If you ask senior experts at AMD who their competitor is, few will mention the name Intel. AMD’s surprising confidence is bolstered by the statement from CEO Hector Ruiz during an interview with BusinessWeek Online.
AMD currently holds 13% of the server chip market and has deeply penetrated the personal customer segment, gradually attracting the attention of enterprise customers and government agencies. “We will take the market share that Intel currently holds,” Hector Ruiz stated.
Growth
The chip manufacturer based in Sunnyvale, California is experiencing revenue growth this year that is double the industry growth rate. AMD is expected to continue this growth in 2006 as the company targets enterprise customers and aims for premium product lines in emerging markets such as China and India. As Roger Kay, President of Endpoint Technologies, a computer market research firm, puts it, “AMD has overcome all obstacles and succeeded in both value and product features.” In the third quarter of this year, AMD achieved a revenue milestone of $1 billion for the first time. With the PC and server markets projected to grow at double-digit rates, AMD’s growth phase is set to continue.
The Battle with Intel
Analysts and top industry experts share a consensus that AMD’s Opteron server chips and other chips for laptops and desktops are poised to outperform Intel’s comparable products in terms of performance within the next year. However, expanding AMD’s market share will not be easy as Intel’s products are already well-established among consumers.
The two giants have engaged in a tit-for-tat battle, each launching “new features” for their products. While AMD was the first company to introduce 64-bit chips and the first to launch dual-core chips that allow two cores to combine for enhanced performance and energy savings, Intel responded in early November 2005 by introducing a low-cost 65-nanometer processor and revamping its manufacturing facility in Arizona.
However, a closer look reveals that AMD surpassed Intel for the first time in October 2005 in desktop chip sales amidst a declining market. Meanwhile, Intel maintains its dominant position in the laptop segment with its Centrino technology—this explains why Intel’s profit margins are significantly higher than AMD’s: AMD’s profit of $130 million in Q3 2005 is only equivalent to Intel’s daily revenue.
Gaining from Legal Battles
The antitrust battle that AMD is pursuing against Intel has somewhat aided AMD in achieving its goals. Government agencies and enterprise customers are increasingly interested in utilizing AMD’s technology and chips in their desktop and laptop lines.
Even Dell, the world’s largest PC manufacturer, has considered using AMD chips for product lines that currently rely 100% on Intel products, as competitors like HP, Gateway, and Lenovo have seen higher profits from using AMD chips alongside Intel chips. However, according to Hector Ruiz, even without securing a major customer like Dell, AMD is projected to achieve a 20% market share in processors within the next few years.
Specifically, in 2006, AMD aims for a 15% market share in the commercial PC chip market, a 5% increase from this year. AMD also plans to release competitive chips against Intel’s Viiv Entertainment-PC products, expected to launch next year alongside Microsoft’s Vista product announcement.
Clearly, it has been decades since the first processor was invented, making it a significant moment for a manufacturer to emerge that can compete with the giant Intel. However, it won’t be easy for AMD to declare itself the number one company in the chip technology industry overnight.
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