AMD Launches Fight Against Intel in Lucrative Server-Chip Market
June 20 2017 - 4:29PM
Dow Jones News
By Ted Greenwald
Advanced Micro Devices Inc. began selling a new generation of
chips for the servers that drive computing in data centers,
challenging Intel Corp. in that high-margin market for the first
time in years.
AMD on Tuesday introduced the first four of nine chips dubbed
Epyc that it claims offer higher performance at lower prices than
comparable Intel chips currently on the market. Intel has said it
will refresh its server processors over the summer.
The Epyc line reintroduces competition to a high-margin arena
that Intel lately has had to itself. Intel holds nearly 100% share
of the $16.5 billion market for server chips of the most popular
type known as x86, according to Mercury Research. That dominance
helped the chip giant keep prices high and achieve a gross margin
-- a key measure of profitability -- of 61% in 2016, compared with
23% for AMD.
Other chip makers also are challenging Intel in servers.
Qualcomm Inc. and Cavium Inc. in March demonstrated chips running
Microsoft Corp.'s Windows Server operating system -- an Intel
staple -- based on technology from ARM Holdings, a division of
SoftBank Group Corp.
International Business Machines Corp. has said it would ship new
server chips based on its own designs in the second half of the
year.
AMD's last entry in the server-chip market came in 2013, and
since then, its share has dwindled to less than 1%, according to
Mercury Research.
AMD's share price rose sharply starting last year on optimism
that it was regaining competitive clout under Chief Executive Lisa
Su, who took over in 2014. This spring AMD debuted its Ryzen chips
for personal computers, which scored well in independent tests.
That boosted anticipation of Epyc, which is based on the same core
design.
AMD in the past has introduced competitive products but failed
to follow through with ongoing releases to sustain its momentum.
The company at a recent meeting with analysts assured them that it
has a long-term road map for products this time.
Ms. Su said in an interview that, despite substantial
investments in PC processors and graphics chips, "the single
largest bet for the company is in the data center." Her goal is to
lift AMD's server-chip market share to double digits "in a couple
of years," she said.
Patrick Moorhead, an analyst with market-research firm Moor
Insights & Strategy, said hitting that goal would require AMD
to execute its plan flawlessly. Moreover, "Intel will be relentless
in clawing back any lost territory," he said, and he expects any
damage to Intel to be limited because it has diversified into areas
like server storage, memory, and networking.
Lisa Spelman, general manager of Intel's Xeon server-chip line,
expressed confidence its products, including its forthcoming server
chips, but said that "Intel takes all competitors seriously."
AMD at its Tuesday launch event in Austin, Texas, showed
Epyc-based systems from several major server vendors including Dell
Technologies Inc., Hewlett Packard Enterprise Co., and Lenovo Group
Ltd., and announced that the chips were being used by major
cloud-computing providers.
AMD touted the line's performance and pricing, but also features
intended to make it more economical in data-center systems. Each
chip can interact more readily with memory and ancillary equipment
like graphics processors, AMD said, allowing a single Epyc to do
work that would require two Intel server chips. Slimming servers
from two to one chip could produce a 20% saving in total cost, AMD
said.
"I think this is AMD's strongest suit -- and harder for Intel to
defend against because it would require an architectural shift,"
Mr. Moorhead said.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
June 20, 2017 16:14 ET (20:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Intel (NASDAQ:INTC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Intel (NASDAQ:INTC)
Historical Stock Chart
From Sep 2023 to Sep 2024