Strengths
Moving Forward to Fabless Business Model (Global Semiconductor Alliance): The recent sale of our manufacturing operations; we will no longer have to invest billions of dollars upgrading its facilities every several years. Over the past-years our capital expenditures were $1.1 billion per year. Since the sale our capital expenses are only about $100 to $200 million a year. These operating expenses have dropped due to the sale, from $3 billion to $2 billion .Given the fact that we have not generated more than $6 billion in revenue in each of the last several years; the adoption of a new business model will enhance profitability in the future. In addition, the decline of fixed costs will result in less volatile margins.
Low-End Market: Despite our loss in market shares in the microprocessor segment, we have managed to reserve our shares in the lower-end markets, which have fared relatively well especially in the market of desktop microprocessor space. This gain will allow us to transition into the low end market of notebooks. Meanwhile our competitor, Intel has competed well on price-to-performance in the low- and medium-ends of the market. Power efficiency: Since the new generations of consumers are more energy efficient, our decision to focus on creating more energy efficient chips it one that will allow us to compete with Intel. Power efficiency has become an increasing concern for our consumer’s because of the costly electricity bills and the rise of the notebook, in which longer battery life is critical. This is our edge in negotiating future contracts
Weaknesses
Execution: Unfortunately we have a reputation of poor execution, which has been consistent over the past few years. We have trouble launching products in a timely fashion and without significant technological glitches. Due to these major delays our competitive edge in the semiconductor industry has been hurt especially that we are always a day late to Intel launching a similar product. Similarly, our inability to deliver according to our outlined plan has hurt our relationships with PC makers. Another problem we face is our manufacturing problems and limited capacity, which has prevented us meeting the current market demand.
Opportunities
Heterogeneous computing: Heterogeneous computing, which refers to computer systems that depend on several computational units such as the CPU and the GPU, will allow us to fully utilize the expertise gained through this acquisition of graphics chipmaker ATI. Heterogeneous computing product offerings will yield better performance for customers, based on the architectures ability to “offload” selected tasks. Our plan was to launch the first Fusion
Accelerated Processing Unit in 2011, but Intel unfortunately launched a similar computing solution, which was called (Arrandale and Clarkdale) in 2010.
Mobile Discrete Graphics: Currently there is an opportunity to increase our presence in the notebook space, particularly with respect to value computers and mobile graphics cards. Notebooks represent a significant growth area for the company. The DX11 is the leading chip in mobile graphics market at the moment, giving us a rare first-mover advantage and the opportunity to increase market share over Nvidia, which is Intel’s current chip. Threats
High-End Markets: Although we have fared well in low-end markets, we have not had similar success in the high-end markets. We have yet to release a chip that can compete with Intel’s Core CPUs. Future product lines by Intel may further harm our current market share. In addition, Intel has the ability to offer lower prices due to their more robust margins. Market share loss in the high end markets is concerning given the profitability of such segments.
Chip Integration: While the ongoing trend of integration of memory, graphics, and other functionalities into the microprocessor may serve as opportunity for our company it may also present a threat in that Intel often has superior relationships with PC makers. The bundling of functions may further demote and or undercut our advantage in the discrete graphics chips space. Intel could leverage its dominance in the microprocessor market to sell its integrated chipsets. Computer manufacturers are increasingly using integrated graphics chipsets, particularly for notebooks, instead of discrete graphics chipsets because they cost less and require less energy. Short-Term Solutions
Make execution a top priority
Given the recent improvement of debt and the spinoff of our capital-intensive manufacturing arm, we should commit a greater percentage of its cash holdings to research and development. Further investment in research and development will help address the innovation and execution short comings, allowing us to finally start to conduct our plan for the future and put it back on target. We also now have more resources to put towards our core designing competencies, as it is no longer a burden of complex and expensive manufacturing processes.
Price aggressively
Due to its inability to secure a clear first-mover advantage in the microprocessor market, we must adopt aggressive pricing strategies in order secure market share, which we are currently doing since we adopted a fabless business model. This program will allow us to face lower operational and capital expenses. We should embrace our reputation as a low-cost alternative to Intel. It will enable us to differentiate ourselves in the highly the competitive market, which Intel may be reluctant to participate in a price war.
Given the robust margins of high-end servers, we have the ability to compete on price side more than in other chip segments. In addition, the improving economy offers a unique opportunity to seize market share.
Long-Term Solutions
Diversify into higher growth markets: Despite market trends toward specialization, we should look to expand into higher growth markets in the semiconductor industry. The microprocessor market has matured, presenting limited growth opportunities. In addition, the overwhelming financial and marketing advantage of Intel will continue to undermine the competitiveness of our company. We should look to startups as a key source of our future innovation in more dynamic markets. One high growth area in the semiconductor industry is smartphones. Our new commitment to ourselves is overhauling our business model and becoming profitable. We should look to the numerous fabless startups in the smartphone market as acquisition targets in order to compete with the likes of Intel, ARM, and Broadcom.
The Wi-Fi market, once thought to have peaked, presents another area of growth. The mobile Wi-Fi market is expected to expand the greatest. The fact that roughly 80 percent of the world’s desktops will be replaced by sales of notebooks highlights the growth potential for the Wi-Fi market. Also, mobile Wi-Fi is being incorporated into both smartphones and feature phones. Although feature phones do not use an open operating system, many offer web browsers, presenting the opportunity for Wi-Fi.

References:
AMD 2010 10K, AMD 2009 10K http://www.businessweek.com/ for article about AMD and Intel products www.gsaglobal.org- Fabless Business Model