) exploited another chink in AMD's (AMD
) armor: Its relative late start in trying to boost its notebook-chip business.
That's about to change this year as the two battle for share in one of the fastest-growing segments of the PC-chip market. Today, notebook-chip sales represent about 19% of Intel's revenue, compared with just 6% of AMD's, estimates analyst Andrew Root at Goldman Sachs. Says Ruiz: "We believe we're not capturing our fair share of the overall processor market."
POTENT COMBO. The market for notebook chips is not only growing -- while PC-chip sales stall -- it's also much more profitable. Intel's average notebook-chip prices are $180, compared with $115 for desktops, Goldman's Root says. And the chipmaker -- with Sonoma, its new follow-up to the Centrino processor and wireless-chip combo -- has upped performance of its integrated graphics and sound cards. That boosts its chipset revenue and gives Intel more heft to compete with AMD on price in other markets, while still turning a tidy profit.
"I'm expecting [chips for notebooks and other mobile devices] to be a very competitive market in the next couple of years," Intel Executive Vice-President Sean Maloney said in an interview with BusinessWeek Online.
Enter Turion. That's the brand name AMD recently chose for a line of energy-efficient notebook processors expected to roll out by June. It will be a significant improvement for the Sunnyvale (Calif.) chipmaker. Most of AMD's current notebook chips generate too much heat for thin-and-light machines. Its Athlon 64-bit notebook chips get good performance reviews. But they're seen more as desktop replacements and have hardly made a dent in the important corporate market. Plus, AMD's low-end Sempron line has made little headway since its introduction last year.
EUROPEAN BOOM. That puts the smaller chipmaker at a disadvantage. Since 2003, Intel has successfully marketed its Centrino processor and wireless-chip bundle as a product that can provide all the performance needed in a notebook, sans drawbacks such as weak battery life. The result: Intel at the end of December controlled 87% of the notebook-chip market, while AMD had a 9% share, according to Mercury Research.
While AMD has been gaining share with U.S. retail-desktop sales, it must better address the phenomenal double-digit growth in the notebook market, which is expected to continue for the next five years, even as desktop-PC sales slow.
Nowhere is the trend more evident recently than Europe, where consumers are snapping up notebooks for home applications such as photo and video editing, and businesses are looking for newer models with better battery life. Technology research firm Canalys reports fourth-quarter sales soared 30% over the previous year, compared with just 11% for desktops.
Ruiz says people should expect to see AMD come out swinging over the next few weeks. The chipmaker will need to weight its gloves with a compelling notebook offering to avoid a knockout punch from Intel. Edwards is a correspondent in BusinessWeek's Silicon Valley bureau