AMD claims 40% cut in R&D spending will not harm company's future

Posted on Wednesday, Aug 12 2015 @ 21:13 CEST by Thomas De Maesschalck
AMD logo
After a run-up during first couple of days of August, shares of AMD mysteriously crashed up to 13 percent on Monday on no apparent news. Barron's speculated it could be a delayed response to the upbeat earnings report from NVIDIA, which was released on Thursday. It's a possibility of course but a delay of one market day seems a bit hard to believe in today's connected world.

While AMD's shares were giving investors a wild ride on Monday, the company's chief technology officer, Mark Papermaster, was a guest on stage around mid-day with Pacific Crest analyst Mike McConnell during the firm’s Global Tech Leadership Forum.

Impact of process technology slowdown on AMD
Some interesting questions were asked, starting with how the lengthening of Moore's Law will impact AMD. Intel recently announced it's sticking 2.5 years with its 14nm node instead of the two-year cycle seen with past production launches, which will result in the company launching three product families on 14nm. Papermaster replied he's not concerned about this and claims AMD can in some ways make up for longer cycles by focusing on design innovation. He added that chip makers will take advantage of new, more expensive nodes where you need it, while putting some other things in separate packages at older, cheaper geometries.
So Moore’s Law typically talks about, as you said, the node — the semiconductor node itself. But what we’ve been doing at AMD’s really drive innovation in design. See you look at our sixth generation Carrizo. It’s a 28 nanometer that we are shipping now, broad acceptance as we enter the second half as — Win 10 comes out. And that 28 nanometer design has a lot of innovations for density, for low-power — longer battery life. We doubled the battery life, and so what you’re going to see is more emphasis on design to drive efficiency and there’s always that reliance on that latest semiconductor node and there is a lot more innovation yet to come. So for us, it’s opportunity.
Competing with Intel in the server market
The next big question was if the battle to recapture marketshare from Intel in the server market had lost momentum. Papermaster replied with a response about the upcoming Seattle processor, which will kickstart AMD's ARM ecosystem, but acknowledged this will be a fairly modest project for AMD. Furthermore, Papermaster pointed out AMD is trying to fix its data center offerings by focusing on a cost advantage in total cost of ownership:
We are helping to seed that with the Seattle processor, the A1100 that we started sampling last year will be shipping second half of this year. We think it will be fairly modest for the Company, but provides that growth. The start of that ARM ecosystem. And you are seeing others not jumping in at the rate that had been originally forecast, but they will be there. And it will grow.

As for AMD’s own efforts, “we had very, very differentiated data center offerings for years in AMD but we were not consistent in continuing to provide year after year that total cost of ownership advantage for the industry. That’s what we’re fixing.”
The 40% cut in R&D spending
Another major worry investors have is the very sharp cut in AMD's R&D budget - even when the company is struggling to compete with its main rivals. In recent years the company's restructuring resulted in lots of job losses as well as an R&D budget decline close to 40 percent versus levels in the beginning of this decade. Papermaster responded that given the contraction in the PC market, AMD was able to reduce R&D that had gone to support its role in the PC market. However, Papermaster claims AMD has been incredibly protective in maintaining investment necessary to protect the future of the company, including R&D on the next-gen Zen CPU architecture and future GCN architectures.
Where we’ve been incredibly protective in maintained investment is in where we are banking the future of the Company. So it is on that next generation of CPUs starting with Zen. It is on successive generations of our graphics core next. Huge volume in what we have in not only in discrete graphics and our APU, but the game console wins are all on Graphics Core Next and we have a very strong roadmap for that Graphics Core Next IP going forward.
Virtual reality the big savior for the PC?
Asked what might rejuvenate the contracting PC market, Papermaster pulled out the virtual reality card:
And then beyond that, there’s really what I think will be a rebirth of the PC industry and that is around virtual reality. You have to experience it to understand what virtual reality means. If you’ve ever put on one of the newer headmount displays, you’ll see it’s going to be a new category and it needs PC-class compute and graphics to have that wonderful experience. If you underpower it, it’s not a great experience.

About the Author

Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.

Loading Comments