AMD Launches Revolutionary Graphics Cards To Gain Share In PC Gaming
At the Electronic Entertainment Expo (E3), held in Los Angeles this week, AMD (NYSE:AMD) unveiled its line of next-generation Radeon graphics chips – Radeon R9 Fury series, Radeon R9 300 series and Radeon R7 300 series. These new AMD graphics cards mark a technology turning point in PC gaming, bringing super high resolutions, ground-breaking VR capabilities, exceptional experience in 4K, smoother gameplay, support for new, advanced APIs like DirectX 12 (which represents an exciting new era of gaming performance, flexibility and image quality for Windows based devices) and Vulkan, and groundbreaking form factors to gamers everywhere through a top-to-bottom line of GPUs that fit virtually every need and budget (Read Press Release).
While the Radeon R9 300 series GPUs and Radeon R7 series GPUs are scheduled for select retailer availability June 18 onward, the Radeon R9 Fury X GPU will be available on June 24 from select add-in card suppliers, including ASUS, Gigabyte, MSI, Sapphire, XFX, PowerColor and HIS.
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Our price estimate of $3.30 for AMD is at a 20% premium to the current market price.
See our complete analysis for AMD
Gaming Is An Integral Part of AMD’s Turnaround Startegy
Owing to a decline in PC shipments, market share loss to Intel (NASDAQ:INTC), and a late entry in new emerging markets, AMD saw its revenue base shrink in 2012 and 2013. Though the company reported a marginal improvement in its top line in 2014, as it successfully ramped up a diverse set of new products in non-PC growth markets, weaker-than-expected PC sales, the market share loss and a seasonal decline in the semi-custom business led to a disappointing Q1 2015.
Despite short-term weakness, AMD remains optimistic about its long-term growth opportunities. Though the company agrees that the next several quarters will be challenging, due to the adverse market environment, it remains focused on its strategy to improve its financial performance and build on its strengths through continued investment in its technology and IP, which will drive product innovation and differentiation.
At its 2015 Financial Analyst Day last month, AMD provided details on the company’s multi-year strategy to drive profitable growth by delivering next-generation technologies across the key areas of gaming, immersive platforms and data centers. Taking advantage of its expertise in high-performance CPUs and GPUs, visualization and power efficiency, the company firmly believes that the above mentioned segments will be cornerstones of its recovery plan. AMD’s success in the gaming industry, particularly supplying semi-custom chips for game consoles, was one of the key reasons which helped the company return to positive top line growth in 2014.
The PC Gaming Graphics War Between NVIDIA and AMD
In March 2013, AMD devised a unified gaming strategy to drive the gaming market across consoles, cloud platforms, tablets and PCs. The strategy has clearly paid off well so far, as the company now powers all major next generation consoles including Sony’s PlayStation 4, Nintendo’s Wii U and Microsoft’s Xbox One. However, when it comes to discrete graphics cards, Nvidia (NASDAQ:NVDA) still has an upper hand over AMD, as far as the current market share is concerned.
PC gaming represents almost 40% of the worldwide gaming market, which is higher than consoles, phones, tablets or any other individual gaming segment. [1]
Following AMD’s acquisition of ATI in 2006, the discrete graphics cards industry has only two key players – Nvidia and AMD. The two companies account for almost 100% of the GPU market. The market shares of the two companies have fluctuated a lot between quarters, but Nvidia still manages to retain its lead over AMD in the discrete GPU market with a 76% market share. As of February 2015, only 28.6% of Steam gamers have an AMD video card, compared to 51.8% for Nvidia, and the former’s share has declined from over 32% two years ago. [2]
Nvidia has pursued architecture updates aggressively and more quickly placed them in products while AMD, strapped for resources as it tries to compete with Intel in CPUs and Nvidia in GPUs, has fallen back on re-branding existing chips in many of its cards. In the past, AMD has often resorted to slashing its prices in order to better sell its graphics chips.
During its financial analyst meeting in May, AMD highlighted that its larger gaming efforts include not only consoles, but everything from casinos to PCs, and will leverage GPUs, CPUs, software and semi-custom chips. Plans for AMD’s Graphics Core Next architecture include high-performance capabilities with twice the power efficiency of current GPUs and a FinFET 3D transistor architecture. [3]
AMD has launched a number of new products (CPUs, APUs and GPUs) with added features and improved efficiency, so far this year. We forecast the company to retain its share in the discrete GPU market (notebooks and desktops) in the long-run.
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Notes:
- Nvidia’s CEO Discusses F3Q 2014 Results – Earnings Call Transcript, Seeking Alpha, November 7, 2013 [↩]
- The End Of The Battle Between AMD And Nvidia Won’t Be Great For PC Gamers, Digital Trends, March 26, 2015 [↩]
- AMD Launches Radeon GPUs with High-Bandwidth Memory, eWeek, June 16, 2015 [↩]