AMD – From Stalking to Intel Peering
Earlier this year, Advanced Micro Devices (AMD) made history when its market share reached $197.75 billion, surpassing Intel’s $197.24 billion for the first time. Currently they continue to compete with AMD with a market share of $121.33 billion and Intel with $123 billion.
Intel has long been the leader in the computer processor market, well ahead of the rest. AMD’s growth is the result of the company’s expansion into entirely new areas. AMD chips power two Tesla electric vehicles, NASA’s Perseverance Mars Rover, several 5G cell towers and the world’s fastest supercomputer.
“AMD has outperformed Intel in many key areas. Unless Intel restructures its manufacturing operations or takes a new direction, it will likely fall far behind the competition,” said Jay Goldberg, semiconductor consultant at D2D Advisory. CNBC.
Ten years ago, analysts had a very different view of AMD.
“A real man has to be extraordinary”
AMD was founded in 1969 by eight people led by Jerry Sanders. He then took on a marketing role for the company. “It’s one of Silicon Valley’s all-time bestsellers,” said Stacy Rasgon, a semiconductor analyst at Bernstein Research. “He was surrounded by extravagant parties, presented himself with an image of luxury and an efficient way of working.”
It was Sanders who invented the legendary concept in semiconductor manufacturing. Fabs are microchip factories that convert raw silicon wafers into integrated circuits. Sanders is famous for his saying, “Real men have talent.”
As technology advanced, chip production became expensive. Meanwhile, each factory also costs billions of dollars to build. This was AMD’s initial hurdle when the predecessor company was primarily designing and testing chips, but was much weaker than Intel.
In the 1980s, Intel and AMD signed a technology exchange agreement. At that time, IBM began manufacturing personal computers and chose the Intel x86 processor, but asked the company to find another partner. Intel agreed and asked AMD to become their second supplier. After they ended their collaboration, AMD reengineered Intel chips to create their own products compatible with the revolutionary Intel x86 architecture software. Intel is not sitting idly by and suing AMD. However, the 1995 agreement still gave AMD the right to develop x86 chips that made computers more competitive for consumers.
In 2006, AMD bought chipmaker ATI for $5.4 billion. In 2009 they split the manufacturing division and called it GlobalFoundries. “After that, AMD started to be successful because they didn’t have to worry about chip molding and stuff like that,” Goldberg commented.
Despite this, GlobalFoundries actually still produces less sophisticated chips that are used in simple parts like anti-lock brakes, car windshield displays, etc. Meanwhile, for AMD’s high-end products, it still needs to find an outsourcing company like TSMC.
Currently, AMD is in close competition with only two other companies in the development of high-end processors: Nvidia in the area of graphics chips for GPUs and Intel in the area of the central processing unit (CPU). Though AMD has a much smaller market share than its two rivals, it’s still made significant strides since outsourcing to a third party.
The AMD Zen processor series, first introduced in 2017, is considered the key to the company’s success. According to analysts, it was this product that saved AMD from bankruptcy.
In addition, the EPYC processor series is also a breakthrough in the data center chip line. Genoa, the latest product launched earlier this month, promises even more performance. AMD’s current data center customers include Amazon Web Services, Google Cloud, Oracle, IBM and Microsoft Azure.
“If we looked at our business five years ago, it would be difficult for us to think about success today,” said AMD CEO Lisa Su. “We believe that the data center, high performance computing, is indeed the most strategic part of the business, and it’s true.”
In fact, AMD’s revenue tripled from $5.3 billion to over $16 billion between 2017 and 2021. Meanwhile, Intel’s annual revenue rose 25% to $79 billion from nearly $63 billion over the same period.
“Intel isn’t moving fast enough. They are expected to continue losing market share over the next year. We’ll see soon enough,” Goldberg commented.
AMD’s success is partly credited to Lisa Su, who has been the company’s CEO since 2014 and is now a prominent figure in the semiconductor industry and a member of US President Joe Biden’s Science and Technology Advisory Council.
After the takeover, AMD tripled its workforce and plans to move production to the United States through partners. In China, AMD has about 3,000 employees and 25% of sales. “We were not particularly affected by the fact that the US recently banned the export of semiconductor technology to China,” said Dr. su
However, he acknowledged that AMD’s revenues have been hurt by the decline in the global PC sector. In its third-quarter 2022 financial report, AMD fell short of revenue expectations as its PC segment slumped nearly 20%, the sharpest drop in 20 years. However, the results of the largest competitor Intel were no better.
Ms Su said Moore’s law, which says the number of transistors on a chip doubles every two years, is slowing. “At least in ten years. But we are prepared for it,” he said.
In preparation, AMD has taken over many companies. AMD previously acquired Xilinx, a company developing FPGA chip technology, for $49 billion. Earlier this year, the company spent $1.9 billion to buy cloud startup Pensando.
“We can talk about how much AMD pays and how profitable it is. But in the end it was the right decision. You build a custom computer business by helping customers design their own chips. It’s a very smart strategy,” Goldberg said.
In fact, more and more large companies are trying to develop their own chips. Amazon has a Graviton processor for AWS; Google is developing an AI chip for Pixel phones and a video chip for YouTube; or John Deere will also release chips for unmanned tractors.
Even the core architecture of the chip is changing. Chips based on the x86 architecture have been around for 5 decades, and the ARM architecture is becoming increasingly popular. Nvidia and Ampere are in the process of developing ARM processors, and Apple has switched from Intel chips to its own ARM M-series processors.
“It’s hard to argue about x86 and ARM. In fact, you’ll find two of the most important chip architectures on the market today,” added Su.
Bao Lam (Track CNBC)