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AMD: what went wrong?

Posted on 17 Feb 2012 at 15:56

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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User comments

Wrong info on Mark Papermaster

Mark Papermaster was sued by IBM when he left them to work with Apple. See http://en.wikipedia.org/wiki/IBM_v._Papermaster

By huxley on 19 Feb 2012

It appears Llano availability has been improving.

I'm not sure if this is true in the UK, but Llano seems to be available on North American retailer Newegg:
http://www.newegg.com/Product/ProductList.aspx?Sub
mit=ENE&N=100007671%20600166681&IsNodeId=1&name=A-
Series%20APU

By Andruin on 19 Feb 2012

Buying it through retail or etailers hasn't been a problem in the UK. If I understand correctly, the issue seems to be that AMD weren't able to produce sufficient working units for OEM Manufacturers to buy and install in systems so lost out dramatically that way to Intel with the introduction of i3 and i5 processors at the same price.

By mr_chips on 19 Feb 2012

Huxley is right

And the article should be corrected. I'm normally not so anal, but i think in this age of apple vs. everyone else, it's important to be factually correct.

By Ranread on 20 Feb 2012

Intel problems...

The Intel problems highlighted were from the late 90s and the first half of the previous decade, when AMD were at their height.

It no doubt damaged them, but it didn't really contribute to their lack of competitiveness in physical products or lack of yield.

Also, you seem to gloss over why AMD became so prominent.

During the early part of the last decade, Intel was making power hungry and inefficient processors, whilst AMD came up with a more efficient design (they were faster per clock cycle than an equivalent Pentium, so they ran slower and cooler and used less power).

It took Intel nearly half a decade to respond to that threat. By dumping the Intel and using the Israeli design team that came up with the Pentium M architecture, they didn't only catch up with AMD, they blew straight past them with the Core and Core2 processor lines, then really pushing it home with the 3rd generation of Core processors (the Core i chips).

AMD caught Intel napping, when it introduced the Athlon and Athlon 64 chips, but it then rested on its laurels and was caught napping by Intel.

With the Core lines of chips, did Intel even need to keep bribing their customers?

You could argue, that the damage had been done by then, that AMD's profit was stiffled, when they were "leading" the chip race. Did that capped profit mean they couldn't invest in the right people to design the Phenom, Llano and Bulldozer? Or would they have been struggling with the internal politics and supply problems, even if Intel hadn't played dirty?

I went through a string of AMD based machines between 1999 and 2006, but with the advent of the Core series, I have been using Intel again.

I am not loyal to either side. If AMD could match the Core performance using less power, I'd switch back for my next machine...

By big_D on 20 Feb 2012

Dumping the Pentium

Ups, just seen, that should read:

By dumping the Pentium and using the Israeli design team...

By big_D on 20 Feb 2012

Bad Management

AMD's demise was clearly bad management on multiple senior levels.

Having intimate knowledge of AMD during this time frame, there were bad decisions on multiple fronts.

The ATI acquisition was too costly. Not necessarily in dollars but in retaining ATI talent and integrating ATI into AMD. Too many upper managers trying to protect their fiefdom rather than implementing best practices from both companies. HR did it the best but it was led by an ATI VP with acquisition experience. Unfortunately, he left not long after the acquisition.

Product wise, ATI was acquired during one of its cyclical re-engineering and process change cycles. This would usually mean lower margins and lower sales. Under AMD it meant bottom line losses.

The most common phrase I heard from AMD upper management to ex-ATI management was, `We acquired you`. Not a great way to build best practices. This from a company that didn`t have acquisition experience.

The graphics product group at AMD went on to do its engineering update and process change while the CPU/chipset group couldn`t launch new processors. Even a die change was out of their grasp.

AT one point, the AMD Graphics Product Group had a stronger working relationship with Intel than it did with AMD processor and chipset groups.

It was, and still is, a train wreck.

With the shrinking of the PC market, it is debatable whether Intel will continue to let AMD survive.

By longtermtech on 21 Feb 2012

Mark Papermaster

Hi,

Thanks for pointing out the mistake about Mark Papermaster - that's now been corrected.

Mike

By Mikey_Jennings on 21 Feb 2012

AMD loyalty

I have only stayed loyal due to cost. Processors & Mothers boards basically. Memory 2 sticks instead of 3. It all comes down to what you can afford.

By roberttrebor on 20 May 2012

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For more details about purchasing this feature and/or images for editorial usage, please contact Jasmine Samra on pictures@dennis.co.uk

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