AMD repack­ages its chips

AMD is repack­ag­ing its ex­ist­ing chips, from FX to Sem­pron, for mid-to low-end PCs, finds Agam Shah

Tech Advisor - - Contents -

AMD’s Athlon and Sem­pron chips may not drum up as much ex­cite­ment as its Ryzen pro­ces­sors, but cus­tomer loy­alty has helped them stick around for more than a decade.

So what hap­pens to those and other PC pro­ces­sors such as the A-se­ries and FX when the firm’s new Ryzen chips start flood­ing the mar­ket in March? For now, AMD has no plans to make changes to its line-up of ex­ist­ing pro­ces­sors. In­stead, they will be re­grouped to fo­cus on price-sen­si­tive PC buy­ers.

Ryzen-based sys­tems are ex­pected to be priced at a pre­mium, com­pet­ing with In­tel’s top gam­ing CPUs. AMD’s FX chips will be aimed at bud­get gamers, while its A-se­ries pro­ces­sors will be tar­geted at lowto mid-range lap­tops and Chrome­books.

Uni­fied AM4 socket com­pat­i­bil­ity helps main­tain ex­ist­ing chips and has pro­vided an easy path to Zen-based PC chip up­grade. For ex­am­ple, the AM4 socket sup­ports Zen pro­ces­sors and the re­cent sev­enth-gen­er­a­tion A-se­ries chips.

Ex­pand­ing its PC chip line-up will help AMD com­pete with In­tel, from the high- to low end, and it is al­ready gain­ing in the PC mar­ket. The firm had a 13.6 per­cent share of the x86 chip mar­ket in 2016, grow­ing from 12.7 per­cent in 2015. In­tel’s share was 86.3 per­cent in 2016, drop­ping from 87.1 per­cent in 2015, ac­cord­ing to Mer­cury Re­search.

Strong lap­top chip ship­ments in the sec­ond half of 2016 and an in­ven­tory purge in 2015 helped AMD grow its mar­ket share, said Dean McCar­ron, prin­ci­pal an­a­lyst at Mer­cury Re­search.

Its most vul­ner­a­ble chips are Athlon and Sem­pron, which sit on the bot­tom rung of the com­pany’s line-up. Some brands such as Phe­nom have died, but Athlon and Sem­pron have shown amaz­ing stay­ing power thanks to brand loy­alty. Those pro­ces­sors will be hard to dis­con­tinue overnight. Chips such as the Athlon X4 and FX-4300, which are cheap to man­u­fac­ture, will keep serv­ing cus­tomers’ needs and will stay in pro­duc­tion for some time to come, ar­gued McCar­ron.

Also, PC mak­ers need low-end prod­ucts to seg­ment mar­kets and main­tain prices. The price of high-end FX chips helps set a min­i­mum price for Ryzen chips. It also helps re­tain it as a high-mar­gin prod­uct, which is im­por­tant for AMD in its pur­suit of higher prof­itabil­ity.

The low-end chips will also help keep AMD’s chip vol­ume active and meet sup­ply agree­ments. It has an agreement with Glob­alFoundries to man­u­fac­ture a cer­tain num­ber of units each year.

Low-end CPUs are also im­por­tant to man­u­fac­tur­ing. They help write off costs and pro­vide a mar­ket for chips with mi­nor de­fects. It’s com­mon for flaws to oc­cur dur­ing man­u­fac­tur­ing, and af­fected pro­ces­sors are of­ten are repack­aged into low-end parts. This helps re­duce in­ven­tory and pro­duces rev­enue from those chips.

AMD can’t say it is get­ting rid of older chips be­cause that would dam­age part­ner­ships with PC mak­ers and OEMs, ar­gued Jim McGre­gor, prin­ci­pal an­a­lyst at Tirias Re­search. “They can’t dis­place the en­tire prod­uct port­fo­lio overnight.”

At some point, the firm will have to work out which chips to drop. It’s likely the those that are most ex­pen­sive to man­u­fac­ture will get the boot.

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