AMD suffered loses and lower sales, while Intel was up in sales and profits. The second quarter was seasonally down in consumer PCs, but up in the datacenter which helped Intel. Intel also benefited from IoT, AMD’s Enterprise, Embedded and Semi-Custom segment, revenue increased. and that is where the company is putting its strategy focus.
Citing softer-than-expected consumer PC demand in advance of the Windows 10 launch, AMD, said their OEM notebook sales slowed late in the quarter as their OEM customers and retailers actively worked through their inventory of Windows-8 based systems. This significantly impacted their second quarter PC notebook sales and reduced their gross margin as they ended the quarter with a larger mix of lower gross margin Enterprise, Embedded and Semi-Custom revenue.
Despite their Computing and Graphics revenue shortfall, their other businesses performed largely as expected. AMD also made some good progress during the quarter as they introduced several key new products, secured multiple embedded design wins across their target markets, and continued to see strength in their semi-custom business. AMD’s results are shown in red in the chart.
Intel showed better-than-expected 2Q15 results and 3Q15 guidance, primarily as PC channel inventories were drawn down more modestly than management’s original expectations. The Data Center Group was somewhat disappointing but better than expected given the guidance from Q1. The company lowered capex another $1B and pushed 10 nm production out until 2H17 and as management acknowledged an extension of Moore’s law from 24 months to 30 months.
Client Computing Group revenue for the second quarter fell 14% year-over-year to $7.5 billion. This group caters to desktops, notebooks, tablets, smartphones, wireless and wired connectivity products as well as mobile communication components. The company said the Second-quarter results demonstrated the transformation of their business as growth in data center, memory and IoT accounted for more than 70 percent of its operating profit and helped offset a challenging PC market.
Given the drop in PC shipments, as reported by Gartner and IDC which average to -4% sequentially, and -10.4% annually, AMD suffered much more (-8.5% sequentially, -34.6% annually) more than Intel (3.1% sequentially, -4.3% annually).
PCs however were not the only platform to show a slowdown in Q2, tablets and smartphones also declined as consumers pulled back their purchases, in spite of the gain in Consumer Confidence as reported by Conference Board Consumer Confidence Index.
The net conclusion is that it’s getting more and more difficult to predict the markets and consumer behavior, which generally is viewed as a call for more diversity in ones product offerings to smooth out the ups and downs of any individual segment. The problem that brings is the impact diversity brings to resources needed to participate in a given segment. No easy answers here that’s for sure.
The semiconductor companies are responding in their own ways, but none of them are planning for business as usual in the future. Changes in focus and strategy are the topics of everyone’s board meetings.
See the next issue of TechWatch for expanded and in-depth coverage and analysis of Intel's and AMD's financial results.