As the chipmaker plows profits into research, it's hoping for good things from a new design team in Massachusetts.
The chipmaker this summer established a new chip design team at its Boston Design Center here, a continent away from its Silicon Valley base, as part of a worldwide effort to strengthen its ability to deliver new processors and boost its sales.
The chipmaker has been shining financially in recent quarters and is staking some of that money on design efforts to help it stay competitive. But it still has a long way to go to catch Intel.
AMD's customers, meanwhile, had been looking for "all kinds of variations" on the company's products, said David Rich, director of business development and customer support for AMD.
"We wanted to have more design groups," Rich said. "So we decided to make the Boston site a real (processor design) site because of the talent that's in the area."
AMD has been shining financially for the past few quarters, thanks to products such as its Opteron server chip, which can handle both 32-bit and 64-bit instructions, and has begun plowing more development resources back into its processor business. The chipmaker now has five PC and server processor design teams of varying sizes. A sixth team works on non-PC chips, such as the Geode for set-top boxes and industrial handhelds.
The three newest teams were all established this summer, including the engineers in Boxborough, a smaller group at the company's India Engineering Center in Bangalore and a team focusing on mobile processors at the AMD Japan Engineering Lab in Tokyo. Their efforts are being coupled with work done by existing design groups at the company's headquarters in Sunnyvale, Calif., and in Austin, Texas. AMD is out to create a variety of new chips to help it boost revenue and profit, and gain a larger portion of the PC processor market away from rival Intel.
In their first few weeks at AMD, new members of the Massachusetts-based team were occupied primarily with getting up-to-speed on working for the company, through projects such as creating and joining in universitylike classes on chip design--Sun and AMD's chips use two different architectures. They also did team building through activities such as constructing and launching model rockets.
Now they're ready to get down to business, Rich said.
"The people that were here already have lots of experience, and the people we've hired--it's not like these guys were new grads that went to Sun--a lot of them had previous experience before that," Rich said.
AMD aims to take advantage of local talent in a similar manner in Bangalore, where it hopes to have a team of 40 engineers in place by the end of this year.
The Massachusetts team has expertise in several areas, including multicore chips, which pack two or more processor cores into a single piece of silicon, and low-power processors that make them ideal for notebook PCs and servers. Both are product areas that AMD considers important for its growth.
For example, AMD plans to start offering dual-core processors for workstations and servers in mid-2005. It recently demonstrated a dual-core Opteron chip running in a Hewlett-Packard server. Dual-core chips for PCs, due later in 2005, will become AMD's main products over time.
The move to add enhance its processor design efforts is a good sign for AMD, which till now has essentially worked on one processor at a time, according to Kevin Krewell, editor in chief of the Microprocessor Report.
"I think what this means is that AMD now has the critical mass of design talent to do more than just one (processor) core at a time," Krewell said. "Now it has enough capability to run two fully independent teams to deliver two products at the same time."
Krewell predicts that AMD will focus its newfound talent on chips for notebooks and servers.
"Desktop parts could pretty much fall out from designs, from either mobile (processors) or servers, at this point," he said. "Notebooks are a growing segment of the corporate and home marketplace, and servers are where the (high) average selling prices are--the dollars AMD needs to get a steady revenue stream."
The other side of the fence
AMD is also working on adding more features to its chips to improve computers' performance or make them more secure. One, code-named Pacifica, is intended to help processors work well with software intended for virtualization, or partitioning a computer to help it run different programs simultaneously. Another, code-named Presidio, is focused on security.
While AMD's processor design labs will contribute multicore designs and work to make technology such as Pacifica a reality, they are still only part of the puzzle for the chipmaker.
The company also needs other pieces to fall into place, such as continued execution by its manufacturing operation, which recently began the shift from 130-nanometer production to 90-nanometer production. It also has to maintain a healthy relationship with software makers such as Microsoft, win more business from computer makers and earn the loyalty of computer users in the consumer and business markets.
For AMD, "success isn't so much about market share as it is about sustained profitability," said Dean McCarron, an analyst at Mercury Research. The company would do well to protect its margins through designing better chips, for which it can charge more, or through lowering its costs through manufacturing, he said. "If you're losing money on every part, it doesn't matter if your market share is at 20 percent or 80 percent."
The chipmaker's unit share of the PC processor market fluctuated in earlier days, rising to more than 20 percent in 2001, but the company has held an average of about 16 percent over the last five years, according to Mercury. That means that AMD will have to make fairly significant increases in market share if it wants to put a big dent in Intel's business. Intel typically sees share figures of 80 percent or more.
The 10 percent solution
AMD naturally wants more than unit sales. It wants to improve its positions in more lucrative markets, including servers, for which it has set a goal of capturing 10 percent of unit shipments in the x86 server market by the end of this year. It's aiming to use rising revenue as a barometer of success as well.
For its part, the Boston Design Center will play an important role in furnishing AMD with new processors to sell. But even without a chip design group, the once small outpost of about 35 former API Networks employees had risen to become a major hub of operations for AMD's Computational Products Group (CPG), which handles the company's processors business.
The office, which now employs about 160 people, hosts the CPG's customer support operation, including its Professional Services Group, which specializes in assisting customers with designing computers based on AMD chips. Its job is also vital to AMD, as the chipmaker wants to see as many computers as possible containing its latest chips.
Although he couldn't comment on many of the projects the group assisted, AMD's Rich indicated that many of the Opteron-based workstations and servers on the market today were created with its help.
The center also hosts a team responsible for marketing AMD chips in high-performance computing applications, in which large numbers of processors are strung together in order to harness their collective power, and continues to assist in the development of HyperTransport, the high-speed chip-to-chip data interconnect that AMD helped create.
Still, the most important job for AMD will be to find the right mix of products and to guide them to market.
"The key to this business isn't having (one) good product. It's having a suite of good products, followed by the next set, followed by the next set. That's how you develop a customer base that's solid," McCarron said.
Investing in the design of new products "is something that's necessary," he said. "This isn't a one-shot business."