Advanced Micro Devices: Life beyond Intel


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Case Details:

Case Code : BSTR039
Case Length : 14 Pages
Period : 1987 - 2002
Organization : AMD, Intel
Pub Date : 2002
Teaching Note :Not Available
Countries : USA
Industry : Semiconductor

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It is a competitive market - there is absolutely no doubt about it."

- Seth Walker, an Intel Spokesman, in February 1999.

"AMD is their (Intel's) worst nightmare."

- Ben Anixter, AMD's Vice-President (External Affairs), in December 2001.

"Isn't it odd that for all the years during the early and mid-nineties, Intel was slowly increasing speed about 33 or 50 MHz at a time and prices were rather high? But then, AMD comes along and in two years, we can change 1000 MHz. I really like this competition thing, I just hope it lasts."

- A Microprocessor Customer, quoted on www.geek.com.

Enacting The David/Goliath Story

In June 2001, the Sunnyvale, California (US) based microprocessor manufacturer, Advanced Micro Devices Inc (AMD) launched a new microprocessor, the 1.4GHz Athlon.

This was in response to the launch of the Pentium 4 2GHz processor of its archrival, Intel Corporation (Intel) based in the same city (Refer Exhibit I for a note on the microprocessor and Exhibit II for a note on Intel). AMD's move did not attract much attention initially as Intel had always beaten it on the market share, brand recall and product superiority fronts for decades (Refer Table I). Over the next few months, news spread across the globe that the Athlon processor was much better than Pentium 4 in terms of performance. Intel had to face customer unrest as the usual marketing hype surrounding the launch of Pentium 4 wore off and Athlon was increasingly being accepted as a technically superior product. Analysts observed that Intel's advertisements had made PC users believe that a higher clock frequency resulted in higher performance - something that was reportedly far from the truth (Refer Exhibit I).

However, this did not come as a major surprise to industry observers who had watched the two companies battle each other for decades. In fact, AMD and Intel were even termed as the 'Pepsi and Coca-Cola' of the global microprocessor industry. Every-time AMD launched a new chip, Intel brought out a faster chip into the market, thus preventing AMD from gaining any competitive advantage.

Due to its financial muscle and successful marketing efforts, Intel had always had the lead in this battle for leadership and most of the leading personal computer (PC) original manufacturers used Intel's chips for their PCs. However, things changed with Athlon. AMD sought to break this widely accepted 'Megahertz Myth' which attributed a microprocessor's superiority to its clock speeds. In Athlon, AMD had a product that challenged Intel's chips not on the basis of clock speeds, but on the overall performance of the processor. Commenting on this, Wee Yep Yin, Product Marketing Manager, SEA, AMD Far East, said, "Ultimately, AMD delivers what is most important to business and consumer PC users - superior software performance, higher productivity and platform longevity."

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