A Brief Strategic Assessment of AMD and Intel
By Phil Trent
Date: January 6, 2002
Advanced Micro Devices, Inc.
In the last few years, AMD has taken on what CEO Jerry Sanders calls their “virtual gorilla” strategy since their R&D resources are a fraction of Intel’s. Several technologies from other companies have been integrated into their CPUs (copper, SOI, NexGen, Alpha). Intel at first downplayed or even publicly ridiculed these technologies, only to adopt them some time after AMD.
Regarding chipsets, AMD develops their own chipsets and sells some quantity, but would rather have chipset companies make all of them. AMD not only allows any chipset maker to make AMD-compatible chipsets, they encourage it. While this diversity was probably at first a negative - because of varying qualities of chipsets – the innovation of AMD chipsets has dramatically increased and cost of AMD chipsets has fallen rapidly. Until recently, high quality AMD Duron/Athlon motherboards were more expensive than their Intel counterparts. This had the effect of blunting AMD’s lower prices on low to middle-range CPUs. In other words, an Intel CPU and an Intel-specific motherboard were about the same cost as an AMD solution.
A case in point of the new availability of quality, inexpensive AMD targeted mainboards is ECS’s K7S5A, an SiS735 based motherboard. I ordered one a few months ago for $52, with LAN and audio and it has been the most stable computer I’ve ever seen. I wonder if Intel didn’t hand SiS the rights to make Pentium 4 chipsets to maintain some leverage over SiS because of their inexpensive, stable, and fast AMD chipsets?
AMD is a great engineering company that is learning how to market their products with excellence. Their performance and work with the computer hardware review sites has won a place in the heart of hoards of DIYs who build their own computers.
If there was an award to be given for CPU marketing, it belongs to AMD’s marketing department. They have successfully marketed their model rating, nullifying Intel's clockspeed advantage, while avoiding most of the predicted confusion regarding the rating. The main reason for their success is by being conservative in their rating system, which still allows AMD’s CPUs – even with the new system – to beat MHz-marketed CPUs from Intel.
In contrast to AMD, Intel loves to make and sell chipsets and even wants to pick and choose who can make compatible core logic controllers. Furthermore, the chipmaker has tried to use its chipsets as a club to beat motherboard makers into submission. This combination of selling volume chipsets and heavy handedness has stifled innovation and upset chipset and motherboard makers. As AMD’s market share grew, Intel’s attitude has changed a lot, but still has a way to go.
Intel was a innovative engineering company who has turned into a great marketing company. Perhaps the pendulum has swung too far in recent past, with the marketing department dictating a little too much to engineering. Craig Barrett was handed a company that was satisfied with its market and marketing dominance and suffered a natural stagnation. AMD awakened the sleeping giant and Intel is starting to get its act together.
Mr. Barrett really swallowed his pride and essentially ditched RDRAM. This was his and Intel’s turning point and they have been improving ever since. This is not to imply that Intel fell on hard times with their 75%+ market share, and still amazing margins.
Kudos to Mr. Barrett for rallying his troops and the successful ramp of the Pentium 4, in both clock speed and capacity, to the point where AMD had to scramble to react. If not for AMD’s new CPU numbering system, Intel would have cleaned AMD’s clock (speed).
Intel remains the clock speed champ while AMD has a small edge in performance. This appears to be working for both of them because the price war has all but abated. I doubt seriously if there is open collusion, but they both seem to have called an unofficial truce. It is probably a natural result of both transitions to .13 and the pounding their stocks and profits have taken by the recent price war. This pounding has temporarily overshadowed market share objectives. Both of their recent stock recoveries reflect, in part, these recent changes. While both prices are holding steady, AMD is introducing higher-priced CPUs with almost no drop in the middle and low end, causing their ASPs to spike.
Even the most bitter of enemies have undeclared truces and Intel and AMD are resting from a tough year in the economy and in the IT industry. How long this will last is anyone’s guess. Likely, they both will be getting back to what they both do best: being a thorn in each others side and driving each other to greater heights in the process.
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