Platform Trends: AMD Stumbles in 2007, Looks to Rise in 2008

Even the most optimistic observer must admit that 2007 so far has been a rough year for AMD. Since acquiring PC graphics powerhouse ATI, the chipmaker has found itself under siege by Nvidia as well as Intel.

The latter's Core 2 Duo, as you know, made its debut by clobbering the Athlon 64 X2 in performance, and more recently Intel has started boosting the price-drop pressure as well. Nvidia has been just as dominant in the high-end graphics arena, as AMD still doesn't have an answer to its rival's top-rated GeForce 8800 models. AMD's only hope has been to circle the wagons and try to dodge the arrows while waiting for reinforcements to arrive.

Under Intel's Thumb

The battle between the Athlon 64 X2 and Core 2 Duo ended the day Intel released its blazing-fast new CPU, and from that day on it's been a constant struggle for AMD to position its processors against the Intel juggernaut. The Athlon 64 X2 is an extremely powerful CPU, but the Core 2 Duo is a near-perfect processor, exemplifying high performance with superb power-saving features. When Intel followed up with the Core 2 Quad, it was like pouring salt on an open wound.

AMD's main strategy has been to cut prices, driving the retail cost of Athlon 64 X2 models through the floor -- and harming the company's bottom line. This seemed to work for a while, as the lower prices enticed buyers to go the AMD route, especially as Intel did not offer a Core 2 Duo at some key price points. That changed quickly, however: Not only did Intel swiftly introduce lower-clock-speed Core 2 Duos at sub-$100 price levels, but the company lowered prices across the line, cutting some models to the bone.

The latest move was the worst for AMD, as Intel not only released a set of higher-clocked Core 2 Duo and Quad processors, but also dropped prices to the level where a 3.0GHz Core 2 Duo E6850 now sells for $325. Sure, AMD's 3.0GHz Athlon 64 X2 6000+ currently sits at around the $170 mark, but the more powerful Intel processor is actually the better relative value.

Phenom To the Rescue?

There are really only two strategies AMD can employ right now; either move its high-end chips to its 65-nanometer-process engineering in order to hit 3.2GHz to 3.4GHz, or fast-track the release date of the processor dubbed Phenom and hit Intel hard with its next-generation quad-core architecture.

AMD has promised to get its Phenom processors out before the end of 2007, and this week the company made a big step toward that goal: At a recent analyst day, AMD demonstrated the Phenom FX quad-core processor. That part was expected, but the clock speed was a surprise, as AMD had the processor running at a full 3.0GHz -- on standard air- instead of liquid cooling, no less.

This is an enormous huge achievement for AMD, as the Phenom was expected to debut at lower clock speeds, possibly giving Intel's upcoming Penryn core the edge. Although AMD didn't -- for obvious reasons -- provide official benchmark scores, a July demo session at 3.0GHz is definitely good news.

DirectX 10 Difficulties

The deck is also stacked against AMD in today's PC graphics-card market. Not only did AMD allow Nvidia to be first to implement Windows Vista's DirectX 10 standard, but continued delays gave Nvidia a huge head start.

By the time AMD released its ATI Radeon HD 2900 XT, it was too little, too late: Instead of challenging Nvidia at the top of the ladder, the new card could barely compete with the latter's third fastest, the GeForce 8800 GTS 640MB. This was bad news for consumers, as ATI's inability to push Nvidia from its perch allowed its rival to maintain its premium pricing and force enthusiasts to crack open their wallets for the very best.

The high end of the market certainly offers AMD a forbidding set of challenges, but things were expected to be better in the entry-level and mainstream/midrange sectors. Unfortunately, AMD's entries here were also delayed, and when the Radeon HD 2400 and 2600 lines finally emerged, they provided the same relative performance compared to their Nvidia counterparts -- in other words, not good at all. AMD's mainstream leader, the Radeon HD 2600 XT, has a hard time competing with Nvidia's junior-varsity GeForce 8600 GT, let alone the company's midrange flagship, the GeForce 8600 GTS.

The Radeon HD 2600 Pro, 2400 XT, and 2400 Pro follow the same pattern, and offer adequate but unspectacular performance against Nvidia's GeForce 8600, 8550, and 8400 cards. AMD knew exactly what to expect and cut the prices of Radeon HD 2600 and 2400 cards even before their release, to make the pill a bit easier to swallow.

This has to eat into AMD's projected profit margin. Meanwhile, with the Radeon HD 2600 XT priced under $150, AMD doesn't currently have a product at the all-important $200 and $300 price points. In fact, the company's DirectX 10 line contains a Grand Canyon-like gap between the $149 Radeon HD 2600 XT 256MB and the $400 Radeon HD 2900 XT 512MB.

The Radeon HD 3000 and RD790

As you might expect, AMD prefers to speak about the future rather than the present, and has got on the horn to promote its upcoming 55-nanometer-process R700 line of GPUs, which are tentatively scheduled for a 2008 release. These are DirectX 10+ cards and will likely support PCI Express 2.0, ATI Avivo HD video, UVD, and the new DisplayPort connector, along with ATI's CrossFire technology. AMD has declared that the upcoming Radeon HD 3000 series will be more competitive in the marketplace, which tells you exactly what the company thinks of the HD 2000 series.

The motherboard used in the Phenom's impressive demonstration included an AMD RD790 chipset. In addition to some new features like Socket AM2+ support and HyperTransport 3.0, this solution can handle up to four Radeon cards in CrossFire operation. This is a plucky solution to the current performance gap with Nvidia -- slap some quad CrossFire into your PC and watch the frames (and your air-conditioning bill) fly right by.

Whatever tactics AMD employs to bridge the chasm between today's Athlon 64 X2/Radeon HD 2000 platform combination and the promised land of the Phenom/Radeon HD 3000 platform, it will be a very interesting ride.