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Advanced Micro Devices officials are hoping that the company’s ability to build unique processors for customers will lessen its reliance on the contracting PC market and help it get back to profitability.
AMD executives, including CEO Rory Read, have been talking about embedded and semi-custom chips as being a cornerstone in the turnaround of an embattled company that—like rival Intel and OEMs Hewlett-Packard and Dell—has been battered by slowing PC sales worldwide. The company picked up a significant win last month when Sony said it would use AMD chips in its upcoming PlayStation 4 game console.
Now, the company is officially unveiling a business unit that will focus on the custom chip business. AMD on May 2 announced its Semi-Custom Business Unit whose job it is to leverage the wide range of intellectual property (IP) throughout the company to design and build one-of-a-kind chip solutions for customers. The company has high hopes for the business—Read has said he expects it to account for as much as 20 percent of AMD’s overall revenue by the end of the year.
“Embedded and semi-custom are growth areas for AMD,” Saeid Moshkelani, corporate vice president and general manager at AMD, told eWEEK.
AMD began organizing the business last year, and has brought in hundreds of engineers, as well as business and development workers, to it, said Moshkelani, who came to AMD last year from Trident Microsystems. They will work with the company’s IP around processors, graphics and multimedia to create custom chips for a wide range of devices, from gaming consoles and set-top boxes to tablets, smart TVs, notebooks and servers.
The engineers will use a modular approach to building the custom systems-on-a-chip (SoCs), reusing AMD’s silicon IP and design building blocks that can then be integrated with the customer’s own IP to create the unique solutions.
Charles King, principle analyst with Pund-IT Research, said the custom-chip route is a good one for AMD, but also one on which other chip makers—particularly those who, like AMD, are seeing greater pressure on their traditional markets, such as PCs—are heading. The ease by which chip makers now can integrate high-end graphics capabilities with standard CPUs is helping drive this trend, King said in an email to eWEEK.
“In the past, delivering those capabilities for, say, game console clients required a huge amount of custom work, up to and including developing entirely new graphics platforms (like the Cell technologies Sony, IBM and Toshiba developed for Sony’s PS3),” he wrote.
AMD’s Moshkelani said that for customers, being able to use custom SoCs optimized for their particular systems is a key differentiator in markets that can be crowded with competitors.
AMD Looks to Expand Beyond PCs With Custom Chip Unit
Under Read, AMD has worked to transform itself and broaden its technological assets. The company in February 2012 bought microserver vendor SeaMicro and its Freedom Fabric, and later in the year officials said it would build chips based on designs by ARM Holdings, whose designs dominate the smartphone and tablet markets.
Read has looked to pare expenses—in part by shedding jobs—as well as refocusing on the company on several core growth areas, including ultra-mobile devices (such as tablets and ultrathin notebooks), dense and energy-efficient servers, embedded devices and semi-custom chips. However, during an April 18 conference call with analysts and journalists to discuss first-quarter financial numbers, Read said that PCs will continue being important to the company.
“The PC market will remain an important business for AMD for years to come,” he said. “The PC is far from dead.”
The semi-custom chip business already is beginning to show results, King said.
“AMD is now the chip vendor of choice for Sony’s PS4, as well as the [Nintendo] Wii U win it announced last year,” he wrote. “Plus, rumors suggest the next-gen [Microsoft] Xbox will also sport AMD silicon, making a hat trick for the company over IBM whose custom Power-based chips supported past-gen systems. Some will argue that the game console market is in decline but I expect it’s still lively enough for AMD to ship millions or even tens of millions of units.”
In the long run, AMD had no choice but to make such bold moves, King said.
“It’d be embarrassing if AMD threw a party and nobody came, but I think the bigger risk is standing around doing nothing,” he said. “With the company’s traditional PC and server markets both under a variety of pressures, I believe Read’s instincts of searching out new vistas for AMD’s IP and other assets is entirely sensible and a far better strategy than waiting for the PC sector to come roaring back.”