Earlier this week, leading PC microprocessor manufacturer AMD (NASDAQ:AMD) disclosed its future road-map for the fast growing embedded computing market. In addition to new improved x86 processors the company unveiled its first ARM-technology based processor, extending its ambidextrous strategy to embedded markets. It is now the first company to offer its customers both ARM and x86 architecture based solutions for low-power and high-performance embedded compute designs.
In an effort to reduce its dependence on the declining traditional PC market, AMD has increased its focus on new growth markets. Until last year, the company derived close to 95% of its revenue from the traditional PC market. However, as part of its restructuring efforts it intends to derive 40%-50% of its revenue from high growth business, including embedded solutions, semi-custom, ultra-low power client, professional graphics and dense server, in the next two to three years. AMD claims to be on track to derive 20% of its revenue from these non-traditional PC markets by the end of this year. 
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How Big Is The Embedded Processors Market ?
The embedded processors segment is a fast growing market with the embedded x86 market slated to reach $7 billion by 2016.  As per a recent VDC Research report, the market for traditional and intelligent embedded CPU systems will grow 36% in the next few years, from 330 million units in 2013 to over 450 million units by 2016. The x86 and ARM architecture together are estimated to account for 82% of the total addressable market. 
AMD’s Embedded Processor Market Lineup
AMD’s new product lineup includes four new processors which will start shipping next year onward –
1. Hierofalcon CPU SoC Family: It is AMDs first ARM-based platform which targets growth in embedded data center applications, communications infrastructure and industrial solutions. The ARM processors are expected to start shipping by the second half of 2014.
2. Bald Eagle APU & CPU: This next generation APU/CPU lineup will be based on AMD’s x86 microprocessor architecture code-named Steamroller. The processors will target the digital signage and embedded digital gaming segments and will be available in the first half of 2014.
3. Step Eagle APU SoC: This further extends the performance and low-power range of AMDs current Embedded G-Series APU SoC platform. Boasting of enhanced features and better performance-per-watt, these processors are designed for low-power embedded applications.
4. Adelaar Discrete GPU: This is AMD’s next-generation discrete Radeon GPU specifically designed for embedded applications. The GPUs will start shipping in the first half of 2014.
With the addition of the above products, AMD now has a broad range of embedded processors for different segments in its portfolio, offering a number of price, performance and power options to meet the needs of embedded designers. The company intends to take on the different segments in the embedded market by offering its customers a range of solutions to chose from – from low-power to high-performance - with a broad ecosystem of software and hardware partners supporting multiple operating systems including Windows and Linux.
We estimate embedded processors to contribute around 16% to AMD’s valuation and forecast revenue from this division to cross $1 billion over our review period.
Our price estimate of $3.63 for AMD is in line with the current market price.Notes:
- Advanced Micro Devices Management presents at Citi Global Technology Conference (Transcript), Seeking Alpha, September 4, 2013 [↩]
- Advanced Micro Devices’ CEO Discusses Q1 2013 Results – Earnings Call Transcript, Seeking Alpha, April 18, 2013 [↩]
- AMD Details Embedded Product Roadmap, AMD Press Release, September 9, 2013 [↩]