Is AMD still a superstar?
Last year about this time, it looked like AMD’s fortunes had changed. It was leading Intel by the nose, undercutting the world’s largest microprocessor maker on price, beating it on performance and killing it on efficiency.
What a difference a year makes. While AMD’s chips are certainly more efficient and more powerful than a year ago, the company is back to a me-too position. Case in point: Its rhetoric about Intel’s monopoly and the amount of money it earns from that monopoly status are the kinds of things you hear from also-rans. AMD has even set up a web site called Break Free, which focuses on the European Commission’s anti-monopoly action against Intel. Still, the bottom line is that competitive companies use the market, not the courts to wage battle—particularly when it doesn’t involve a patent or employee who walked off with company secrets.
It was Jerry Sanders who once said “Real men own fabs.” (Actually, there is debate on that topic. Cypress CEO T.J. Rodgers claims he said it first, but that’s beside the point.) That type of hubris defined AMD. It was a spunky rival to Intel, comfortable and secure in its role as a second to Intel and ever ready to needle the giant.
AMD’s push into multiple cores before Intel, its willingness to open its core to third parties, and its push into efficiency showed a different kind of business strategy. For a couple of industry-defining years, it was Intel that was following and AMD that was leading.
The deals that AMD cut with companies such Dell proved to be a serious wakeup call for Intel, though. Intel turned down the heat on its chips, began churning out multicore chips and began cutting new and very aggressive deals in the market—so much so that it affected the earnings of both Intel and AMD. Intel, once the sleeping giant, became an actively aggressive giant, almost overnight eliminating AMD’s technology lead.
AMD has since suggested floating bonds to raise money, cut a deal with the German government for help in expanding its Dresden fab, and inked more and more deals in all parts of the globe—including an important development alliance with IBM to keep its technology on the bleeding edge. The problem is that unless AMD can come up with a defining competitive edge such as multicore or major energy savings, its next step may be rather unsexy—returning to following Intel, cutting costs and competing on price.
It’s hard to have been a rock superstar and have to be the warm-up act for a band that has regained its footing. At least for now—until something changes in the processor world so that the current manufacturing no longer works at some future process node—things are returning to what they were. It’s not a bad position to be in for AMD, providing it can accept the blow to its ego. But in the chip business, as in the music world, that’s a big blow to accept.
–Ed Sperling, Editor in Chief
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