amd: an innovative struggler

8/20/2019 AMD: AN INNOVATIVE STRUGGLER

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ABSTRACT

Advanced Micro Devices, Inc. (AMD) is an American worldwide semiconductor company

based in Sunnyvale, California, United States, that develops computer processors and related

technologies for business and consumer markets. t develops a variety of products namely

!esktop "raphics, #aptop "raphics, $orkstation "raphics, !esktop %rocessors, #aptop

%rocessors, Server %rocessors, &mbedded %rocessors, Chipsets, 'emory and Solid State !rives.

A'! is facing stiff competition by ntel and vidia in microprocessors and graphics card

respectively. A'!, which was a market leader in **+ in microprocessors field, lost its market

to ntel. here were many reasons considered for the failure of A'! products. Analysts havegiven reasons like lack of sales, -uality of products, ntels cheaper tactics or over/valuation of

the company after buying A.

he company, since then have faced a bitter period. t again revived in *0 with launch of new

products hitting the market and creating enthusiasm among users. 1ut it has not been able to

achieve its market value which was prior **2

Keywords: A'!, ntel, vidia, 3adeon, graphics card, microprocessor, downfall of A'!.


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Change is inevitable. o success in todays tough competitive market one has to make strategic

decisions at each point. hese decisions will ensure your success or failure. Strategic decisions

taken at right time will lead to success but lack of its failure will lead to downfall of the

company. 4ne such company which lacked implementing strategic decisions is A'!.

echnology advances in the computing industry are at a breakneck speed. Companies must

continually update e5isting versions of their technology and launch new, innovative products to

keep up with competitors and provide end/users with ways to work faster and more efficiently.

he si6e of this industry is increasing at an e5ponential rate with market analysts predicting this

industry to be valued around 702 billion !ollars by **.

he massive si6e of this industry is due to the advancement in the technological area. n late 8*s

%c market was in its early stage with very little sales and that too in advance countries. 1ut

thanks to globali6ation and advance technology now most of the households have %C. 9urther

growth of this industry was ensured by smartphones. ncrease in the market of smartphones

ensured a cutthroat competition in microprocessor industry. his industry has witnessed a

dramatic change in terms of revenues. $ith the introduction of smartphones and a tough

competition to provide customers with innovative products, microprocessor industry flourished.


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&5hibit 0: 'arket si6e of microprocessor industry

2012 2013 2014 2015 E 2020 E0

20

40

60

80

100

120

140

61.7 66.980.2 87.6

128

(in billion dollars)

Source: ITcandor 2014

he si6e of industry has grown at a rate of 08.2; in the year *0< with the growth of

smartphones in the world. $ith the development of smartphone market in developing and

underdeveloped nations there was a huge rise in the revenues of chip industry. he gaming

industry has also grown. As all the gaming consoles re-uire microprocessors and graphic

processing unit, the demand of these are further rising.

he demand is high and so there is a huge opportunity in this industry. As a result many new

players have entered in this industry making competition tough for the e5isting players like A'!

and ntel. =ey players which are running this ndustry currently are

0) ntel) A'!>) vidia


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+) @ualcomm) B%2) S 'icro

ntel is the market leader in this industry with around +0; share. o wonders why we see ntel

trademark on every laptop or desktop. $ith A'! ust having around 2; of the share is now a

struggler. he company which was once a market leader is now nowhere in comparison to ntel.

#ack of leadership and implementation of strategies being the main reasons for this downfall.

$ith leading market single handedly ntel doesnt have to worry about its competitors. 1ut

companies are innovating new products which can change the entire scenario. #ike Sony and

'icrosoft turned towards A'! for %S< and Bbo5 as B2+ architecture was re-uired and A'! is

a giant in this architecture. A'! should sei6e more opportunities to come into the market again.

&5hibit : 'arket share of microprocessor industry

62!8!

3!

5!

5!

9!

10!

Microprocessor Industry

In"el

#$%

I&$

'idia

'*

&roadco+

ST$icro

o",ers


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Source: candor, *0<

Rise of AMD

9ounded in 'ay 08+8 by seven 9air child employees headed by Derry Sanders A'! established

itself as an underdog from the get/go by focusing its early efforts on redesigning parts from

9airchild and ational Semiconductor instead of creating new products. A'! moved its office

from Santa Clara, California to Sunnyvale ust after few months of its establishment.

1y 08? A'! grew to be a si6eable company. t started reverse engineering ntels processors.

A'!s processor A'8*2* was actually ntels processor 2*2*. 9or this A'! and ntel signed a

cross licensing agreement in 08+ costing A'! 7>?,***. A'! started its first production in

Austin e5as 9acility in 088. n 0820, 1' created its %C, and wanted ntels B2+ architecture

but only on a condition that ntel also provide a second source manufacturer for its patented B2+

architecture.

A'! achieved a milestone when it entered into a contract with ntel in 082 acting as a second

source for ntels B2+ architecture. he contract was for 0* years and the condition was that each

company could ac-uire the right to become a second source for another companys product. n

this agreement e5change of technology was the key factor. &ach of the two organi6ation can

manufacture product of other company if they agree on it and the technology to be e5changed is

of e-uivalent technical comple5ity. he rise of %C market grew in the first three years of contract

and so did the sale of A'!. n 082? there was a turnaround in the chip industry and overall

demand for the %Cs became very low. 1ut A'! did not suffer much as continued to develop

innovative products throughout the year.

n 082 ntel did not convey the technical aspects of chip 2*>2+ to A'! which was a violation

of 082s contract. $hen A'! invoked arbitration over the issue , ntel invoked the contract. n

088< A'! won the case against ntel. n 088> A'! developed Am


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he introduction of E=F series of microprocessors by A'! proved to be a huge success. =+

competed directly with ntels %entium processors but due to fast speed and cost/effectiveness

A'!s processors were having a competitive advantage. he rise of A'! mirrored the fall of

ntel. n **> =2 was launched which again added to the success of A'!. 1y **+ the

company was on its peak and ntel was not able to compete with the cost effective products of

A'!. 1ut then A'! was not able to continue its success. he decline of A'! was a heated

debate in the years following **+.

Fall of AMD

A'! became leader in microprocessor industry in **+. 1ut soon it gave it position to ntel,

which was leader before A'!. here were many factors responsible for this downfall. #ack of

-uality products, change in management, not meeting deadlines and misdeeds of ntel were

some of the key features which led to the fall of A'! n **+ A'! ac-uired A in a deal

worth 7?.< billion. 9inancial analysts saw that deal as grossly overvalued. he deal lead to ?*;

market capitali6ation of the company.

@uality plays an important role in any industry but when it comes to industry like computer

industry it is the biggest factor. obody wants to compromise on -uality. Gowever if there is ahuge price issue then people might find it as a compromising factor. %eople wanted more high

-uality products , they wanted to avoid deadlocks in their system. A smooth running system

which can provide multitasking is favorable to them. hese -uality issues arose in A'! when

they launched Fusion (gamer chip in collaboration with A) and Barcelona in order to create

even more faster chips. he flaw was a key buffer which needs to be switched off. his has

caused trouble to the people and they were not getting satisfactory results. t was found that

manufacturing was done by machines rather than e5perienced human operators. hese human

operators were skilled and this has caused efficiency of the products.

Competition drives innovation. A'! achieved its leading position in **+ but then it rela5ed. t

has created a gap by introducing faulty products. his gap was filled by ntel. ntel introduced i

processor in Duly which was much better in performance than A'! processors. A'! had the

advantage of price as its price was always lower than ntel products but then ntel launched i?


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and i> processors which were at par in money value as compared to A'! and were much better

in performance as compared to A'! counterparts. he time gap which was given by A'! was

enough for ntel to recapture the market.by the end of **2 ntel again became the leader of the

industry. #ack of strategic management lead to fall of A'!.

$hen a deadline is given it has to be met. n a competitive market deadlines can cost company

his full market. his is what happened with A'!. t has delayed its new products by two years

which was a huge gap. A'! also cancelled its new orders as it was busy in fi5ing faults in !ell

systems as it was the biggest customer of A'!.

$hen A'! was struggling ntel has used its cash reserves to offer incentives to A'!

customers. t asked them to witch or delay A'! orders. ntel has given 7>million to one of

the biggest customers of A'! to cancel orders. !ell received +; of its cost order and

cancelled the order. Similarly Sony has cancelled all its orders. At time Sony was taking >*; of

its chipsets from A'! but then it reduced to *;. Gowever &uropean Commission has imposed a

fine of 70 billion on ntel in 'ay **8.Competition commissioner eelie =roes said Entel has

harmed millions of customers by deliberately acting to keep competitors out of the market for

many yearsF, claiming that Eeveryone but ntel was worse offF. &ventually ntel was forced to

pay 70.? billion in damages to A'!.

&5hibit >: 3evenue of A'! for past 0* years


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2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

1

2

3

4

5

6

7

5.84 5.62 5.85 5.85.4

6.49 6.56

5.42 5.29 5.51

(in billion dollars)

Source: amd.com

A'! has launched a series of new processors in *00 which marked its re/entry into the market

but in *0 the market was again lost. ts competitors particularly ntel(in microprocessors) and

vidia(in graphics card) came up with advanced technology and that too at competitive prices.

A'! has shifted its focus more towards graphics industry which is on a boom. "aming

e5perience is changing and so the gaming platforms. A'! has tasted success when it grabbed

deal for graphics processing unit for the new gaming consoles of Sony(%S


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showing downfall of A'!. $hile its share value is down the company has undergone a

complete restructuring in the last two years. C&4 of the company has been chaned from mr.

3ory 3ead to !r. #isa Su in *0>. !r Su has the companys future strategies in the 9inancial

Analyst !ay on 'ay ?,*0?. Gere the road map for the ne5t couple of years has been

highlighted and targets are set as to where to take company in the ne5t couple of years. he

customer base of company is -uite strong despite its struggling phase.

Some of our customers and business partners include leading brands, such as

0. Acer . Apple>. Asus


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sector in past year and feels that this industry still is growing. $ith their high -uality and cost

effective "%Us they will ensure to gain more market share.

A'! has announced launch of EIenF, a C%U for 52+. he company did not reveal all the

information but provided basic details. hey are once again focusing on high performance C%U,

with


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Source: anandtech.com


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References

• https:KKen.wikipedia.orgKwikiKAdvancedL'icroL!evices

• www.amd.com

• Cyrus 9arivar and Andrew Cunningham(*0), 4n ropes from the top of the mountain

to the deepest of the valleys retrieved from

http:KKarstechnica.comKbusinessK*0>K*K

• "raham Singer(*0>): A'! 3ise and 9all retrieved from

http:KKwww.techspot.comKarticleK?88/amd/rise/and/fallKpage0.html

• Dason &vangelho(*0): A'! ushers in new performance desktop processors retrieved from

http:KKwww.in.techradar.comKnewsKcomputing/componentsKprocessorsKA'!/ushers/in/

new/performance/desktop/processorsKarticleshowK>22*8>>


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amd: an innovative struggler

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