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Will AMD's New Strategy Shake up the Semiconductor Market?

Likely fueled by a combination of the company’s recent manufacturing challenges, struggling profitability, shrinking market share, and the recent lay off of nearly 12% of the company’s workforce, AMD’s new CEO Rory Read appears intent to forge a more decisive, independent future for AMD. Although we will have to wait until February for AMD to publicly unveil the company’s new strategic direction, recent actions and announcements illuminate the depth of change we can expect to see from AMD in coming months. In a recent interview with Mercury News, company spokesman Mike Silverman explained: “we’re at an inflection point...We will all need to let go of the old ‘AMD versus Intel’ mind-set, because it won’t be about that anymore.” 

So, if AMD intends to divert attention away from competition with its archenemy in the x86 architecture space, we are left wondering what the future will hold for this multinational semiconductor player. While AMD’s core competencies and strong presence in x86 will likely preclude drastic measures such as adoption of the ARM architecture, VDC anticipates significant changes from AMD in coming years, such as: 

  • Stronger investment in research and development of power-efficient CPUs to compete with ARM in the tablet, smartphone and other high-volume mobile device markets.
  • Growing focus on the company’s higher-margin server business, which saw double-digit revenue growth in the past year.
  • Potential exploration of the microserver market, optimizing its low-power CPUs to meet the needs of cloud-based companies such as Amazon or Twitter.
  • Continued efforts to transition chip manufacturing from Global Foundries, a 2009 spin-off of AMD, to Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest dedicated independent semiconductor foundry.  

For a company that has thus far appeared complacent playing second fiddle in markets dominated by Intel, developments such as these could truly represent the “inflection point” this Sunnyvale-based semiconductor company needs. VDC believes that while the degree of risk inherent in changes of this magnitude is indisputably high, these bold alterations to AMD strategy may finally set the company on a path to develop a strong and independent presence in the semiconductor market.  

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