Characteristically, AMD's approach to ramping both products is all or nothing. We were somewhat surprised to hear that AMD has already stopped all wafer starts of the older Athlon product. That means that all of the older Athlon products will be gone from AMD's sales mix by the end of the current quarter -What does this mean for us? Well, to put it simply, AMD is no longer making Athlons (in their current incarnation). While there is still a small supply of Athlon processors currently in the channel, once those dry up, AMD will be relying soley on the Thunderbird and Spitfire cores. This is a bold move for AMD; basically they feel that yields on the newer Thunderbird and Spitfire cores (I refuse to call it the ‘Duron’.) will be high enough to keep a steady supply of processors on the market. If, however, something goes terribly wrong and the newer cores have low yields, AMD may be in a bit of trouble.
AMD told us that all of the products in production have already been spoken for. If the production ramp of the new products goes well, AMD's product mix will be substantially more competitive a quarter from now than it is now. If there are any problems, the financial impact will be substantial. Our talk with AMD Friday revealed no problems - indeed, the early yields on Thunderbird at both the Austin fab and the copper interconnect fab in Dresden have been encouraging - but investors will need to track the situation closely.
All this said, I’m fairly confident in AMD's ability to produce CPUs. In a year plagued with processor supply problems, AMD consistently has been able to meet market demand. It seems that the days of AMD being a second-rate CPU vendor may be behind us, as this quotation from the article seems to confirm.
AMD finds itself in the unique situation of being able to ramp production of a high-performance PC microprocessor with essentially no interference with Intel, which is struggling to ramp its own production capacity. We have seen AMD stumble on manufacturing execution before, and given the challenges that AMD faces over the next two quarters, we need to monitor AMD's progress closely. However, the other big problem that AMD has always faced in the pastruinous competition from Intelis not a problem right now. With that in mind, and given AMD's exciting product lineup and we believe a very inexpensive stock valuation, we recommend accumulating the stock.
So there you have it, folks. Production on the current incarnation of the Athlon core has ceased, and AMD is ramping up production of the Thunderbird and Spitfire cores for release sometime in the near future. I, for one, can’t wait to get my hands on one. : )
Props to the Shack for finding this one.