Advanced Micro Devices (AMD, Financial) recently released the second generation of its infamous Ryzen processors, codenamed Zen+. This iteration is based on the 12nm process technology of GlobalFoundries as opposed to the 14nm process for the first generation Ryzen.
Naturally, the new processors perform better and are more power efficient than the first generation Ryzen processors. “Second Gen Ryzen processors can offer up to 15% higher gaming performance than 1st Gen Ryzen processors, while delivering the highest multiprocessing performance you can get on a mainstream desktop PC,” said Advance Micro Devices in a press release.
Zen+ packs roughly an additional 3% IPC increase while offering a 20% boost in content creation over Intel’s (INTC, Financial) premium Coffee Lake, i7 8700K. Moreover, Zen+ offers up to 15% performance boost over the first generation of Ryzen processors in gaming scenarios.
Zen+ is positioned well to compete against Intel for two key reasons: power efficiency and pricing.
Improved power dynamics
One of key threats to Intel’s dominance is the power efficiency of the second generation Zen processors. Zen+ provides around 6% higher clock-per-watt as compared to the previous generation. For the same power rating, Ryzen 5 2600 enables a turbo frequency of 3.9 GHz as compared to 3.6 GHz for the Ryzen 5 1600 (a first generation model). Ryzen 7 2700, the most efficient of the pack, supports a turbo frequency of 4.1 GHz as compared to 3.7 GHz for Ryzen 1700. This clearly indicates that Advanced Micro Devices managed to create a more efficient line up.
Why is it a threat to Intel? Well, the server market and mainstream portable PC market is quite sensitive to power requirements of a processor. On the portable PC side, consumers value extended battery life with decent performance. On the server side, data centers and server farms look into total cost of ownership (TCO) for buying decisions. Given that Zen+ offers better absolute multi-threaded performance and better single threaded performance at similar power rating, Intel is expected to lose market share to Advanced Micro Devices going forward. See the chart below:
Source: Focus Equity, based on AnandTech benchmarks
Although Intel is the winner in single-threaded performance in absolute terms, power-relative performance tells a different story.
It can be seen that Ryzen 7 2700 offers almost double performance-per-watt as compared to Intel’s offerings. Intel might be successful in luring gamers with raw performance, but notebook OEMs and the server side won’t be thrilled if the power discrepancy between Zen+ and Coffee Lake translates to mobile and server processors. Given the power-performance dynamics, it seems AMD is at the verge of stealing material market share from Intel.
Aggressive pricing
Advanced Micro Devices is pricing its new offerings aggressively as performance-per-dollar of Zen+ has increased to 15-30% over the first generation Ryzen.
Source: Focus Equity, based on AnandTech benchmarks
Ryzen 7 2700 packs more clock per dollar compared to previous generation models. This is indicative of Advanced Micro Device’s aggressive pricing strategy in a hope of gaining market share. Due to favorable pricing and marginal performance difference in gaming between the counterparts, budget-constrained gamers might favor Zen+ over Coffee Lake.
What’s interesting is that AnandTech’s testing reveals that Zen+ outperforms Coffee Lake across main stream games. Other reviewers, however, offer contradictory results. Nonetheless, the performance difference is marginal, making Zen+ a favorable pick for gamers.
Room for improvement
Although 12nm offers density improvements over 14nm process technology, Advanced Micro Devices didn’t utilize this to boost performance. The transistor density is the same for the first generation and the second generation Ryzen. This gives AMD room for future improvement at the current note. If 7nm is not ready in time, the company can boost performance through increasing transistor density at 12nm. In other words, AMD has an option to navigate its product development roadmap in response to changing circumstances. This reduces execution risk for AMD while increasing competitive risk for Intel.
Bottom line
Power efficiency of Zen+ is an opportunity for AMD to capitalize on the market share opportunity in portable PCs market and servers. In the short term, aggressive pricing and comparable gaming performance will allow the company to gain desktop PC market share. The room for improvement at 12nm also gives AMD flexibility, reducing the execution risk. As Advance Micro Devices is priced cheaply compared to Intel, it’s a better choice from an investment perspective.
Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.
