Known as High Efficiency Video Codec, this requires more horsepower to process, but it can deliver higher quality videos than H.264 at any bitrate. The demo however wasn't very smooth, but that's because the software and drivers used to play this is still a work in progress and it's not fully optimized yet. Further to that, it's not a hardware accelerated codec on the Kaveri's UVD fixed function component. Hence the HEVC processing we saw was being processed at the software level. Once AMD has made further progress in software development to utilize the APU's HSA architecture, performance may yet improve. We'll have to revisit this when the ecosystem is more mature. For more reading on this matter, check out this previous article.
Full HD (1080p) HEVC decoding can be tackled by the Kaveri APU, but 4K HEVC decoding will require the additional assistance of an additional Radeon GPU of at least an entry-level add-on card.