An Outlook on Scientia's AMD Outlook

If you haven't done so, please go read Scientia's blog:
http://scientiasblog.blogspot.com/2007/05/amd-q1-2007-outlook.html

Scientia said: “It doesn't seem reasonable though to assume that general demand has fallen off as sharply as AMD's numbers so there must be another reason... The only other possibility I can think of is that AMD's cpu sales fell off because of delays in delivering chipsets…”

I find this bizarre. When did AMD ever have problems with chipsets? AMD announced the reasons why CPU sales were low, why invent another one? The only reason why AMD’s Q1 sales is horrible is because they stuffed the channel in Q4 which resulted to an artificially inflated demand. Naturally, since demand didn’t pick up the next quarter, AMD’s customers stopped ordering from AMD while they clear their inventory. Anyone who wished to understand how much AMD’s demand declined, all you need to do is average out the volume sales for the Q4’06 & Q1’07 to cancel out the effect of channel stuffing. Other factors also contributd like logistics and poor product mix. But never chipsets.

Scientia said: “I've seen comment after comment about AMD's R600 delay yet no mention of Intel's 965 chipset being two months late”.

That’s because AMD’s R600 isn’t only 2 months delayed and isn’t as insignificant as Intel’s chipset. The survival of AMD’s graphics business hinges on the delivery and performance of R600. I’m sure the same thing cannot be said about Intel’s P965. And of course nobody comments about Intel’s chipset delays because nobody is really interested about chipsets.

Scientia said: “I've now seen people proclaiming that R600 is a total failure when it has already been suggested in the trades that AMD's R600 orders will max out the capacity at foundry giant TSMC.”

Normally we declare a product to be a failure when its has seen excessive delays, broken drivers, poor performance and missing features. But never mind all that. Instead let's look at how the orders have maxed out TSMC's capacity which just so happens is the ideal state of a foundry.

Scientia: “Without doubt though, the good news for AMD is mini-DTX”.

AMD is creating more market segmentation in the desktop space where margins and market share have been declining year over year against mobile. How is this good news again? It looks like the only reason why AMD is pursuing this strategy is to create a niche for its uncompetitive desktop offerings. Intel isn’t interested and it appears like a lot of mobo makers are either.

Scientia said: “So, AMD is just going to have to bite the bullet until Q3 when things should improve. “

This statement is highly speculative without any real performance benchmark from Barcelona. Not to mention its very low volume shipment for the rest of 2007. AMD themselves said K10 won’t contribute to AMD’s bottom line in 2007. Anyone who suggest otherwise is fooling themselves.

Scientia said: “The chipset and graphic sales should be up by then and AMD should be fully anchored on the desktop with mini-DTX and DTX. “

This is a classic example why Scientia get’s everything wrong (see his previous predictions). He appears to have the tendency to heighten the impact of some of AMD’s insignificant business strategies and at the same time downplaying everything else that truly matters. Like Intel’s quad-core offering now becoming mainstream for example. At the moment all I see is a pending disaster with the R600 who’s fast becoming the media laughing stock and unsupported desktop form factor.

Scientia said: “AMD's position does seem fairly good going into 2008 since it still insists that 45nm is on track and will be ready six months after Intel's."

Intel is ahead by a year as it will start loading 45nm next quarter to be able to ship products by Q4. AMD proclaims 45nm readiness 2H'08 (Q3-Q4'08). Now isn't that a year?

Scientia said: “So, AMD could potentially improve its volume and revenue position substantially by end of 2008."

I have seen nothing from the lengthy blog that suggest any concrete plans to turn things around. Barcelona is once again over emphasized. The same prediction that has led Scientia to incorrectly estimate AMD’s last two quarters is only repeated. No need to guess the out come of his new prediction.

AMD Explains the Fragging

From uberpulse:

AMD explains why 16Core Barcelona got fragged by an 8C Clovertown:

"The objective of our demo was to show performance scaling from our current dual-core processors to our upcoming quad-core processors within the same thermal envelope and drive home the point through a real-world demonstration that customers could expect to see 2x the performance without an increase in power consumption. "

Sounds like disaster control to me. Assuming that AMD is telling the truth and did intend to show performance-per-watt scaling, then I don't really see the value of the demo. The fact still remains that Intel's V8 showed better performance using less silicon. It is great that K10 scales well against K8 but if Barcelona comes out as a non-performer, who cares? Nobody is interested in comparisons to an already beaten product.

The question AMD deperately needs to answer is why is it that the best they can come up with is a crippled Barcelona while Intel's Penryn looks stable and ready to go.

AMD also said: "One thing to note, the system we showed, while it was a 4P, it was running only 6GB of memory".

I'm sorry, this is really a lame excuse. Why cripple the benchmark? I never heard of anyone running a benchmark and not optimise the setup to get the full potential of the system. Or maybe AMD can't afford the extra memory due to cost cutting.
[thanks to the anonymous poster for the link:]

Unreleased Barcelona will be DOA

From ZDNET:
The company ran a demo comparing the performance of two four-socket servers, one using the quad-core Barcelona chip and one using a dual-core Opteron chip. The demo measured the performance of the chips on an imaging benchmark called POV-Ray, ...
The quad-core chip processed about 4,000 pixels per second in rendering the image, while the dual-core chip could only hit around 2,000 pixels per second. Allen said Barcelona was not running at the fastest clock speed that will be available at launch, although he declined to specify the speeds that will be available... AMD did not test Barcelona's performance against one of Intel's quad-core Clovertown Xeon processors, but Allen said Barcelona "will be the highest-performing x86 chip out there. It will blow away Clovertown."

Remember the number: POV-Ray at 4000 for a 16-core 4S Barcelona config (4Sx4core).

To compare that number, check this Intel V8 Review: http://www.xbitlabs.com/articles/cpu/display/intel-v8.html
Intel's 8-core Clovertown scores 4677 p/s in POV-Ray.

UPDATE: From Uberpulse: "Why do you need 16 cores, when you can do better with 8. Our 8 core system is 30% faster than the 16 core machine AMD showed to the press yesterday. I just don't understand how they can claim to be 40% faster", said Francois Piednoel, an Intel engineer present at the show.

It takes Intel half the number of cores to beat Barcelona! If this doesn't spell disaster for AMD, I'm not sure what. Forget about competing with Intel. I just hope that AMD releases Barcelona soon enough to at earn at least something to pay for the bancruptcy fees.

AMD`s Hype-per-Watt Leadership

From Digitimes:
“While the Puma platform looks set to include technological features which will improve performance and battery-life for notebooks; according to AMD hardware based on the new platform is not likely to hit the market until mid-2008, i.e. one year from now. While it is nice to get a preview of upcoming products and technology, with AMD's recent track record of confirmed (R600) and speculated (Barcelona) product delays, and poorer than expected performance (HD 2900 XT), it is questionable whether, when (or dare we even say if) it is launched, Puma will meet the hype AMD is currently trying to generate though these early announcements”.

A tide of frustration and scepticism is growing against AMD. This company is getting too good in making PowerPoint presentations while becoming worst in releasing products on time with the promised performance. AMD’s “proof to claims” ratio for the last 2 years is either a very low decimal number or zero. AMD may have achieved overall success is the last few years but by the way it has been behaving, it appears like it hasn’t put down the party hat. The exact opposite can be said about Intel with its product pull-ins. As if Intel is trying to compete with itself. We’ve seen the public benchmark of Penryn and soon, Harpertown – both 2008 releases while AMD’s 2H’07 product, one that they dreadfully need to survive is nowhere to be seen. With the unflattering product reviews of the 65nm Athlon X2, QuadFX, R600 & HD2900XT, it is easy to draw a conclusion as to why AMD is afraid to show any real benchmarks.

As AMD is desperately trying to come off as the innovator in the industry, they had no choice but to pre-empt Intel’s Santa Rosa product release with their very own “me-too!-Centrino-copied” mobile platform. The big difference is Santa Rosa was announced sitting inside an OEM laptop, Puma was announced on a PowerPoint slide. Luckily for AMD, they won’t hear Intel shooting its mouth about someone copying their strategy. It’s not because AMD copying Intel is status quo, it’s just that everyone knows being a year behind is embarrassing enough.

Otellini Hints Why In The End, There Will Be Only One

Otellini: "Chip manufacturing gets harder and more expensive all the time. It's basically the laws of physics and the laws of economics at play. To build a modern semiconductor plant which uses 300-millimeter wafers, and state-of-the-art lithography with designs measuring 45 nanometers, costs close to $4 billion. Then there are the tools inside it, which amount to close to a billion dollars, per generation of technology. That means you need to generate $4 billion to $5 billion a year in revenue out of it. There are not many semiconductor companies that are $5 billion or more in revenue. So economics leads many companies to collaborate. "

AMD currently generates roughly $5B annual revenue but runs 2 Fabs. It is clear that the reason why AMD needed to capture 30% marketshare was to generate enough revenue to support 2 Fabs. Having failed that goal, it will be tough for AMD to return to profitability without significant sacrifices. We've seen a few adjustments, one of which was to halt CAPEX on 300mm upgrades for Fab30. This will affect the company's long-term competitiveness in cost and still this isn't enough to turn the company around.

Otellini: "No. 2: The laws of physics mean chip making gets harder and harder. We think we have some breakthrough technology at 45 nm. We think it will be harder for people to do that than it was in the past at, say, 65 nm or 90 nm. Our lead over the competition may extend with this generation and probably extend a lot after that. This is not a macho thing. It's all based on sheer economics. "

AMD's reliance on Foundries to support volume needs at the low end is not a viable long term solution to compete with Intel. The diverse set of customers Foundries have forces it to focus development on process shrink and less on transistor performance for logic devices. As Intel rolls over its volume runners to 45nm, AMD's foundry made processors will look 1-2 generations behind. These single core 90nm, foundry made CPUs will never command a high enough price to make any business sense. AMD can go on and continue the price war with useless processors but AMD needs to understand that the quicker they commoditize CPUs, the quicker their demise will be. We've already seen what the lastest price war has done to AMD's profits - or lack of.

A Talk With Paul Otellini.

Why the AMD Stock Upgrades?

"ThinkEquity analyst Eric Ross, who boosted the stock from "sell" to "buy." Ross lifted his rating based on what he said appear to be strong orders from Dell ..."

AMD is receiving upgrades from different analysts in the past few days, mostly from a “Sell” into a “Buy" rating. This should be pleasant to hear for a few AMD fans, particularly the hypocrites who have the tendency to believe analysts only when they have something good to say. The positive news this time focuses on AMD’s inventory which appears to be on a recovery. While this may be one good step away from AMD’s quagmire, it isn’t out of the woods yet. A stock upgrade can make sense considering how much it was beaten down from its 52-week high.

The issues AMD reported last quarter was primarily about lower ASPs and significantly lower volume sales. With such problems, easing of inventory does not necessarily point to a recovery. In fact the opposite occurs whenever inventories are cleared. ASPs fall further to move products quickly and shipped volume decline to allow time for market consumption. In fact, one can assume that this is precisely what we saw last quarter as AMD ‘allegedly’ stuffed the channel in Q4’06 and suffered for it the next quarter. AMD may be genuinely on the path of inventory recovery this quarter as its last guidance points to a flat to slightly better Q2. AMD should see more stability in pricing and customer orders from here on. This is definitely good news for AMD but the nagging reality of low ASPs and low volume remains. We all know what AMD needs to do to correct this and rumours of delays, bugs and lower speed bins doesn’t sound very encouraging for a possible upside.

Making Sense of Intel's July Price Drop

Intel’s recent announcement of another round of price drop in July must feel like another stake through the heart of AMD’s struggling business. If AMD lost a massive amount of market share last quarter due to Intel’s dominant product portfolio, for example a C2 Quad Core at $500, one can easily expect the hurt it will do to AMD’s if that same product drops half price. Without an existing competitive product when Intel’s price cut arrive, it’s easy to predict another decline in revenue and ASPs for AMD for the 2nd half of the year.

Without decent competition and a healthy demand for C2’s, Intel’s change in pricing can only be due to a healthy process resulting to an increased supply of top-end CPUs. Always remember that Intel prices it products at the point of ‘maximum revenue potential’. It is ridiculous to even consider that Intel is reducing prices across the board in response to a low-volume competing product that is only going to ship at the late end of the year. This reasoning would only be valid if, 1) Intel reduced prices only on directly competing products, 2) if Intel is dumb enough to reduce prices months in advance of competition and lose revenue.

There is also an increased chatter of a possible 45nm ramp pull-in from Intel. 45nm material suppliers have already increased guidance for Q2 based on orders from an ‘undisclosed’ customer. It doesn’t require a lot of thought who’s the only Fab running 45nm this year. Pulling in the price drop from the original schedule of October to July further reinforces that Intel is executing well ahead of schedule. If Intel has started loading 45nm this quarter, counting 15 weeks from wafer starts to customer built, I’ll leave it to your imagination what can be done at the start of Q4’07.