Hector Wants 25%

The Taiwanese Economic News reports that the head of AMD, Hector Ruiz is on a trip to drum up more business in Asia.

It paraphrases him as saying that the day of Intel dominance in the world microprocessor market would come to an end soon.

Many would find this a silly statement to begin with, but it becomes even sillier when you look towards the end of the article, which reports him as saying that AMD’s goal is to increase its market share over the next four years from 16% to 25%.

I don’t know about you, but this rather abuses the meaning of the word “dominance.”

If your competitor sells three widgets for every widget you make, most people (and lexicographers) would say your competitor dominates the market.

If this were a basketball game, and your team loses 82-16 (roughly Intel/AMD marketshare), I think most people would say your team got dominated by the other guys. When the coach promises to only lose 73-25 four years from now, only an insane fan would claim that the Age of Domination was over.

Verbal confetti, that’s all it is.

But Is 25% Realistic?

Of course, this is not exactly a do-or-die competition. AMD has never beaten Intel one-on-one during the PC era, and yet it has managed to survive.

Historically, outside of a couple one quarter wonders (which generally occurred when Intel was shifting CPU generations; i.e. a 30% marketshare when Intel was going from 386 to 486); the biggest marketshare AMD has been able to sustain for a while is a 22-23% marketshare. They did this during the Thoroughbred era, when Intel had a busted PIII, and waiting to get a rushed Willamette out.

Even the 22-23% marketshare figures are a bit dubious, since immediately thereafter, there was a huge glut of AMD processors in the retail market, which took quite some time to reduce, so the real figure is probably a little less than that.

So 25% would be breaking new ground for AMD, but not a whole lot. It certainly isn’t an outlandish goal.

That doesn’t necessarily make it realistic, either. If AMD could retain having the better processor the next four years, 25% might seem a tame goal, but that is a very, very iffy proposition: a year, yes, two, maybe, but four?

However, it doesn’t seem like Hector expects to do this by just grinding away at Intel’s established marketshare. He’s given every indication of believing that AMD’s future lies in those areas where computing isn’t so commonplace, in general, the Third World, most especially China (and to a lesser extent India).

Is China The Answer?

The article linked above has Mr. Ruiz thinking that AMD’s going to have 50% of China’s CPU market soon. In the short-term, he might be right. Whether in China or elsewhere, those beginning to make enough money to consider a fairly big-ticket item like a computer will be cost-conscious, and they haven’t heard that damned Intel ding-dong for the past twenty years. In that sense, it’s an unbiased market.

However, in the longer-term, for various political, economic and even psychological reasons, I just don’t see China sitting around passively buying U.S. processors forever. So long as the government remains more or less like it is currently, they’re going to want control of such a strategic asset if at all possible. After all, would the Pentagon be happy if all their CPUs came from France?

Even if the intentions end up being far more benign, the Chinese have a long track record of milking Western companies for maximum technology and know-how at minimum cost, then making their own. I’m not trying to call the Chinese inscrutably evil; the U.S. did much the same with Great Britain during most of the first century after independence.

Nonetheless, it’s hard to think it more likely than not that Hector (and to be fair, Intel seems to be doing the same) is getting played. Sales will never quite meet expectations, and in the meantime, technology transfers will grow and grow, and some day, AMD and Intel may well find that they’ve given birth to a new competitor particularly attuned to those emerging markets.

That’s long-term, though. AMD faces another big challenge rather sooner than that.

Cell

25% may not be too crazy a goal in a two-team game. But what if a couple other players barge onto the court? What if the average Joe in 2008 gets to choose among an Intel box, or an AMD box, or a Sony box or a Microsoft box or somebody not even on the horizon yet who makes a better Cell computer than Sony, all of which will do what he wants?

What happens to marketshare then?

It would seem to me that AMD would on the whole be more vulnerable to any Attack of the Newcomers, simply because many of its customers buy on price.

Then again, maybe just somehow, AMD in four years just might be that designated Cell PC company (or turn into it, you have to wonder about proprietary-to-the-core Sony or MS misplaying the potential of the PS3/XBox2 as PC).

Personally, I think AMD will always be an also-ran to Intel until they get bought by somebody with deep pockets, stop being a me-too to Intel, and chuck the dice like that.

Of course, that would really be bold, a true do-or-die manuever, but I don’t see any other way AMD could ever really challenge Intel’s dominance. They just don’t have the money alone to do otherwise.

I really doubt AMD would ever willingly get assimilated by a Borgish IBM or Sony or MS or Samsung or whomever. At least the execs will want AMD to stay independent.

But, if Cell becomes a big factor in PCdom by 2008, backed by one of more of the giants mentioned above, it’s hard to see how AMD won’t get ground up between two or more big millstones.

Ed