AMD’s new vision
By Ed Sperling, Editor in Chief -- 9/14/2007
Hector Ruiz, chairman and CEO of Advanced Micro Devices, sat down with Electronic News/Electronic Business to discuss the company’s new quad-core Barcelona server chip, the future of AMD’s business and its forthcoming push into the consumer electronics world. What follows are excerpts of that interview.
Q: One of AMD’s real strengths has been its tight focus on cost. Will that still be possible at future process nodes and with future releases of complex, multicore chips?
Ruiz: We now have a broad spectrum of products that covers every single segment of the market. We’ve done that with 10 percent of the people [that Intel has] and 10 percent of the resources. We have a manufacturing organization that’s benchmarked by Sematech as the best in the industry. I think we’re an innovative company that’s very strong on execution. The fact that we’re six months late with Barcelona seems to overshadow everything else. But if you put that delay aside, that’s why it’s critical for us to continue to gain share—to get to that scale where all of that will become obvious and the there is strength in the financial numbers behind it. We’re pretty close and I’m confident we will do that.
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Q: How?
Ruiz: We’re lean, we’re efficient, we’re half the price of our competitor, and we still manage margins that are reasonable. We’re in the 40-ish percent [margins] while they (Intel) are in the 50-ish percent. What we need now is the scale to leverage that.
Q: Will AMD get some of that scale by leveraging partnerships it has forged with companies such as IBM?
Ruiz: We will, but that has taken longer than I would have thought. Because [a processor] not a commodity product, despite what people think, it relies on an ecosystem in order for it to work. Building that ecosystem takes time. We’ve reached a scale with some customers that is pretty healthy, but we need to reach that scale with all customers.
Ruiz: We’re very selective about those partnerships. We don’t have the breadth and depth to do what they (Intel) do. For example, they inked a partnership in China to build a factory there. But when we do it, we do it well. We have never inked a partnership where we have backed out of it. If you look back at the history of Intel, you will find that’s not the case.
Q: Will you continue to run your own fabs?
Ruiz: I don’t think our business is the type where you can afford to offload everything. But there are things you can do to have more efficient use of capital. I’m not prepared to talk about that, but there are definitely ways to be more efficient.
Q: Any new markets you plan to target? IBM and Intel are both focusing on vertical markets these days.
Ruiz: Not in the same way. The acquisition of ATI is going to help us expand more into the consumer space better than if we had not acquired ATI. The strong presence of ATI in consumer electronics and digital television will take computing further than we have done so far. We see ourselves playing a big role in the digital home, for instance.
Q: Is there any synergy in development on the consumer side and the business side, particularly with the quad-core server chips you’ve just introduced?
Ruiz: There’s a significant separation because of the needs of the server space, but there’s a significant overlap, too, which I think is going to be very healthy in driving some of the efficiencies we need.
Q: AMD made its name in the PC space, but now it also is making an even stronger push into the enterprise. What’s the reaction among customers?
Ruiz: AMD has established itself as a very credible company in the enterprise. Barcelona, as people come to understand it and get the benefit of using it, will build equity in the enterprise that will be here for a long time.
Q: Will virtualization software cut into those sales?
Ruiz: We are going to see a period of decline. I don’t know if it’s one year or more before people learn to use virtualization. That may look like a flattening while people do that, but we will see an increase after that.
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