At its recently held APU 2013 Developer Conference, PC microprocessor manufacturer AMD announced its 2014 mobile product roadmap with which it aims to re-accelerate its growth momentum in the future.
The company derives more than 85% of its valuation from the PC market in our model. With this exposure, lower PC shipments led to a significant decline in revenues last year and the company incurred a loss of $1.8 billion. AMD announced a restructuring plan(contributing to this large loss) in Q3 2012 which is well underway. In addition to lowering its operating expenses, it focuses the company on introducing new product offerings and leveraging growth in adjacent markets and unaddressed segments to drive improvedperformance. AMD’s efforts seem to be paying off as the company returned to profitability and delivered positive free cash flow in Q3 2013. (Read: AMD Returns To Profitability With Strong Growth In Its Semi-Custom Business)
AMD’s new APU lineup aims to build on its leadership in graphics and gaming across devices, including tablets, 2-in-1s, consoles and ultra-thin notebooks. The company claims to have established a strong growth momentum in the low-power mobile computing market in 2013 and aims to build on the same with an updated product portfolio.
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In addition to providing an update on Kaveri shipments, AMD introduced two new APUs, code-named Mullins & Beema, which it plans to launch in the first half of 2014.
Kaveri & Beema Platforms To Help Spur PC Demand
The PC market has been under pressure. Cannibalization by tablets and smartphones combined with weak reception for the Windows 8 OS has been one factor. Lower demand in the enterprise and (more notably) consumer markets have lowered industry revenue as well, especially in mature markets (the U.S. and Western Europe). Even growth in emerging markets has been slower. PC sales declined marginally in 2012, and research firm IDC estimates shipments will decline by 9.7% in 2013. However, while overall PC shipments are forecast to decline for the next few years, IDC predicts the portable PC segment to grow at 8.7% between 2013 – 2017.
Kabini, AMD’s first quad-core APU with up to four CPU cores and eight GPU cores, offers solutions for entry-level and small form-factor touch notebooks. Earlier this year, AMD moved towards heterogeneous computing and Kaveri is its first processor with a heterogeneous system architecture. Around 47% of the Kaveri silicon is devoted to graphics, as compared to 31% in Intel’s Haswell chips.  Additionally, the graphics for Kaveri will be based on the same technology that is used for Microsoft’s Xbox One and Sony’s PlayStation 4 gaming consoles. Kabini chips will start shipping in desktops, laptops, servers and embedded systems beginning early next year.
The new AMD A-Series mainstream APU platform, code-named Beema, is expected to deliver up to 104% higher productivity performance per watt when compared to the Kabini platform.  AMD shipped over 80 million APUs between 2011 and 2012. The company expects shipments to rise to 150 million in 2014 and cross 300 million within a few years. 
Mullins To Offer Better Productivity & Performance Than Temash: Both Platforms Help AMD Leverage Growth In Alternate Markets
Temash is the industry’s first quad-core x86 SoC which, in addition to small form-factor notebook, targets the fast growing tablet and hybrid market segments. It offers a longer battery life compared to its predecessor and is specifically targeted at high performance tablets that can run full HD games and productivity applications. AMD’s new AMD A-Series low power APU platform, codenamed Mullins, is expected to deliver up to 139% better productivity performance per watt compared to the Temash platform.
AMD targets notebooks in the $350–$550 range, which has been its strong point historically. It has a number of upcoming touch-enabled Windows 8 notebooks at the $399 price point and intends to target the fast growing 7 inch form factor tablet market as well.
While we believe that AMD’s growing focus on the tablet market is a good long-term strategy, we do not think it will have a significant impact on its stock price. The company still has no plans to manufacture smartphone processors in the near future. We think AMD has a long way to go before it can effectively compete with Intel and established ARM players in the mobile computing market. Thus its strategy to target consoles and embedded systems seems more credible.
Our price estimate of $3.55 for AMD is almost in line with the current market price of $3.54.Notes:
- AMD Next-Gen ‘Kaveri’ Chips to Ship to OEMs This Year, eWeek, November 11, 2013 [↩] [↩]
- AMD 2014 APUs to Deliver Leaps in Performance and Battery Life in Tablets, 2-in-1s and Notebooks, AMD Press Release, November 13, 2013 [↩]