Business | Technology
AMD plans to steer clear of profit-squeezing netbook chips
Advanced Micro Devices, Intel's main competitor in personal-computer processors, said making chips for so-called netbooks is not profitable enough to warrant following its rival into the market.
- Bloomberg
- Published: 23:35 January 10, 2009
San Francisco: Advanced Micro Devices, Intel's main competitor in personal-computer processors, said making chips for so-called netbooks is not profitable enough to warrant following its rival into the market.
Intel's low-cost Atom processor has spurred the rise of netbooks, stripped-down portable computers that handle internet access and other basic functions. The devices are built with the cheapest components, making it hard for suppliers to earn enough money, said AMD executive vice-president Randy Allen.
"They are going to be characterised by having very low margins for processors, chipsets and graphics," he said in an interview at the Consumer Electronics Show in Las Vegas. "I'm not saying that they are a bad device, but I certainly wouldn't carry one as a main computer."
The decision keeps AMD out of the fastest-growing part of the PC industry and underscores its new strategy not to compete with Intel in every market.
Netbooks, which were first produced by Asian manufacturers, have drawn the backing of Hewlett-Packard and Dell, the largest PC makers.
While AMD continues to compete with Intel on price, it is focusing on higher-end computers. The company introduced a new set of chips at the electronics show for thin and light notebooks. The processors will let computer makers sell the devices for less than the $1,500 (Dh5,510) they typically cost, AMD said. The product, called Yukon, is more powerful than Intel's Atom and not designed to compete directly, Allen said.
Related Links
AMD, based in Sunnyvale, California, fell five cents to $2.69 on the New York Stock Exchange. The shares dropped 71 per cent last year, compared with 45 per cent for Intel.
Intel executives have said that while Atom chips carry lower gross margins, their production requires less in overhead costs, making them a lucrative product. Intel doesn't break out profit margins on specific products.
Intel's fourth-quarter gross margin, the percentage of sales left after production costs, was at the lower end of its predicted range, the company said this week. In November, the company projected a margin of 55 per cent, plus or minus "a couple of points".
The margin is the only measure of profit that Intel forecasts publicly.
AMD's gross margin was 51 per cent in the third quarter.
More from Technology
More from Business
Business Editor's choice
-
‘Wrong Way' Krugman
The source of our economic malfunction lies with government-mandated bank regulations
-
Greek exit could make Eurozone stronger
Departure will show limits of bailouts and allow remaining members to act much more like a unit
-
UAE upholds values of free trade
Recently released statistics confirm an established fact, namely that of the UAE embracing the free trade principle in general and imports in particular
