Fast Forward: Is AMD Running out of Gas?

Nathan Edwards

AMD has enjoyed great success against Intel in the last few years, but trouble is looming. If the costly acquisition of ATI doesn’t pay off soon, AMD could be permanently crippled. And a crippled AMD is bad for everyone who benefits from lively competition in x86 processors—including Intel.

Historically, Intel commands 70 to 90 percent of the x86 microprocessor market, depending on the particular market segment and point in time. AMD can live with that, but just barely. When Intel screws up, billions of dollars may be lost, but the juggernaut survives. When AMD screws up, it’s life threatening. AMD is always under pressure to devise near-perfect strategies and execute those strategies nearly perfectly.

Two things are going wrong now. First, Intel has largely recovered from its mistakes with the x86. Intel’s Core 2 microarchitecture is a big improvement over the NetBurst microarchitecture and its phallic hyperpipelining. Intel has embraced the 64-bit x86 extensions that AMD pioneered and is introducing competitive multicore chips. Intel’s low-power notebook processors look good, too. And Intel has a new alternative to AMD’s HyperTransport that promises greater integration in future Intel chips.

The second thing going wrong for AMD is indigestion. Major acquisitions like ATI are hard to swallow, financially and logistically. AMD recently had to raise $2.2 billion, not a good sign.

Some AMD fanboys pray for deliverance in the form of legal lightning. Actions alleging that Intel engaged in unfair business practices are pending in multiple countries. However, pinning hope on litigation instead of innovation is often the death knell for a company.

Much attention is being heaped on AMD’s new Quad-Core Opteron (Barcelona). But to fully recover, AMD must prove that acquiring ATI wasn’t an expensive goof. Future AMD processors that integrate the GPU with the CPU will be great for most people who aren’t high-end gamers. However, AMD might have accomplished the same thing by licensing the graphics technology from ATI instead of spending $5.4 billion to buy the whole company.

No doubt Intel enjoys AMD’s problems. Nevertheless, Intel is at its best when challenged by competitors like AMD. Lately, Intel has even been slashing prices. Sure, it’s an obvious tactic to put more pressure on AMD. But it’s good for users, too.

Tom Halfhill was formerly a senior editor for Byte magazine and is now an analyst for Microprocessor Report .

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