AMD (NYSE:AMD) has finally come out with its much awaited 2nd generation APU’s – codenamed “Trinity”. With up to twelve hours of battery life and almost double the performance per watt of last years Llano APU’s, Trinity could give stiff competition to Intel (NASDAQ:INTC) powered ultrabooks, which failed to garner the expected response last year, as their steep price was a cause of concern for many.  Trinity is an improved design over the previous generation, enabling a best-in-class PC mobility, entertainment and gaming experience for mainstream and ultrathin notebooks, desktops, home theater PCs and embedded designs. We analyze the impact of Trinity chips on AMD’s notebook business which contribute close to 25% to our price estimate.
Increasing Popularity of Notebooks
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There has been a significant shift from desktops to notebooks in the last few years with Q3 2008 seen as the inflection point when notebook shipment outpaced desktop shipment heralding the advent of notebooks in a big way. With an increasing popularity and rising demand in both the developed and emerging markets, we see the global notebook shipments crossing 240 million units by the end of our forecast period.
Competition from Intel Powered Ultrabooks
With its Trinity APU’s, AMD is all set to power the next generation of low-power ultra portable laptops.
With power efficient and premium AMD Rodeon graphics engine, Trinity provides a great visual experience which combined with decreased power consumption makes it a compelling product. In addition it is well positioned to take advantage of the upcoming transition to Windows 8 operating system.
Unlike Intel’s Ivy Bridge, which brought a significant reduction in transistor size, Trinity carries on with last years 32nm fabrication process. The company claims that AMD’s “ultra thin” laptops, with the new Trinity chips could cost around half the price of an Intel Ultrabook.  Given the low per capital income in most emerging economies, the lower priced notebooks are expected to perform better in these markets. As these economies are slated to drive growth in the global PC market, AMD could leverage on its lower priced processors.
With a record number of design wins from companies like Acer, Asus, HP, Lenovo, Samsung, Sony and Toshiba based on its 2nd generation APU’s and VISION technology, we believe that AMD could see a slight increase in its market share in 2012.
However, Intel’s bigger ecosystem gives it better economies of scale and the ability to offer its chips at more price points, putting it in a strong position to challenge Trinity. Moreover, with competition intensifying with the slated entry of ARM based players in the PC microprocessor market, both Intel an AMD face potential threats in this segment. Thus, through the entire forecast period we expect its share to remain more or less in the range of 16-17%.
You can adjust the values in the graph above to see the impact of an increase/ decrease in the notebook market share, on our current price estimate of $8.39 for AMD.Notes:
- Second Generation AMD A-Series APUs Enable Best-in-Class PC Mobility, Entertainment and Gaming Experience in a Single Chip, AMD Press Release, May15, 2012 [↩]
- AMD reveals Trinity specs, claims to beat Intel in price, multimedia and gaming, engadget, May 15, 2012 [↩]