Students: Spirache Rares

Alexandru Sava
Alina Popa

AMD vs INTEL
The next big technology leap

Introduction
We live in a digital age. Music, video, phone calls, information creation and information
consumption are all, by and large, done digitally. A huge proportion of this happens on the
Internet.
People use the Internet and its content via computers: As Internet content becomes more
sophisticated with, for example, film, music and podcasts, more computing power is needed. The
computer chips inside computers need to keep pace with that demand.
Computer chips are essentially collections of transistors - tiny electronic devices that control the
flow of electricity to create the 1s and 0s that underpin computing. Silicon is made from purified
sand that is super-heated. Produced as a huge sausage-like shape called an ingot, it is sliced into
wafers.
Transistors are the building blocks of computer chips that Intel and AMDhas been making for 40
years. Intel has been working to make these transistors smaller so that more of them could be
fitted onto the same area of silicon, making the chips more powerful. This came at a price. Until
recently, the smaller the transistors, the hotter the chips tended to run.

Strategic management
Intel is continually developing new approaches to keep it ahead of the competition. Vertical
integration gives Intel a strong advantage. This means Intel does not outsource any of its work
for research, development or manufacturing. For example, many companies do research and
some development but give the product design to another company to produce.
Intel does all three processes itself. Its manufacturing process is capital-intensive because of the
specialist equipment. For example, Intel spent more than $7 billion (3.5 billion) on
manufacturing plants using the latest 22nm process technology. Intel believes this investment is
worthwhile, as this highly competitive approach gives it a competitive edge by:

ensuring quality

protecting its ideas

Students: Spirache Rares

Alexandru Sava
Alina Popa

meeting its timescales.

Competitive advantage means a company has or does something better than its rivals.
The Intel 'tick-tock' strategy was announced in September 2006 by Intel's CEO, Paul Otellini. It
is a blueprint for Intel to maintain its technology leadership and competitive advantage. It plans
to take advantage of Intels product research, development and manufacturing capacity to deliver
improved products every year.
This regular improvement will ensure continued market leadership. In 'tick' years Intel will
introduce a new manufacturing process (of which the 22nm process is the latest). 'Tock' years
will see the introduction of new designs (architectures) of CPUs (central processing units).
Intel is competitive because:

it has a regular cadence (or rhythm) to the development of new products or improvements
to existing ones

it integrates teams from R&D and all areas of manufacturing, all working to the same
schedules. Intel is the only company that can combine and optimise manufacturing process
technology, product design, leading-edge capacity, design tools, masks and packaging in-house

it sets the highest standards in high-quality clean production. The company invests vast
sums in R&D and manufacturing. This makes it is difficult for rival companies to match Intel

it designs quality products. Intel continually develops new technologies that combine
product-led, user-led, and market-led features

it is able to leverage its manufacturing capability. This means it can increase production
to bring product to market in large volumes. Increasing volume and getting the product onto the
market as quickly as possible are important elements in creating and maintaining a competitive
advantage.

The competition
The competition is quite tough in terms of overall performance. AMD is ahead in price
performance, and Intel's performance per watt is superior. Commercial gaming cafs will prefer
Intel because of its lower power consumption, and individual enthusiasts will also favor Intel
because they are only concerned about absolute performance, in which the company is slightly
ahead. In our view, the advantage is with Intel in high end enthusiast processors.

Students: Spirache Rares

Alexandru Sava
Alina Popa

The key success factor for AMD or Intel will be their APUs. AMD recently launched Kaveri
which holds promise for gaining share in the declining PC and laptop industry. On the other
hand, Intel is focusing on updating its Haswell offerings during the year.
A business can develop its products either through product-orientated development or marketorientated development:

product-orientated development focuses on developing the production process and the

product itself arising from for example, new use of technology or innovation

a market-orientated approach identifies and analyses customer needs. It then develops

products which meet them.
Both approaches are important.
Right from its early days, Intel realised the importance of combining product innovation with a
market-focused approach. Intel responds to both customer demand and product innovation. Its
products are therefore 'user-centric', that is, the product development meets the needs of the
customer.
This information helps Intel's product design teams to understand what customer requirements
are.
Intel also has a development programme to increase the capacity of a microprocessor. This fits
with the two-year cycle in which the microprocessor is adapted or a new product is launched.

Comparison between the companies

Advanced Micro Devices and Intel face the challenge of transforming their technology as the
masses shift towards portable and wearable devices. The PC-oriented business of both these
companies is shrinking as a result of this shift. AMD is in the process of executing a strategic
shift towards graphics, gaming and micro servers. Intel, on the other hand, is trying to make its
way into the smartphones and tablets market through its Baytrail offerings. In this report, we will
explore AMD's upcoming products and technologies and compare them with the forthcoming
offerings of Intel. Furthermore, we will also analyze the chances of both companies successfully
transforming in line with the technological renovation.
AMD has been lagging behind Intel in the desktop market for several years. It was the first to
introduce the dual core technology in the past, yet Intel has dominated the PC market because of
its differentiated offerings, even at premium prices. Arguably, AMD has been better in terms of
price performance on several occasions, but this fact alone was not enough to bring down Intel.

Students: Spirache Rares

Alexandru Sava
Alina Popa

However, the industry dynamics are changing. Declining PC sales and the increasing tablet and
cloud computing market demand a strategic shift. AMD is executing its own shift by focusing on
ARM-based dense servers and low power APUs directed towards the tablet market. On the
desktop side, it appears to have decided to cater to a niche, i.e. professional and gaming graphics.
The company is also competing in the desktop market with its latest Kaveri APU.

Research and development

The aim of research and development is to:

create new and better products

improve the methods for making the products

develop new market opportunities to sustain or accelerate growth.

Research
Research involves designing new ideas to solve a problem or to create an opportunity. An
example is the development of a new microprocessor for a mobile phone to give it access to the
Internet.
Intel conducts research in two key areas:

research into manufacturing capabilities and material. This type of research led to the
introduction of the 22nm high-k metal gate silicon manufacturing technology

more broad research focused on what technology can offer. This can cover how to
integrate multiple different types of wireless technology into a single device or how to use silicon
technologies to act as sensors. The research reaches into areas such as robotics.
Intel invests large sums in its research laboratories all over the world.
Intel's leadership in silicon technology, combined with the R&D capability to develop new
products and new ways of making products, makes it one of the leaders in its field.
The result of this research is the creation of products customers want, which can be
manufactured easily in large volumes. Examples include notebook computers containing Intel
Centrino Processor Technology.
Development

Students: Spirache Rares

Alexandru Sava
Alina Popa

Research generates many ideas but only the best will be chosen for development.
Development involves converting good ideas into a commercial product, for example, by
improving a microprocessor to run multiple computer programs at the same time. The
development of the selected products must meet specific timetables for launch worldwide.
The end products resulting from an intensive R&D programme benefit the customer. These
might include a smaller and faster computer or mobile phones at lower prices. Technological
advances can also mean less energy consumption, reducing the carbon footprint of consumers
and businesses.
Before manufacturing, Intel produces a 'blueprint' or design of what a particular microchip will
be needed for. This outlines all the functions it will need to support, such as wireless capability or
image software. The design has to answer key questions:

What type of chip is needed and why?

How many transistors can be built on the chip?

What is the best chip size?

What technology will be available to create the chip?

When does the chip need to be ready?

Where will it be manufactured and tested?

To answer these questions, Intel works with customers, software companies and Intel's
marketing,
manufacturing
and
testing
staff.
Intel has been described as a 'manufacturing monster'. It can develop and bring a product to
market faster than anyone else. Intels production process is automated using sophisticated
robotic equipment to ensure accuracy. This is a good example of production in the secondary
sector of industry.
Intel has plants around the world manufacturing different processors for different markets. It
chooses locations where there is enough land to build such large plants. These need to be close to
skilled labour, its markets and to customers. For example, Intel fabricates 45nm chips in New
Mexico, Oregon and Arizona in the USA, as well as in Israel. Each new factory costs up to $3
billion (around 1.5 billion) to construct. The refitting costs for older plants can be over $1
billion (around 0.5 billion).
Intel uses a methodology called 'copy exactly'. This ensures factories are built in exactly the
same way, no matter where they are, and gives a consistent approach. This is critical when

Students: Spirache Rares

Alexandru Sava
Alina Popa

manufacturing such sensitive and highly complex devices. It takes an average of 200 people
working full-time for two years to design, test and have a new chip ready for manufacture.
The manufacturing process requires the highest standards of 'clean environments'. This is
thousands of times cleaner than in an operating theatre. Intel's employees wear special suits to
ensure no dust or hair falls onto the wafers. The air is so clean that one cubic metre of air
contains less than one particle of dust. The production process is a highly complex one.

Market segments
Intel provides computer chips for many different market segments. A market segment is usually
defined, for example, by age, gender or geographical position.
Intel identifies its market segments by product use, e.g. notebooks, desktops, servers. Some
products are for the business market, for example, desktop computers and laptops for companies.
Other products are for personal use, for example, notebook computers for students.

Conclusions
Since 1968 Intel has contributed to improving people's lives, work and leisure. The company's
work is at the heart of the Internet, personal computing, mobile phones, games consoles and
home entertainment systems. Intel products drive the technology we use in homes, hospitals,
schools, offices, factories and airports.
Intel's commitment to continual innovation and investment in research and development in
product and manufacturing technology ensures competitiveness and growth. It also provides
customers around the world with the latest developments.
It is clear that neither Intel nor AMD will be able to dominate each and every segment on its
own. The high end PC segment will be dominated by Intel because of its power efficient and
high performing products. In the medium to low end market, both Intel and AMD will have some
share due to Intel's superior performance per watt and AMD's better price performance. The
discrete graphics market will be dominated by AMD altogether because of greater performance,
new and innovative technology and lower price. The APU segment is important for both AMD
and Intel. AMD will gain market share in the APU desktop market because of its recently
launched Kaveri. On the mobility front, AMD's Mullins is expected to be featured in several
devices because of its low power, but ARM based chips are expected to dominate the industry.

Students: Spirache Rares

Alexandru Sava
Alina Popa

Intel is not expected to gain any share in mobility until its Cherry Trail arrives. In micro servers,
the competition is tough. Overall, Intel is expected to maintain its dominating position in the PC
market; portable devices and servers are not expected to contribute towards Intel's revenues for
now. The company's valuations are expected to remain stable and, hence, Intel is an investment
for dividends. On the other hand, AMD will gain some share in the PC market.