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25/11/2022

Story Of AMD Becoming A Chip Giant And Overtaking Intel After Following It For Years




Story Of AMD Becoming A Chip Giant And Overtaking Intel After Following It For Years
This year, Advanced Micro Devices surpassed Intel in terms of market capitalization for the first time. Intel has long been the market leader in computer processors, but AMD's rise is the result of the company expanding into entirely new markets.
 
AMD paid $49 billion for adaptive chip company Xilinx in one of the largest semiconductor acquisitions in history. AMD chips are now used in two Tesla vehicles, NASA's Mars Perseverance land rover, 5G cell towers, and the world's fastest supercomputer.
 
“AMD is beating Intel on all the metrics that matter, and until and unless Intel can fix its manufacturing, find some new way to manufacture things, they will continue to do that,” said Jay Goldberg, semiconductor consultant at D2D Advisory.
 
Analysts had a very different view of AMD a decade ago.
 
“It was almost a joke, right? Because for decades they had these incredible performance problems,” Goldberg said. “And that’s changed.”
 
CNBC spoke with AMD CEO Lisa Su about her company's remarkable comeback, as well as huge bets on new types of chips in the face of a PC slump, new export restrictions to China, and shifting industry trends.
 
‘Real men have fabs’
AMD was founded in 1969 by eight men, the most prominent of whom was Jerry Sanders. The notoriously flamboyant marketing executive had recently left Fairchild Semiconductor, which is credited with inventing the integrated circuit.
 
“He was one of the best salesmen that Silicon Valley had ever seen,” said Stacy Rasgon, semiconductor analyst at Bernstein Research.
 
“Stories of lavish parties that they would throw. And there’s one story about him and his wife coming down the stairs of the turret at the party in matching fur coats.”
 
He also popularized the term "fab" (chip fabrication plants)
 
“Jerry Sanders was very famous for saying, ‘Real men have fabs,’ which obviously is a comment that is problematic on a number of levels and has largely been disproven by history,” Goldberg said.
 
Making chips has become prohibitively expensive as technology advances. Building a fab now costs billions of dollars and takes years. AMD no longer manufactures chips but instead designs and tests them.
 
“When you think about what do you need to do to be world class and design, it’s a certain set of skills,” Su said. “And then what do you need to do to be world class In manufacturing? It’s a different set of skills and the business model is different, the capital model is different.”
 
AMD was manufacturing computer chips in the 1970s. By the 1980s, it had become Intel's secondary supplier. Following the split between AMD and Intel, AMD reverse engineered Intel's chips to create its own products that were compatible with Intel's groundbreaking x86 software. Intel sued AMD, but a 1995 settlement allowed AMD to continue designing x86 chips, making personal computer prices more competitive for end users.
 
AMD paid $5.4 billion for ATI, a major fabless chip company, in 2006. Then, in 2009, AMD separated its manufacturing arm entirely, forming GlobalFoundries.
 
“That’s when their execution really started to take off because they no longer had to worry about the foundry side of things,” Goldberg said.
 
Catching Intel
When it comes to designing the most advanced microprocessors, AMD only has two major competitors: Nvidia in graphics processing units, GPUs, and Intel in central processing units, CPUs.
 
While AMD has a much lower GPU and CPU market share than Nvidia and Intel, it has made remarkable progress since shifting away from manufacturing and reducing capital expenditure.
 
Meanwhile, Intel increased its manufacturing commitments last year, committing $20 billion for new fabs in Arizona and up to $100 billion for what it claims will be the world's largest chip-making complex in Ohio. However, the projects are still years away from completion.
 
“Intel is just not moving forward fast enough,” Goldberg said. “They’ve said they expect to continue to lose share in next year and I think we’ll see that on the client side. And that’s helped out AMD tremendously on the data center side.”
 
AMD's Zen CPU line, which debuted in 2017, is widely regarded as the key to the company's recent success. Su stated to CNBC that it is her favorite product. It's also what analysts believe saved AMD from bankruptcy.
 
“They were like literally, like probably six months away from the edge and somehow they pulled out of it,” Rasgon said. “They have this Hail Mary on this new product design that they’re still selling like later generations of today, they call it Zen is their name for it. And it worked. It had a massively improved performance and enabled them to stem the share losses and ultimately turn them around.”
 
Among the Zen products, AMD's EPYC family of CPUs made significant strides in the data center. Genoa, its most recent release, was released earlier this month. Amazon Web Services, Google Cloud, Oracle, IBM, and Microsoft Azure are among AMD's data center customers.
 
“If you looked at our business five years ago, we were probably more than 80% - 90% in the consumer markets and very PC-centric and gaming-centric,” Su said. “As I thought about what we wanted for the strategy of the company, we believed that for high-performance computing, really the data center was the most strategic piece of the business.”
 
Between 2017 and 2021, AMD's revenue more than tripled, rising from $5.3 billion to over $16 billion. Meanwhile, Intel's annual revenue increased by about 25% over that period, from close to $63 billion in 2017 to $79 billion last year.
 
Geopolitical concerns and PC slump
Many credit AMD's success in catching up to Intel's technological advances to Su, who took over as CEO in 2014. AMD's employee base has more than tripled since then. Su was named Fortune's #2 Business Person of the Year in 2020 and received three of the industry's highest honors. She also serves on President Joe Biden's Council of Advisors on Science and Technology, which worked hard to get the CHIPS Act passed recently. It allots $52 billion for American companies to manufacture chips in the United States rather than overseas.
 
“It’s a recognition of just how important semiconductors are to both economic prosperity as well as national security in the United States,” Su said.
 
With Asia producing all of the world's most advanced semiconductors, the chip shortage highlighted the problems of overseas reliance, particularly in light of ongoing tensions between China and Taiwan. TSMC is currently constructing a $12 billion 5-nanometer chip fab outside of Phoenix.
 
“We’re pleased with the expansion in Arizona,” Su said. “We think that’s a great thing and we’d like to see it expand even more.”
 
The Biden administration imposed new restrictions on semiconductor exports to China earlier this month. AMD employs approximately 3,000 people in China, and the country accounted for 25% of AMD's sales last year. However, Su claims that the revenue impact has been "very small."
 
“When we look at the most recent regulations, they’re not significantly impacting our business,” Su said. “It does affect some of our highest-end chips that are used in sort of AI applications. And we were not selling those into China.”
 
The PC slump is hurting AMD's revenue, at least for the time being. AMD missed expectations in its third-quarter earnings report earlier this month, just days after Intel warned of a weak fourth quarter. PC shipments fell nearly 20% in the third quarter, the steepest drop in more than two decades.
 
“It’s down a bit more than perhaps we expected,” Su said. “There is a cycle of correction which happens from time to time, but we’re very focused on the long-term road map.”
 
Going custom
Not only are computer sales slowing. The very foundation of computer chip advancement is changing. Moore's Law, an industry standard, has long stated that the number of resistors on a chip should double every two years.
 
“The process that we call Moore’s Law still has at least another decade to go, but there’s definitely, it’s slowing down,” Goldberg said. “Everybody sort of used CPUs for everything, general purpose compute, but that’s all slowed down. And so now it suddenly makes sense to do more customized solutions.”
 
That's why AMD bought Xilinx, a company known for its adaptive chips known as Field-Programmable Gate Arrays, or FPGAs. AMD also paid $1.9 billion for cloud startup Pensando earlier this year.
 
“We can quibble about some of the prices they paid for some of these things and what the returns will look like,” said Goldberg, adding that the acquisitions were ultimately a good decision. “They’re building a custom compute business to help their customers design their own chips. I think that’s a very, it’s a smart strategy.”
 
More and more large corporations are developing their own custom chips. Amazon AWS has its own Graviton processors. Google creates its own AI chips for the Pixel phone, as well as a video chip for YouTube. Even John Deere is developing its own chips for self-driving tractors.
 
“If you really look underneath what’s happening in the chip industry over the last five years, everybody needs more chips and you see them everywhere, right?” Su said. “Particularly the growth of the cloud has been such a key trend over the last five years. And what that means is when you have very high volume growth in chips, you do want to do more customization.”
 
Even basic chip architecture is in a state of flux. AMD and Intel chips are built on the x86 architecture, which has been around for five decades. ARM architecture chips are becoming increasingly popular, with companies such as Nvidia and Ampere making big promises about developing Arm CPUs and Apple switching from Intel to self-designed ARM processors.
 
“My view is it’s really not a debate between x86 and Arm,” Su said. “You’re going to see basically, these two are the most important architectures out there in the market. And what we’ve seen is it’s really about what you do with the compute.”
 
For the time being, analysts believe AMD is in a strong position as it diversifies beyond its core business of x86 computing chips.
 
“AMD should fare much better in 2023 as we come out of the cycle, as their performance gains versus Intel start to become apparent, and as they start to build out on some of these new businesses,” Goldberg said.
 
(Source:www.cnbc.com)

Christopher J. Mitchell

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