AMD repackages its chips

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

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.