AMD’s Entry Into Tablets Will Not Help Its Stock

by Trefis Team
+24.48%
Upside
3.35
Market
4.17
Trefis
AMD
AMD
Rate   |   votes   |   Share

Though most of its competitors such as Intel (NASDAQ:INTC) and Texas Instruments are being hurt by the PC slowdown, AMD (NYSE:AMD) has been the worst hit so far. AMD’s stock price has declined by more than 60% since March 2012. In addition to macro headwinds, internal factors such as a change in leadership, a manufacturing glitch last year and its slow response to rapidly changing consumer needs has reduced investor confidence in the company. (Read Our Article: Why AMD’s Stock Collapsedand How It Can Recover)

In an effort to strengthen its competitiveness and reduce its expense base, AMD announced a restructuring plan in Q3 2012. To stay in-line with changing consumer needs, the company intends to increase its focus on high growth markets of ultrathins, convertibles and tablets. At the recently concluded Consumer Electronics Show (CES) 2013, AMD reiterated its strategy to focus on developing low-power technologies by introducing new processors for these segments.

Temash, a low-power mobility processor for Windows 8 tablets and hybrids, was one of the key highlights of AMD’s presentation at CES. Temash will be the industry’s first quad-core x86 SoC and promises to offer significant performance and power improvement over its predecessor. It targets tablets that run on the Windows 8 platform. Though Microsoft’s Windows 8 platform currently accounts for a very small portion of the tablet operating system (OS) market, it is expected to grow rapidly.

The tablet market is currently dominated by ARM technology with technology giant Intel, which is also based on the x86 architecture, still struggling to make its mark in the market. While AMD’s upcoming processors will only support the Windows platform, Intel processors run on both the Android and the Windows OS, which offers them a larger market to target.

Though AMD’s growing focus on mobile computing is a welcome move, we feel it will not make a significant contribution in its top-line growth and will have a minimal impact on turning around the stock price. AMD has a long way to go before it can effectively compete with Intel and established ARM players in the tablet market.

See our complete analysis for AMD

Temash promises a significant improvement over predecessors

Failing to score significant design wins, AMD’s earlier efforts to enter the tablet market have been unsuccessful. Its first two tablet chips, including last year’s Hondo and Z-01 tablet chip failed to make an impact in the market.

Temash will be industry’s first quad-core x86 SoCs though it will be available in both dual and quad-core variants. AMD claims that the new processor offers 100% higher graphics processing performance compared to its predecessor, the Hondo chip.

Temash offers a longer battery life and is specifically targeted at high performance tablets that can run full HD games and productivity applications. Temash-based performance tablets and hybrid notebooks will be available in the market later this year.

AMD intends to stay away from the low-cost tablet market for now

Apart from Apple, the tablet market is dominated by ARM technology-based players such as Nvidia and Qualcomm. AMD also lags behind Intel, which entered the mobile computing market last year. Like AMD, Intel’s chips are based on the x-86 architecture and are used in tablets for companies such as HP, Lenovo, Dell, Acer, Asus, etc.

At CES, while Intel introduced its new low-power Atom processor to tap the fast growing low-end smartphone and tablet market, AMD’s current market strategy focuses on staying away from the low-cost tablet segment.

Many popular low-cost tablets such as Google’s Nexus 7 and Amazon’s Kindle Fire run on the Android OS and are priced at $199. While Android is a popular choice for low-cost tablets, the Windows platform is more prominent in the $499+ tablet range. Targeting high performance tablets, AMD’s Temash aims to gain a foothold in the $499 – $599 tablet price range. [1]

Potential market size for AMD’s Temash tablet chip is lower than Intel

With a 54% market share, Apple’s iOS is the clear winner in the tablet market. However, owing to growing demand for low-cost tablets, especially from emerging economies, Android is not far behind and accounts for approximately 43% of the market.

Despite the launch of Windows 8 and Microsoft Surface last year, Windows OS based tablets were estimated to account for only 2.9% of total tablet shipments in 2012. However, research firm IDC predicts Windows to register the fastest growth in the tablet OS market in the next few years and estimates its share to increase to 10.3% by 2016. [2]

The worldwide tablet shipments are estimated to reach 282.7 million units by 2016, which means that the Windows OS will power approximately 29 million (10.3%*282.7) tablets by 2016, as per IDC’s estimate. [2] While Android’s market share is estimated to decline, it will still account for 112 million units (39.7%*283) of tablets shipped in 2016, almost four times that of the Windows platform.

Tablet OS

2012 Market Share (%) 2016 Market Share (%) CAGR 2012 – 2016  (%)

iOS

53.8%

49.7%

20.9%

Android

42.7%

39.7%

21.0%

Windows

2.9%

10.3%

69.2%

Other

0.6%

0.3%

7.7%

Grand Total 100.0% 100.0%

23.3%

Source: IDC

In addition to ARM, the market leader in mobile computing, AMD’s entry in the tablet market lags behind Intel that offers support for both the Android as well as the Windows platform. Thus, its target market for tablets is higher compared to AMD, whose upcoming Temash processors will only support the Windows platform. Considering that both companies work on the x86 architecture, AMD’s tablet processor will have to be superior in performance compared to Intel’s Atom processors to effectively compete with Intel in the market.

Though AMD’s growing focus on tablets is a welcome move, we feel the company has a long way to go before it can make a significant mark in the fast growing tablet market.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. AMD not interested in low-cost tablets, Computer World, January 8, 2013 []
  2. IDC Raises Tablet Forecast for 2012 and Beyond As iOS Picks Up Steam, Android Gains Traction, and Windows Finally Enters the Market, IDC Press Release, December 5, 2012 [] []
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
AMD Logo
  • commented 2 years ago
  • tags: AMD BRCM TXN QCOM INTC
  • I think AMD is in a better position than Intel at this stage. AMD has restructured for low prices, Intel will go broke in a hurry if they will sell at the low profit margins that ARM and AMD do. AMD is rebounding and will have 64 bit ARM processors next year, and AMD invented the 64 bit x86 processor, so they will do very good with the 64 bit ARM processor.

    Intel has mostly a chip foundry advantage, but it does not have high end GPU's and it's business model does not work at low profit margins. intel is bleeding billions in trying to come up with chips that can compete with the low power ARM processors and is losing billions building new chip foundry factories and in research.

    Intel profit will sink for a couple of years until it find hardware that can compete with the low power ARM devices and until it finds the low profit margin business model. Sandy Bridge, Ivy Bridge, and the future Haswell are still no match for ARMs low power capabilities. And next year ARM with NVIDIA, AMD, QUALCOM, etc. are releasing the most powerful and new 64 bit ARM chips, which will be the chips that will erode the profit of Intel's 84 bit processors.

    AMD is 64 bit x86 and ARM and it has achieved a low profit margin business model. Intel is not and does not have high end GPU's and does not have a low profit margin business model. I think Intel will continue to slide, while AMD may become the new Intel in the x86 and ARM business. Even more when Intel loses it's edge when GlobalFoundries and TMSC release their 22 nm, 14nm, 3D transistor FinFET technology.
    AMD Logo
  • commented 2 years ago
  • tags: AMD BRCM TXN QCOM INTC
  • Core Manufacturers
    Hi,
    i gone through your website about Core Manufacturers its wonderful.if you want any additional information about Core Manufacturers visit this website:http://www.powercores.com/home.php
    AMD Logo
  • commented 2 years ago
  • tags: AMD BRCM TXN QCOM INTC
  • Nice write up, but it's hard to believe it's stock won't rise after seeing it quickly rising. I have seen a lot of news about this company lately and it caught my eye.

    AMD is known for it's low cost chips, the company is in a bad spot and theres no way of hiding it. Of course it's going to to jump directly against Intels more expensive current x86 chips, but they have already announced they will be making ARM based chips. They also hired a couple people from Apple that worked on the Ipad and Iphone processors. The company seems to be heading in the right direction, I don't know if they have a new director, CEO or what but that company has been making some good calls lately. The new ARM chips AMD produces will surely be less expensive than INTELs or NVIDIAs giving them an advantage to be in more Android phones.

    What it's the authors opinion on what the company should be doing, that it isn't trying to do already?