Unlike Intel, AMD was unable to report record revenues. What they were able to report was a small profit. They also were able to show some growth above that expected by most analysts, and even those in AMD. Earlier this quarter AMD warned that revenues might not be as high as expected, but in the end AMD seemed to have done ok.
The company had a gross revenue of $1.69 billion, which is well above the expected $1.66 billion many analysts were predicting. Net profit for the quarter came in at a reasonable $97 million. This is a big improvement from Q3 2010, which had a net income of -$118 million. Being positive for a quarter is a big accomplishment for AMD. Controlling costs as a fabless semiconductor company is a lot easier as compared to running multiple Fabs and researching and implementing next generation process nodes. Margins increased to 45%, but are still a far cry from the 60% plus that Intel achieves. ASPs are also down due to the large amount of low priced, 45 nm parts that AMD still sells.
The primary movers for the positive results for AMD are their lineup of APUs. The “Bobcat” based APUs have been a success for quite a few months, and with their superior performance and features as compared to the competing Intel Atom series, AMD is making a tidy sum off of them. The big winner in the APU sector is of course Llano. The uptake on this processor in the mobile space has been tremendous. AMD has seen a 35% increase in mobile sales, and when combined with the already strong Brazos/Ontario platform, AMD is finally a factor in the mobile market. The only real issue in this market that AMD is facing is that of continued poor yields on Llano processors.
Apparently this first product combining a high performance manufacturing process, a quad core CPU, and a pretty hefty GPU has lead to quite a few issues. A lot of finger pointing between GLOBALFOUNDRIES and AMD has been going on, so it is hard to say where exactly the blame is. Considering the huge number of transistors of the part, plus the complexity of the design, I am sure that there are plenty of areas where blame can be assigned. Yields are improving over time, but we will not see them hit yields associated with mature products. AMD and GF could eventually fix everything with improvements in process and design, but it will likely not come to that. Instead AMD is pushing ahead very aggressively with the Trinity APU, which is a combination of a 7000 series GPU and the improved “Piledriver” CPU architecture. All indications point to this being a much better product in terms of performance, power consumption, and perhaps most importantly the ability to manufacture this design with good yields.
For all of the improvements in the mobile market, AMD saw a downturn on the desktop. AMD simply has not been competitive with the Phenom II and Athlon II series of chips when going up against the Sandy Bridge parts from Intel. Bulldozer was continually delayed and only recently started shipping for the desktop market, but that income will only be reflected in the Q4 results. Unfortunately for AMD, Bulldozer’s performance and thermals do not match up well to Sandy Bridge from Intel. While AMD is working on a new revision for desktop use, we will not see those parts until January at the earliest. Also, the Piledriver update for desktop will not be available until mid 2012. By that time Intel will have 22 nm products in volume.
Llano is helping to keep the boat afloat!
On the server side things are looking up. Interlagos has been selling relatively briskly, and Cray is essentially buying every chip they can lay hands on. AMD is also starting to ship to other partners with products to be available in late Q4. While the Bulldozer architecture is not entirely suited for the desktop market, it does look to have some decent success with servers. The decisions made in the design are more in line with HPC applications which can utilize a lot of threads, and the FPU design is again better utilized in these scenarios. So while Bulldozer is pretty unexciting on the desktop, HPC workloads may actually see a big boost as compared to previous generations. Considering the lack of Bulldozer desktop parts on the market right now, we can safely assume that AMD is pushing as many chips into the server market as possible.
GLOBALFOUNDRIES does appear to be the overall limiting factor. There just simply are not enough 32 nm wafer starts to fulfill the demand for AMD’s products. Yields on current Bulldozer products do appear to be in line with expectations, but Llano still suffers. AMD still is trying to meet demand on the Llano products, but doing so requires more 32 nm wafer starts for those products. The balance between Bulldozer and Llano does not appear to be easy to figure out for AMD.
The graphics division had a good quarter as well. Sales have increased, the ASPs are also on the rise, and they made a nice little profit for themselves. These sales are kept separate from the APU numbers. AMD has increased its sales in desktop discrete, mobile, and professional markets. Considering that both Sandy Bridge and Llano have pretty robust integrated graphics solutions, it is not surprising to see desktop graphics sales shift from the low end towards a richer midrange mix. The sub-$100 market has been gutted by the latest CPUs and their integrated graphics, which in the end is a win for both AMD and NVIDIA. These low end discrete parts are very low margin, and by selling fewer of these cards the ASP for the graphics lineup actually improves.
AMD has survived another day, and actually came out ahead of it all. They continue to move forward and still provide a fairly competitive product. Production of 28 nm graphics products has already begun, but the expectation is that these will be lower end parts and mobile processors. Initial availability will be late 2011, but mass availability will not be until late Q1 2012. Trinity does look to be released in the early Q1 2012 timeframe, but these parts will be aimed primarily at the mobile market at first. AMD will introduce socket FM2 infrastructure later in the year so as to support Trinity on the desktop. There is still some confusion if Trinity will be compatible with FM1 boards, but at this point I do not necessarily expect it. Another major Bulldozer revision is planned for Q1 2012, and there are some expectations that it will fix some of the performance issues we are seeing on the desktop, as well as address the higher than expected TDP problems with the current revision of chips.
AMD expects further growth next quarter, but that it will be fairly small overall. The expectation is around 3% revenue growth, plus or minus 2%. So at worst we might see $1.7 billion, and at best upwards of $1.77 billion. Margins should show a small improvement as manufacturing gets sorted out. We also expect to see seasonal growth in graphics plus first revenue shipments of 28 nm products.