Despite Signs of Economic Recovery AMD's Market Share Fell in Q2

In the past 12 months, AMD has revamped its entire product line around its 45nm Shanghai architecture; the company now has a range of Athlon II and Phenom II parts that stretches from an Athlon II X2 at 2.8GHz/1MB L2 at $60 to the unlocked Phenom II X4 965 "Black Edition" at $245 with 512K of L2 per core and a 6MB L3. Shanghai, as we've discussed on more than one occasion, was a big step in the right direction for AMD—it may not offer competitive performance vs. Core i7/Core i5, but it competes quite well with Intel's Core 2 Duo.

Unfortunately, the company's stronger product line has yet to bolster its sagging market share. According to the research firm iSuppli, AMD's share of the global PC market fell to 11.5 percent in the second quarter of 2009, a year-on-year decline of 0.4 percent. AMD's share of the PC revenue pie also fell sequentially, down 1.4 percent from Q1. If you're trying to make sense of the various analyst reports and market share figures, it helps to remember that different reports target different (and distinct) market segments. At the end of Q1 2009, AMD held 29.4 percent of the desktop CPU market, 10.1 percent of server/workstation revenue, and accounted for 12.6 percent of mobile sales. Long term, this is an untenable situation. Of the three categories—desktop, mobile, and server—its the latter two that drive revenue the most. When Intel and AMD revealed Q2 financial results, Intel's gross margin per processor was 50.8 percent. AMD's gross margin for the same period, excluding one-time factors, was just 29 percent. Higher ASP's mean better gross margins, better gross margins means more money.

iSuppli analyst Matt Wilkins identifies AMD's low ASPs as the reason the company didn't benefit from the 1.4 percent global rise in PC shipments that occurred earlier this year. "AMD didn’t benefit from the small sequential rise in PC sales because its average microprocessor pricing was lower than that from the first quarter of 2009,"Wilkins said.

The newly launched Lynnfield platform and Intel's 32nm CPU/GPU processor (codenamed Westmere) strike at both the midrange and the low-end of the PC business; Sunnyvale will have to answer both products with competitive solutions, without cutting its own throat in the process. Thus far, AMD has fought back by releasing the hexa-core Istanbul processor months ahead of schedule, unveiling new mobile low-power chipsets/processors, and recently launched its Vision initiative. The stated goal of the project is to offer would-be buyers the ability to choose a system based on what they want to do with it, rather than by CPU clockspeed alone. If you want to see how AMD would categorize systems, check here for an example. Congo, AMD's new low-power chipset, should smoke Yukon, although AMD does note that they made some "small" changes to the integrated GPU. The R780M ships with ATI's UVD technology, which should make high-def playback much more smooth.

Will these projects and launches collectively change AMD's position in mobile or server? Hard to say. Instanbul's performance (and drop-in compatibility) may help the company regain server market share, but Intel has had a tight grip on the mobile market for a long, long time.