AMD pins its hopes on ARM servers and custom semi design

ARM servers to account for 15 per cent by 2019, according to AMD

AMD is pinning its growth hopes on a combination of ARM servers and custom semi design as part of its recovery strategy under new CEO Lisa Su.

According to CFO Devinder Kumar, speaking on a recent conference call, the company hopes that ARM servers will account for as much as 15 per cent of the total server market in less than five years, as ARM beefs-up its 64-bit offerings.

"It's a longer-term play," said Kumar. "We think it gets there and maybe if you ask me right now in the 2019 timeframe, I say 15% of the overall server space is in the ARM server business. When you get transitional space, AMD's market share today is like 2% or 3%, nothing to really talk about."

However, AMD will be competing against a number of rival companies that are also bidding to put ARM in the data centre. AMD is not the first, either, but is planning to introduce new server cores in 2016, to follow-up the tentative experimental parts it has so far released.

A major problem for ARM adoption in the server space is software and driver maturity, a challenge being addressed by standards organisation Linaro, but one that continues to hold back adoption, while Intel continues to improve in terms of power consumption and heat dissipation. The high level of customisation across the ARM eco-system - which helps drive down cost - is also a problem when it comes to standards.

And, should ARM servers take off, AMD can expect to face fierce competition from the plethora of ARM licensees that have already done well out of ARM in mobile, such as Qualcomm, Nvidia, Samsung and up-and-coming semiconductor manufacturers in China.

At the same time, AMD plans to increase its custom semi-design business. According to Morgan Stanley analyst Joseph Moore, who spoke to Kumar at the recent Morgan Stanley Technology, Media & Telecom Conference, AMD has recently signed a number of new customers up to its "semicustom" practice, which it expects to grow into a business worth as much as $1bn in much-needed new revenues.

"Those products will launch sometime in 2016. And timing is only dependent on the customers, I won't comment on that. But what I can come from as we said previously, there are two products, it's a billion dollars of revenue starting sometime in 2016. One of the products is ARM. And the last thing I'll say is we are looking at our semicustom business as going beyond gaming," Kumar told Moore. These customers, according to reports, are outside AMD's gaming stronghold.

The shift in emphasis follows a torrid decade in which the company has been marginalised in its core PC and server markets by Intel, while the company has also floated off its capital-intensive semiconductor manufacturing capabilities under Globalfoundries.

However, the company will continue competing against Intel in the x86 PC and server microprocessor space, although it will face even fiercer competition this summer when Intel releases its next-generation Broadwell and Skylake parts, which will utilise 14-nanometre manufacturing process technology that AMD will struggle to match this year.