AMD, the long neglected stepsister to Intel, has done marvelously well in recent years, primarily due to Intel’s “meltdown” of trust in their flagship processor products and Intel’s delays in shipping new competitive 10nm chips. Coupled with ineffectual senior management and poor board control, Intel, the darling of the Wall Street set, sat wallowing in management paralysis and a moribund stock price until recently.
Meanwhile AMD’s CEO Dr. Lisa Su has been instrumental in moving AMD from its Eeyore approach to life to that of a first-rate competitor in the chip space with its Ryzen, Radeon and Epyc product lines. Dr. Su has not only changed AMD’s attitude – she’s also changed the entire competitive landscape with bold technology moves and strategic partnerships with companies such as Microsoft. Having dealt with the earlier AMD in the 1990’s, where no one would make a decision and the C-suite was filled with ineffectual do-nothings, it has been refreshing to see capable management drive good engineering and product management.
In the last few years, AMD and Intel have swapped places. AMD, the driver in specialist processors, has gone full-bore into the vacuum left by Intel’s strategic blunders and broadened into general processors . Intel, in contrast, has made an old Intel revenue-enhancement approach “new again”, by taking their general processors and specializing them for specific markets.
But believing the grass is greener on the other side of the chip business comes with its consequent perils.
Intel’s movement into specialty processors presents problems. Specialty chips imply lower part usage and inconsistent yield quality. For a company used to refinement of general processor chips and high yields, creating a plethora of slightly different yet mostly the same chips can result in a ever smaller piece of the long tail. So why would Intel entertain this strategy? Intel’s movement into this area is likely predicated by a concern of a significant economic downturn. In a recession, sometimes the only consistent chip revenue comes from a collection of oddball specialty chip sales to government and industry, as AMD well knows.
Meanwhile, 30% of AMD’s business is now through China, and that lifeline has been seriously impacted by the recent China-US trade wars and instability in Hong Kong. In addition, AMD bet big on Microsoft driving new business with their touted Surface Laptop 3 using AMD’s Ryzen processor. But recent reviews aren’t all rosy, with some reviewers showing poorer results compared to Intel’s current processors.
Some of those benchmark results aren’t surprising. Intel has long held key advantages in chip heat dissipation and thermal properties. A hot chip won’t perform well on those benchmarks nor will it be great for battery life, and AMD’s chips run hotter in some of those tests. Intel has also finally gotten a handle on its 10nm chip manufacturing issues, and is now shipping the more competitive Ice Lake chip. In “>head-to-head tests, Intel clearly has the upper hand after several years of running behind AMD. Intel stock has picked up a bit in response.
So what’s all this mean for AMD tactically? At the moment, nothing. Microsoft is committed to AMD, and will likely continue to do so for a while. But whether Microsoft will remain committed to the Surface Laptop 3 is another question entirely. Microsoft has dropped products before for far less reason, and the Surface Laptop 3 isn’t creating a lot of enthusiasm. The bread and butter of the AMD processor world – gaming – isn’t doing so well either, as gamers run into fundamental Internet bandwidth and latency concerns that all of the offload tricks in the universe won’t help.
If the global trade wars continue and the global economy weakens, and if Microsoft softens on its support of Surface Laptop 3, AMD could face hard times in 2020. Intel is back in the game after a bruising few years and playing hard in AMD’s backyard. Can Dr. Su guide AMD through the likelihood of a pending global recession while playing in Intel’s backyard? If anyone is capable of doing so, she is. It should be an interesting 2020.