My Money is on Intel

Implications:  Both Intel and AMD are suffering from their ongoing war at the moment.

The odds of winning long-term seem to be heavily in Intel's favor, although AMD should remain a solid competitor to keep Intel honest.

Analysis:

Intel seems to have built a solid lead over AMD, and there is every reason to believe they will be able to maintain that lead. There are a few key characteristics that determine success in this market: Price, performance, and power usage on the chips themselves, along with fab technology. Intel and AMD are currently quite competitive on price, Intel has a solid lead in performance, both seem very close on power usage (with perhaps a tiny edge to AMD) and Intel has a clear lead in fab technology.

Fab technology is perhaps the most key element of all, since it affects the price and performance of the chips, as well as the financial stability and competitiveness of the company. Better fab technology leads to better yields, which allow prices to be lowered without hurting margins as much. One of AMD’s biggest problems is that they lag on fab technology, so although they can (and have) lower prices to match Intel, it cuts more into their margins. Better fab technology also generally allows better chip performance, thus higher prices, which also help margins. AMD is clearly well behind Intel in fab technology. Intel is getting ready to start rolling out 45 nm chips in the next few months, while AMD is still ramping up production on 65 nm chips. This is not an area where AMD is likely to catch up any time in the next few years. On the contrary, they will have to work hard to avoid falling further behind.

When one looks at the actual chips, the current Intel generation generally has better performance than the competing chips from AMD. The next AMD generation, “Barcelona” is due out in a few months. As yet it’s not clear how much of an improvement they may represent. Some early benchmarks suggest they are significantly faster than anything either Intel or AMD sells today, but as yet no independent tests have confirmed this. If so, this will give AMD a new lease on life, but the next generation of Intel chips, “Penryn”, is due out only a few months later than Barcelona. The Barcelona chips will need to be competitive with Penryn for AMD to maintain market share during the next couple of years.

Looking into the crystal ball for the next 2-3 years, it appears Intel will maintain its lead in fab technology as well as remain equal or better on chip technology. AMD has an uphill battle just to maintain parity on the chips, and can’t even do that well with the fabs. It’s certainly not appropriate to count AMD out, but they will continue to struggle to maintain their market share and margins against Intel during the next 2-3 years. The safe bet lies with Intel here.