Advanced Micro Devices was hoping to profit from a bigger
share of the PC chip market after its longtime nemesis,
Intel, suffered a string of antitrust regulatory rebukes in
But it hasn't quite worked out that way. Intel has extended
its lead in the business while AMD has struggled to stay out
of the red, ousted its chief executive and recently announced
it is gutting its workforce.
Now AMD, a Silicon Valley fixture for more than four decades,
is considering a new strategy that some experts believe could
dramatically alter its protracted struggle with the Santa
Clara, California-based Goliath, one of the most closely
watched and acrimonious brawls in the tech industry.
"We're at an inflection point," said company spokesman Mike
Silverman. "We will all need to let go of the old ‘AMD versus
Intel' mind-set, because it won't be about that anymore."
Although AMD has been vague about its plans, the company is
widely expected to push hard to get its chips into
smartphones and tablets. Those markets not only are dominated
by other companies, but its gargantuan archrival is trying to
elbow its way into them, too - potentially moving the war
with Intel onto a new battleground.
Nonetheless, AMD has to change to keep up with the fickle
tastes of consumers, according to Mercury Research analyst
"The competitive dynamic has shifted because of these new
markets opening," he said. "There's kind of a big
restructuring of the world taking place and all of the
companies are working to address it."
AMD, which was founded in 1969, and Intel, launched one year
earlier, began feuding over patents and other matters in the
early 1980s. That's when IBM chose to equip its personal
computers with Intel's brainy x86 microprocessors and picked
AMD as a backup supplier of those chips.
But the squabbling hit a new decibel level after AMD
developed its own x86 design and accused Intel of employing
intimidation and other unfair tactics to discourage their use
by computer makers.
After AMD filed a broad antitrust suit against Intel in 2005,
similar allegations were leveled in the next few years by
Japan, Korea, New York state, the US Federal Trade Commission
and Europe, with the latter fining Intel $US1.45 billion.
The chip giant has repeatedly denied wrongdoing and is
appealing the European penalty.
But in 2009 Intel agreed to give AMD $US1.25 billion to
resolve its complaints, and last year it settled the FTC's
suit by promising to change some of its practices. New York's
suit is still pending.
AMD executives had hoped the legal actions would help them
grab a bigger piece of the PC microprocessor business. But
the opposite has happened.
In 2006, AMD owned 23 percent of the market, while Intel
controlled 75 percent, according to research firm IDC. Since
then, AMD's share has slid to around 19 percent, while
Intel's has grown to 80 percent.
Heavily in debt from its $US5.6 billion purchase of a
graphics chip chipmaker, AMD in 2009 sought to cut its
expenses by spinning off its manufacturing operation into a
joint venture called GlobalFoundries. But by then it had
suffered a long string of financial losses, which didn't sit
well on Wall Street.
"How many quarters are investors supposed to tolerate before
we get action necessary to deliver some semblance of
break-even or profitability?" groused American Technology
Research analysts two years ago.
Since then, AMD has turned in better earnings and won praise
for its chips' quality. Nonetheless, it's been chided for
trailing Intel's technology and for being heavily dependent
upon the PC business, where the pace of growth has slowed.
AMD's failure to get its chips into smartphones and tablets
reportedly was behind its board's decision in January this
year to oust CEO Dirk Meyer, who had been in the job since
2008, and to replace him in August with Rory Read, former
chief executive of PC and tablet maker Lenovo.
Meanwhile, AMD's woes have continued.
In September it cut its revenue and profit forecast after
having fewer of its top chips to sell because of
manufacturing glitches at a German GlobalFoundries plant. And
earlier this month, AMD announced it was laying off 1400
employees - nearly 12 percent of its workforce.
By contrast, Intel's business has been booming. Reporting
sales of nearly $US44 billion last year, compared with about
$US6.5 billion for AMD, Intel has turned in a succession of
Some analysts believe AMD may fire back at Intel by adopting
a chip design long anathema to both companies. The design,
licensed to various chipmakers by British firm ARM, currently
dominates smartphones and tablets.
AMD might make chips based on both the x86 and ARM designs,
some experts have speculated. But if it switches exclusively
to ARM, it would leave Intel essentially alone in the x86
business, which "would make Intel kind of look like they are
the guy that missed the meeting," said tech analyst Rob
All AMD has said so far about its new strategy - which it has
promised to detail in February - is that it intends to pursue
"growth opportunities" in low-powered devices, emerging
markets and Internet-based businesses.
Whatever path it takes, it had better be different from the
one it's been on, says Creative Strategies tech analyst Tim
Bajarin, because the microprocessor market "has really
changed in this post-PC age."