AMD: what went wrong?

AMD

Five years ago, AMD looked set to topple Intel. Now its very existence is under threat. Mike Jennings investigates what went wrong

In 2006, AMD could seemingly do no wrong. Its processors were the fastest in the PC market, annual revenue was up a record 91%, expansion into the graphics game had begun with the high-profile acquisition of ATI, and it was making exciting plans for a future where, we speculated, it could “smash Intel’s chip monopoly” for good.

Its chief rival, meanwhile, was having a torrid time. Intel’s first-quarter results saw a 40% drop in profit, revenue was falling, and it shed around 10% of its workforce: a whopping 10,000 jobs.

The underdog from Sunnyvale was on the verge of toppling Intel, and it felt like the computing tide was about to turn.

The underdog from Sunnyvale was on the verge of toppling Intel, and it felt like the computing tide was about to turn

Although 2011 has seen eerie parallels with 2006, the shoe is now definitely on the other foot. This time it’s AMD that’s cutting 10% of its global workforce, after its share price plummeted from a high of $9.44 in February 2011 to $4.53 by October.

How did AMD end up surrendering such a advantageous position – and was it given an unfair shove on the way down?

Troublesome transistors

The extent to which AMD has contributed to its own downfall can hardly be exaggerated. Back in 2006, AMD sought to capitalise on its success by announcing two major products: the Barcelona desktop architecture and Fusion, its much anticipated first collaboration with ATI.

Both were plagued with glitches, delays and production problems however, which extinguished much of the early enthusiasm.

Barcelona was officially finalised in the summer of 2006, with president Dirk Meyer promising a summer 2007 launch for the new chips, branded “Phenom”.

But the August launch was postponed until September and, when AMD finally put its chips on the table, they received a frosty critical reception – our tests concluded we were “underwhelmed by its performance levels” – thanks to a flaw that required a key internal buffer to be disabled. Fixed chips didn’t arrive until April 2008.

AMD’s failure to capitalise on its technology lead was brutally (and as we’ll see later, unfairly) exploited by Intel. Just months after fully working Phenoms finally materialised, Intel unveiled its Core i7-920 – and we said “there isn’t a doubt in our minds that tomorrow belongs to Core i7”.

Its November 2008 launch was followed by the mid-range Core i5 almost a year later and, in January 2010, by Core i3 – two series of processors that waded straight into AMD’s traditional budget stronghold.

Amazingly, it took AMD three years to respond to Intel’s first-generation Core processors, with Bulldozer. The architecture, launched as FX in 2011, is built using dual-core modules, and pre-release talk was bullish: leaked AMD documents saw high-end FX cores squaring up to Intel’s Core i7-2600 series, and AMD unveiled prices that were much lower than those of Intel.

The move was welcomed by IDC analyst Mario Morales, who says AMD should “establish its own position rather than compete with Intel”. AMD’s own spokesman Mike Silverman told customers to “let go of the old AMD versus Intel mindset, because it won’t be about that any more.”

Yet comparison is inevitable – and not very complimentary. Our review concluded that “Intel still holds all the cards”, with pricier AMD FX processors delivering benchmark scores synonymous with Intel’s mid-range Core i5s. The verdict was unanimous; our sister title bit-tech dubbed the FX-8150 a “stinker”.

Light was shed on Bulldozer’s problems when ex-AMD engineer Cliff Maier spoke out about manufacturing issues during the earliest stages of design. “Management decided there should be cross-engineering [between AMD and ATI], which meant we had to stop hand-crafting CPU designs,” he said.

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