Advanced Micro Devices Inc (AMD)

[mas]

Industry sources express concern about limited capacity for AMD in 2006

http://digitimes.com/mobos/a20060414A2003.html

Monica Chen, Taipei; Jessie Shen, DigiTimes.com [Friday 14 April 2006]

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AMD may suffer from limited capacity in the second half of 2006, following the scheduled launch of its Socket AM2 dual-core platform on June 6, according to market sources. The sources expressed concern that AMD may have a hard time maintaining strong first quarter profits and gross margins throughout the end of this year since its capacity could fail to meet demand.

In addition, Intel’s launch of the Conroe dual-core series may put more pressure on AMD, with the new processors delivering better performance than AMD’s Socket AM2 line, the sources noted. Intel will kick off volume shipments of the Conroe series in four versions in July of this year.

AMD’s AM2 series may turn out to be less competitive than the Conroe, market sources believe, expecting that AMD may end up raising its competitiveness by providing much lower prices than Intel’s impending price cuts.

In addition to capacity and product performance concerns, Intel’s recent ambition with strategic programs for the channel market, such as the Common Building Blocks (CBB) program, is looking to take effect in the coming months, unspecified market analysts indicated. The analysts express doubt if AMD will be able to continue raising its market share, which surpassed 20% of the overall CPU market in the fourth quarter of 2005.

According to AMD, the upcoming Socket AM2 CPU series will definitely drive up its sales performance for the latter half of this year and will be a major driver for its market share rise. In addition, the chip vendor believes capacities from its 12-inch fab in Dresden (Germay) and through its sourcing and manufacturing technology agreements with Chartered Semiconductor, will sufficiently meet demand from 2005 throughout 2008.

AMD on April 12 posted net income of US$185 million, or US$0.38 per share for the quarter ended March 26, 2006, with a record gross margin of 58.5%. During the same period in 2005, the chip vendor generated a net loss of US$17 million, or US$0.04 per share, with its gross margin sliding seven percentage points sequentially to 34%. The chip vendor attributed the growth to record sales of its Opteron processors and increased average selling price (ASP).
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Quite hard to believe considering Fab36 and Chartered but we will see .