AMD (Advanced Micro Devices) currently occupies second place in the PC and server processor business after Intel. The field was narrowed to three -- VIA Technologies is #3, though it is only responsible for around 1% of the market -- because of the enormous investment required to manufacture processors. Ten years ago, a company could build a silicon fabrication plant for $2-3 billion, but now the cost is closer to $10-12 billion. And as the lithography decreases in size, the required investment will only become larger. AMD's market share historically ranged between 5% and 20%, with many people believing that Intel refrained from crushing AMD only to avoid being charged with anti-trust violations.
But Intel is not a powerhouse in all areas of the processor business, as Qualcomm has 64% of the global cellular baseband chip market and 51% of the smartphone applications processor market. Other players in this market include HiSilicon (owned by Chinese Huawei), MediaTek (a Taiwanese spin-off from United Microelectronics Corporation), Marvell (a top supplier of SSD controllers), and Samsung. After trying and failing for a decade to dominate the mobile market, Intel is eliminating 12,000 jobs, and that in a twelve-month period which witnessed the loss of 72,333 jobs in the tech sector. Intel declared that its new focus will be on the cloud, but it's already a major player in that arena, having 95% market share in enterprise servers and more than that in enterprise cloud. Intel will also focus on the IoT (Internet of Things), the realm of chatty lawnmowers, eavesdropping televisions, come-hither baby monitors, gossipy oxygen monitors, tattletale mattresses, vincible buildings, and perceptive penis rings. AMD, on the other hand, does not intend to enter the IoT market, though it is betting heavily on corporate data centers.
The push to migrate everything to the cloud will result in Big Data firms having access to your entire online life, quite a price to pay for access to music, videos, and data via any platform around the world. You are the product being sold, not the customer.
The computer business is dog-eat-dog -- just ask CDC, RCA, Honeywell, Sperry Univac, Burroughs, and GE, all of which were former computer manufacturers -- and so AMD farmed out its fabrication business in 2009 with the creation of GlobalFoundries to manufacture its processors, making AMD a fabless manufacturer, unlike Intel which still controls its processors from beginning to end. AMD did this to obtain some much-needed cash to continue its business.
AMD filed an anti-trust lawsuit against Intel in the 2004 to 2009 time frame for Intel's monopolist behavior, along with the European Commission and graphics chip maker Nvidia. Intel eventually settled for $1.25 billion to AMD, $1.45 billion to the European Commission, and $1.5 billion to Nvidia. After GlobalFoundaries was created, Intel threatened to terminate AMD's license to manufacture x86 processors because GlobalFoundaries did not necessarily inherit the licensing agreement.
In October 2014, AMD announced that the Taiwan-born Lisa Su, who joined AMD in January 2012, would become President and CEO.
Last June AMD was reportedly considering breaking up the company. Last September, AMD split its graphics chip unit into a separate business internally called Radeon Technology Group. Like Intel, it had failed to gain a foothold in the mobile market.
One of the reasons Intel does not have a cash-flow problem is its use of H-1B visas which are used to replace American workers with cheaper foreign ones, mainly from India, with 6% of Intel's U.S. workforce being here on an H-1B visa. Intel depends on them to such an extent that it even has a Director of Immigration Policy, Peter Muller, who advocates not only for more foreign workers, but also for work authorization for their spouses to double the number of lost American jobs. Microsoft, Intel, and Facebook were three of the top-five companies lobbying Congress for more H-1B visas in 2013, with politicians such as Marco Rubio cheerleading the effort. Contrary to popular belief, the vast majority of H-1B visas are not used for people with advanced skills, with the exact figures being 65,000 for applicants with a B.S. and 20,000 for those with an M.S. or PhD. Not to mention that the H-1B visa program is not attracting the best and brightest workers.
Another myth regarding H-1B visas is that it is illegal to use them to replace Americans. It's not. The law “is designed to make sure you can replace American at will, while making it look like you can't,” said John Miano, an attorney for Washington Alliance of Technology Workers.
Moore's Law is often misquoted, with many people believing that it ordained a doubling of performance every 1-2 years. In truth, Intel's Gordon Moore predicted in 1965 that the number of transistors would double every year. In 1975, he revised his estimate to cover a two-year period. The performance increase from Lynnfield (2009) to Sandy Bridge (2011) was 10-50%, hardly a doubling, with most models closer to 10-20% improvement. Moore's Law substantially slowed down with the transition to a 22nm lithography, starting with Ivy Bridge (2012). The transition to 14nm lithography, starting with Broadwell (2014), caused Intel to revise the tick-tock model into a tick-tock-tock one. The transition to 10nm lithography promises to slow it even more.
AMD announced that it is licensing the design of its new Zen processor and SoC (system-on-chip) technology to Tianjin Haiguang Advanced Technology Investment Company (THATIC), a joint venture with China. This is something that Intel has never done, although it has partners in China and Israel, with Intel being the top private employer in Israel with many locations there. Worldwide, Intel has fifteen fabs and GlobalFoundaries has five.
"Intel will give you a black box, but not the keys to the kingdom," Jim McGregor, principal analyst at Tirias Research, said.
The industry press articles that referenced the report from IDG News Service referred to the technology as x86 when in fact that specific technology is owned by Intel (the term "x86" stems from Intel's 16-bit 8086 in 1978 and 32-bit 80386 in 1986). AMD's 64-bit extension of it, x86-64, a/k/a amd64, is more important given that all current PC and server processors support it. AMD and Intel are tied together with golden handcuffs given that each licenses the other's IP.
Both AMD and Intel are suffering from the shrinking PC market, though detachable tablets, i.e. tablets that double as laptops, may offer growth in the low single digits. Many people are still using five-year-old Intel Sandy Bridge or AMD era-equivalent Bulldozer and Piledriver processors with an SSD, with the days of PCs being overwhelmed by software a short time after sale long behind us. Intel has not done itself any favors with its naming scheme that mainly insiders appreciate. AMD reported that its Q1 2016 operating loss was $70 million, compared with a Q4 2015 operating loss of $99 million.
One curious thing regarding the licensing arrangement is that Q1 2016 revenue was lower than expected due to lower demand for its graphics chips used in consoles and reduced demand from China. China accounted for 42.2% of AMD’s revenue in 2014. AMD may be betting on past behavior.
The administrations of Bush the Younger and Obama gave hundreds of billions of dollars to ensure that pampered Wall Street executives could continue to purchase luxury cars, yet they failed to see the strategic importance of having the processor business centered in the U.S. and Europe. Having multiple, reliable sources for processors and chipsets is necessary to guarantee that our military and infrastructure hardware does not contain backdoors, whether in the firmware or baked into the silicon.
Another issue regarding the announcement is that it claims that AMD is only transferring high-performance processor technology, but x86-64 architecture is used in servers, desktops, and laptops. China is not known for enforcing the IP of foreign entities, with the technology transfer to THATIC actually being under the auspices of the Chinese Academy of Sciences, a national research institution.
AMD should have done its due diligence.
China announced trial runs of its own magnetic levitation train less than two years after the opening of Shanghai's German-designed Transrapid system. The technology required for magnetic levitation trains could not possibly have been developed independently in a two-year period. Chinese engineers were filmed breaking into the Transrapid maintenance room in the middle of the night and taking measurements of the new train.
"Dozens of Chinese manufacturers are shamelessly copying our machines," said Rainer Hundsdörfer, the CEO of Weinig AG, a German company that manufactures machine tools. "And when I point this out to the Chinese in their booths, they're not even embarrassed. On the contrary. They're proud of the quality of their copies and want to know how they can improve them even further," he added, referring to his discovery of copies of his company's products at trade shows.
All of the leading railway companies wanted to do business in China which demanded cutting edge technology to be licensed to Chinese companies. Not surprisingly, China aggregated all of the various technologies to create its own world-class railway company. The Western companies received only a token amount of business, but now, not only are they locked out of the Chinese market, they have to compete world-wide with a company which has better technology.
As Siemens and the other companies discovered, China plays by very different rules. As Der Spiegel noted, "zizhu chuangxin," or "independent innovation," is the Chinese way of describing how Chinese firms further develop foreign technologies.
"Deutsche Bahn thinks first and foremost about Deutsche Bahn, and Siemens first and foremost about Siemens," explained deputy chief engineer of China South Locomotive & Rolling Stock, Lu Renyuan. "But, in China, each person thinks about how we can all advance our nation together."