AMD: Survival and the Future
Introduction
Since its acquisition of ATI, AMD has developed into a platform vendor. In addition to CPUs, the company also offers chipsets and graphics processors. Phenom, the company's first quad-core CPU for the desktop segment, was finally released after many delays only recently.
AMD is also a company fighting to survive. Indeed, the situation is so dire that the German state of Saxony, where AMD's Fab 36 is located, as well as the German government, felt the company needed financial support and contributed over $384 million to the firm's coffers.
Meanwhile, AMD's main rival Intel finds itself in a completely different situation. For years now, Intel has been subsidizing the PC market with so-called advertising-costs subsidies, and it's not only the large retail chains that benefit from this support. In addition to the server space, AMD is now also concentrating on the mass market. The downside is that margins are the lowest in this segment. If AMD floundered, the consequences for the market would be dire. Effectively, there would be no competition without AMD, leaving us with a monopoly in the form of Intel, with everyone from OEMs to end users at the mercy of one company's pricing politics.
Toms's: Mister Polster, thanks to its acquisition of ATI last year, AMD is now in a position similar to that of your competition. Shouldn't this fact allow your company to gain new customers, since you can now act as a single source for a computer's central components? After all, AMD also now produces chipsets and graphics processors in addition to CPUs. The word "platform" comes to mind.
J. Polster: We are positioned even better than the competition. Compared to AMD's previous company structure, we now possess our own platform, which comprises the chipset and the graphics solution as well as the processor. To my knowledge, the competition does not offer graphics chips.
Toms's: In your opinion, will AMD be able to survive without support on a national and a European level?
J. Polster: Yes, of course. No company can survive on financial benefits alone. We make very large investments that have to pay off over time. Within the entire IT sector, processor and chip makers are the ones that bear the largest risks.
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Toms's: Is life for you as a CEO becoming more uncomfortable right now?
J. Polster: Well, I've been with AMD for quite a while. And since you asked, it has never exactly been cozy. In our business, you pull no punches, and quarter is not given.
Toms's: Will AMD be able to retain its independence?
J. Polster: I assume you're referring to the 8% investment by Mubdala Development? This is a clear case of an investor that is expecting a certain return on its investment. To us, it's more a sign of confidence that the company acquired shares. Also, this transaction does not constitute a majority investment or even a take-over, meaning it didn't have to be reviewed by the U.S. Committee on Foreign Investment.
Toms's: Were you surprised by the performance figures of the new Phenom processor?
J. Polster: No. I was surprised by its mainstream performance. We offer a strong and solid platform, which we have been able to realize as a result of our acquisition of ATI. I will admit that we're currently not quite at the top in the high-end market.
Toms's: What does the new strategy for desktop CPUs look like? Will AMD be concentrating on the lower- and-middle price segment, in effect ceding the high-end market to the competition?
J. Polster: We are concentrating on markets where we can achieve large volumes. And that happens to be the mass market, where we can cater to the individual segments. We never intended to start any kind of x-core war.
Toms's: In several online stores, the less expensive AMD Phenom is outselling comparable CPUs the competition offers. Would you say the Phenom is enjoying a good reception in the market?
J. Polster: Yes, Phenom is very well received. We are continuing our strategy of being a little more affordable than the competition. With the Phenom CPU, we are offering products at a very attractive price.
Toms's: Why did AMD drop the original X4 (and X3) designators from the Phenom product name at the last minute?
J. Polster: You see, we never intended to start any kind of x-core war that could have been reduced to a certain naming convention. You know, like "who has the most cores." From the perspective of the buyers and the users, processor designations are playing less and less of a role. After all, nowadays most people don't even know what kind of a processor belongs to a certain designation.
Toms's: Why are the new CPUs shipping at such comparatively low clock speeds?
J. Polster: As I said before, that is directly related to the market segments we are addressing. The mainstream segment is where the bulk of the quad-core CPUs are sold. There, we are ideally positioned with the Phenom models currently in the market. Of course we will still be releasing versions of the Phenom running at higher clock speeds.