To compete with Intel, AMD needs to be an integrated chip supplier with both design and manufacturing of processors done in-house, said Nathan Brookwood, principal analyst at Insight64. Leveraging manufacturing and design closely could drop chip manufacturing costs, allowing AMD to compete with Intel on chip prices.
To help reduce capital expenditures, AMD can put off buying some of the manufacturing tools it needs to upgrade the fabs until the company reaches profitability, Brookwood said.
AMD can increase production at its fabs now that the Barcelona blunder is behind it, Brookwood said. AMD's most recent server chips, the quad-core Opteron processors code-named Barcelona, started shipping in volume last month after bugs were found that led to multiple delays.
"Even though AMD hasn't been generating profit, it's not because of not shipping a lot of units. It's because of Barcelona -- they had to make huge pricing concessions to maintain business," Brookwood said.
Now that the company is on the cusp of a new product cycle, there could be a resurgence in the sale of chips -- which could pump up production in the fabs, Brookwood said. AMD this week announced new chips, including a 12-core processor code-named Magny-Cours, due for release in the first half of 2010.
AMD is optimistic about being profitable in the second half and meeting processor ship dates. "They are feeling pretty good about where they are," Brookwood said.