AMD's Plan of Attack
Advanced Micro Devices (AMD) Chairman and CEO Hector Ruiz is basking in a year of unprecedented profit and revenue growth at the world's second-largest chipmaker. AMD also has been gaining market share in key segments of the server chip business and at retail against its giant rival Intel (see BW Online, 6/12/06, "AMD: Chipping Away At Intel's Lead"). Its biggest win to date came in May, when Dell, the last major holdout to buying its chips, announced it would begin selling AMD-based servers later this year (see BW Online, 5/19/06, "AMD Inside"). Still, the Sunnyvale (Calif.) company looks to face tougher going in just a few short weeks as Intel (INTC) rolls out the first in a series of powerful, energy-sipping chips called Core 2.
After AMD laid out its own road map for continuing its gains during its June 1 technology-analyst day, BusinessWeek Technology Correspondent Cliff Edwards quizzed Ruiz about the strategy and challenges ahead. Central to Ruiz's approach is increasing AMD's number of partnerships with software vendors and other chipmakers such as Nvidia (NVDA), Atheros (ATHR), and Broadcom (BRCM).
All those companies face challenges from Intel's platform strategy, in which it bundles microprocessors with graphic chips, wireless chips, and software to take a larger share of the business away from them. To combat that, AMD announced it would open its architecture to such partners, letting them bake their technology into AMD parts more closely, ideally meaning that they will work better together. The following are edited excerpts of their exchange:
You introduced a plan, called Torrenza, that sounds like your answer to Intel's platform approach, where you team up with other companies to create what you call "open platforms." What kind of reception are you seeing from this approach?
Customers are finding the fact that we are opening up our architecture very attractive. There are some segments where raw chip performance is important, but that's a small segment of the market. As [Intel] closes the technology gap, it will be a much tighter race, but we're going to introduce a really new architecture that will work well with our partners for the best performance. We're going to start sampling it at the end of 2007 and roll it out in 2008.
Once again, we're going to distance ourselves from them. The good news for customers: [Intel is] getting better, but it's not a new architecture. We're in the throes of finalizing the architecture we're going to introduce next, and that's going to be killer.
That may be true, but Intel is accelerating its road map. It looks like you'll be months behind in terms of process technology over the next few years, which could give them some performance advantages. How do you fight that perception in the marketplace?
We were a year behind in 90 nanometers and nobody ever asked me if Opteron (AMD's server chip) was a 65-nanometer chip or 90-nanometer chip. They just asked, "How well does Opteron perform?" -- and they liked what they saw!
I don't see that as very different this time around. We're going to have great products and people are not going to care.
Where do you see your main points of attack, though?
I'm following the George Patton philosophy. We're not going to defend [trash], we're just going to attack, attack, attack. We're going to attack in servers, desktop, mobile...everywhere. We're not interested in defending. Somebody asked [Patton], "Hey, should we dig a trench or a hole?" He said, "You do that, you die." Same thing here.
Don't you think Intel will be much more competitive this time around, given that it's more a technology game?
When we introduced Athlon (in 1999), that was a better product. They reacted by making a Pentium 4, saying we're going to go all the way to 10 gigahertz. That didn't work.
This crummy architecture they called the Pentium 4, they struggled with. They're now introducing a new set of products, but it's still the same basic architecture. They have a better core, but I think what's happening is the battle is no longer about the core. Customers are looking for architectural performance, innovation.
Before the Dell (DELL) win, AMD won some customers with an almost anti-Dell pitch, or "how you can differentiate from Dell" pitch. Is there some concern that customers like HP (HPQ), Sun (SUNW), and the like might start backing off on using AMD parts?
We have stated often that we would like to have Dell as an AMD customer, and are very pleased that Dell has decided to offer servers based on AMD. We look forward to working with Dell to continue to address how they can meet their customers' needs using AMD64 processor technology.
Our relationship with our OEM (original equipment manufacturer) partners has never been stronger, and they are expanding their AMD-based product lines. They understand and realize that it's important for our long-term growth and success to support Dell as a customer.
The company's two top executives are constantly in China and South America. How important will that relationship be going forward? What percent of revenues is international now, and what percent are you targeting in the next five years?
Our international revenues are roughly 70 percent and this number will increase over time. China, India, South America, South Asia are the future -- China in particular. We believe we need to be successful in China if we are to be successful overall.
The challenge is how very differently each country is developing. Many of the smaller towns in each of these areas have inconsistent power and limited broadband, but in a few years they will be the backbone of the India PC industry. This is probably how Proctor & Gamble (PG) felt when they were bringing sundries to America's frontiers. We are an important part in connecting the world, and we will participate and lead where the growth is occurring.