AMD capacity sold out for 2006

At a conference hosted by Morgan Stanley, AMD CEO Dr. Hector Ruiz was tight lipped about how much share AMD has gained from INTEL. I think he had a good reason, 1Q06 still has 3 weeks left. When asked about whether AMD sees a PC market slow down, Dr. Ruiz stated that AMD does not have any concerns. Previously, in an interview with BusinessWeek, Dr. Ruiz stated that AMD is doing well while INTEL is not and AMD intends to keep it that way.

Dr. Ruiz did provide some overall view of AMD's operations and the micro processor industry landscape.

For 90nm process, FAB36 is executing extremely well at mature yields. Dr. Ruiz had a hard time finding the super duper words to praise the superb work done by the German team at Dresden. FAB36 is ramping as fast as possible and finished products are shipping. FAB36's transition to 65nm is on schedule (2H06) and will be pretty converted to 65nm by mid-2007. Finished 65nm products are coming out of FAB36 right now, and Dr. Ruiz used the extreme word to describe them.

As for Chartered FAB7, it's now at product qualification stage, finished products will hit the shelves in 2H06.

On margins, Dr. Ruiz stated that AMD will achieve 60+%, while still allowing PC makers to profit.

On multi-core, Dr. Ruiz pointed out that AMD's architecture shines more as one goes to more cores. AMD will go beyond quad-core. There is no technological barrier to do more cores, it's up to customer demand.

On capacity, Dr. Ruiz reckoned that AMD may be capacity challenged in consumer space, AMD will put higher priority on server and commercial client. Dr. Ruiz pointed that it is much more difficult to sign up server customers than desktop. Getting a company to use a server chip involves talks at the highest levels, while commercial desktop is more like dollar per pound business decisions. Right now, AMD has less than 10% market share in the commercial client space, AMD's focus this year will be changing that.

On mobility, Dr. Ruiz admitted that INTEL had a head start on mobile, but AMD is going to bring some major innovation in the mobile space within a year.

Dr. Ruiz observed that there are only three companies in the world that can provide total micro processor solutions, IBM, INTEL and AMD. AMD is going to break INTEL's monopoly, but it won't become another monopoly itself. Unlike INTEL, who kept all profits to itself, AMD will create an ecosystem that will allow everyone else to profit.

Based on Dr. Ruiz presentation, I conclude that AMD's capacity is sold out for 2006 and INTEL is left to grab whatever AMD can't fill.

Moreover, the hyping of the Merom/Conroe vaporware at the coming IDF will create an Osborne effect that will sharply reduce customer demand for IA32 technology, including Netburst based P4 and Xeon, and Pentium-M based Core Duo.