7000 Series APUs Opteron ARM CPU
Polaris
i3, i5, i7GPU
x86 CPUs Core Solo & M Itanium Processor AMT Technology
Pentium & Celeron CPUs x86 Core M vPro CPU
CPUs Pentium & Celeron Xeon, Xeon Phi SSD Pro 2500
Ivy & Sandy Bridge CPUs CPUs Series
CPUs Quark SOC Atom & Pentium i3, i5, i7 x86 CPUs
Duo Core, Quad Atom CPU CPUs
Core CPU
Tegra K1 GPU Xeon EK1
Tegra CPU
GPU ServerSystem
DGX-1 Fabric IP Quadro VR GPU Tegra K1 GPU
Integrated
Kepler GPUGPUs Shield Portable RAID Technology Shield & GEFORCE
Tegra 4 ARM CPU Drive CX & PX
Quadro GPU Quadro GPU
GRID Technology GRID Technology

Gobi Connectivity Snapdragon ARM 24 Core ARM CPU Atheros Series SOC
SOCs Snapdragon
Gobi Connectivity 820,602A SOC
Kryo CPU CSRC9300 Chipset
Adreno 530 GPU IZat & VIVE
Hexagon 680 DSP
 Non-Custom Markets Custom & Semi-Custom Markets (Less
(Commoditized) Commoditized)
Mobile Devices Other Custom
PCs Laptops & (Smartphones, Servers & Gaming Consoles & VR (Casino, Medical,
Desktops Tablets, Datacenters Industrial,
Wearables) Automotive, POS,
etc.
ARM Tech. & Has 100% Success Varies
New x86 Tech Market Share of Depending on
Perfect for Re- All Large Scale Market
entry into the Gaming Consoles
Market

Over 95%
Has 82% Market
Market Share of
Share of All PCs
All Servers
(ONLY x86 Tech.)

Has 79% Market

Share of All
Gaming PCs

Has 42% Market

Share of All
Smartphones,
Apple #2 at 21%
 Recommendations
IV. Recommendations
Become a pure custom/semi-custom
player

Continued focus on video game console

market

Carve out niche in server & datacenter

market
 Licensing as a Short Term Fix for Liquidity Problems

In 2016, AMD entered into a licensing agreement with a Chinese state-backed

joint venture which will bring in $239 million. AMD will be supplying CPU &
SOC technology and expertise as well as server fabric IP for the licensee to
design server chips for the Chinese market.

Licensing the x86 architecture for server use is an effective way to create
more competition for Intel and degrade their 99% market share all the
while profiting from otherwise stagnant IP.

Using licensees to chip away at Intels market share would also allow for an
easier entry of AMDs ZEN x86 server systems in 2017 as well as
their K12 ARM server systems.

Licensing deals are a great short term tool for AMD to capture capital and
gain investor confidence. This is especially important for AMD because of
their long standing liquidity problems.
 Servers & Datacenters

Foolish only on the surface: Intels virtual

monopoly, but not focusing on commoditized
market

Cold storage market: retention of inactive data

that an organization rarely, if ever, expects to
access (e.g. Facebook)

Less need for computing capability, core

performance is not the key purchasing driver of
chips, but rather energy consumption

AMDs versatility with x86 & ARM based chips

Produce custom chips for companies very Intel [] has

concerned with energy bills (e.g. technology
industry) 99% of the
AMD has manufacturing flexibility compared to
market for
Intel, which relives heavily on volume servers Source: Bloomberg (201
 AMD Better Suited than Intel for Custom Servers & Cold Storage
Severs
Pure Processing Pure Thermal Better Suited for
Performance Performance & Custom Production
All Power Usage
Custom
Servers

Less Access Speed Longer Storage Life Better Suited for

& Frequency & Power Usage Lowest Possible
Cold Required Cost
Storage
Servers
 Video Game Console Market: A Semi-Custom Stronghold
AMD powers all major video game consoles including
PlayStation 4, Wii U and Xbox One

Game consoles account for 42% of the $65 billion global video
game market (Trefis Research)

China lifted its 13-year-old ban on foreign video games

consoles if companies develop products in their government
designated free trade zone

Global video games market will surpass $100 billion by 2017

Source: Trefis Research (2014), Statista (2

 Focused Strategy: Becoming a Custom Player

General Recommendations SERVERS & DATACENTERS GAMING

Move aggressively into the Keep focus on video game

Reduce exposure to PC
Cold Storage market console market
market
Bet on ARM-based chips Handheld Video Game
Focus technology
(Zen for 2017) Devices
portfolio development on
ARM-based chips
Low Power Datacenters Long shot: VR (Oculus,
Remove stigma of being Vive, Samsung)
a budget brand
AMD should focus on these custom/semi-custom
Consider licensing x86 markets where its technological capabilities and
architecture only as a 3rd party manufacturing flexibility are best put to
short-term fix
use, and the market conditions are the most
Continue improving favorable moving forward.
bundling capabilities
V. Backup Slides
 REFERENCE LIST

Semiconductor Industry Association (2016), 2016 SIA Factbook [Online]. Accessed July 9th retrieved from:
http://go.semiconductors.org/2016-sia-factbook-0-0
Statista (2016), Global semiconductor consumption market share from 2003 to 2019, by region [Online]. Accessed
July 10th, retrieved from: http://www.statista.com/statistics/238228/global-semiconductor-market-share-by-region /
EE Times Europe (2016), Semiconductor market breakdown and 2016 forecast [Online]. Accessed July 10 th,
retrieved from: http://www.electronics-eetimes.com/news/semiconductor-market-breakdown-and-2016-forecasts-0
Global Semiconductor Alliance (2009), Semiconductor Commoditization: The $250 Billion Question [Online].
Accessed July 9th, retrieved from: https://www.gsaglobal.org/forum/2009/4/articles_krishnan.asp
Mercury Research (2016), Graphics Q1 2016 PR release [Online]. Accessed July 10 th, retrieved from: http://
www.mercuryresearch.com/graphics-pr-2016-q1.pdf
Bloomberg (2015). Accessed July 14th, retrieved from: https://
www.bloomberg.com/news/articles/2015-07-15/intel-forecast-shows-server-demands-makes-up-for-pc-market-woes
WCCF Tech (2015), AMDs Research Budget Reaches Record Lows in 10 years Intel and Nvidias at Historical
Highest [Online]. Accessed July 10 th, retrieved from:
http://wccftech.com/amd-budget-lowest-10-years/#ixzz4F42oCu2a http://wccftech.com/amd-budget-lowest-10-years
/
Trefis Research (2014), AMD: Growth Opportunities & Challenges in Game Console Market [Online]. Accessed July
10th, retrieved from: http://
www.trefis.com/stock/amd/articles/201014/amd-growth-opportunities-challenges-in-the-game-console-market/2013
-08-15
Statista (2016), Global unit sales of current generation video game consoles from 2008 to 2015 [Online]. Accessed
July 10th, retrieved from: http://www.statista.com/statistics/276768/global-unit-sales-of-video-game-consoles/
AMDs Current Business Health vs Competition
 ARM Architecture
More Efficient, Enables Low Power Servers

Targets Datacenters that are Limited by Power Usage

Targets Mobile Devices that Depend on Battery Life

Uses Reduced Instruction Set Computing which are smaller

and simpler

Instruction Decoder doesnt need to Translate code as much

as an x86 which Saves Power

x86 Architecture
Higher Native I/O and Stronger Performance
x8 The standard in servers, laptops, and desktop PCs

Image credit to Android Authority

6 Not Efficient Compared to ARM Architecture, and more Costly

Intel has Commoditized this Architecture for much of the

Semiconductor Industry

Uses Complex Instruction Set Computing which are Larger

and more Complicated