AMD vs Intel Marketing
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AMD has gone through several phases of growth and challenges since its founding in 1969. In the late 1960s to early 1990s, AMD received a license to produce Intel's x86 processors but also released its own designs like the Am386 and Am486. In the 1990s and early 2000s, AMD released the K5, K6, and first truly competitive Athlon processor. It launched the Opteron server chip in 2003 and acquired ATI in 2006. By the late 2000s, AMD was facing competition from Intel and delays bringing its Fusion processors to market. The document analyzes AMD's situation and recommends it launch the Brazos chip immediately to gain market share while continuing development of the delayed Llano processor
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AMD vs Intel Marketing
- 1. AMD: REVERSING THE FUSION LAUNCH GROUP D7 AISHWARYA USGAONKAR ALANKRITA MISHRA ANKIT SEN JOSHUA DESOUZA SHOBHINI RAI SHUBHAM GHOSH
- 2. 1969: AMD founded 1982: Received a second source license for Intel’s x86 microprocessors 1992: Released Am 386 & Am 486, low priced version of Intel’s 80386 & 80486 1995: AMD released its first in-house designed processor K5 1997: Failing to meet expectations with K5, AMD launched K6 1999: AMD launched Athlon, that offered better performance than Intel’s Pentium 2003: AMD launched, Opteron, a 64-bit processor, compatible with both 32-bit and 64-bit softwares 2005: Opteron dual-core was launched by AMD, a more energy efficient processor compared to Intel’s new product. Acquired ATI technologies in 2006. 2007: AMD launches a GPU (Radeon HD 3800 Series) under ATI brand 2008: AMD announced that it would no longer manufacture its own chip. (fab-less) 2009: The AMD-ATI merger finally showed its worth when AMD launched HD 5000 series of graphic cards. 2009: VISION brand launched by AMD, Late 1960s to Early 1990’s The 90s ERA Early 2000s to 2008 The recent years
- 3. 2005: AMD filed a lawsuit against Intel , accusing it of using its dominant market position to damage AMD’s relationship with OEMs 1995: Initially when AMD released K5, it was intended to compete with Intel’s Pentium. But it failed and 2 years later, AMD came up with K6
- 4. ISSUES At the Company level •Delay in finalizing the Llano and extension of launch indicating low efficiency of the R&D. •AMD had to choose between the two alternatives, i.e. whether it should launch Brazos now and Llano later or launch both Llano and Brazos later •Profit had declined and moved into losses in 2007 and 2008. Unsustainable income (legal settlement) resulted in profit during 2009. •Stagnant market share of around 25% - 27% throughout 2008 and 2009. Marketing Campaign •“The Future is Fusion” campaign was a short mass marketing campaign. Although targeted towards the end users, budget allocation ($10 million) was low and the campaigning itself was limited (billboards and one page ads). OEMs and Consumers •AMD wanted to position its VISION brand as the ultimate gaming and graphic experience provider. However, OEMs were unsure if this was the right move and if this would increase confusion among end users. •Awareness or knowledge about APUs and its benefits to the customers as well as balancing technical aspects and selling an experience to the consumer.
- 5. ALTERNATIVES Pros: • Financial Relief for the company • Brazos is ready to manufacture and can be delivered immediately • It could give a short term increase in market share in Netbooks and low performance notebooks. • AMD would be in a better position to tackle competition from Intel, especially with ‘Sandybridge’ Cons: • Not meeting up to the hype and expectations already created among consumers Pros: • AMD wanted to encourage optimizing applications for Fusion APUs. Collaborations with various software firms have a lead time of a year. • A year would help AMD position the VISION brand in the consumer’s mind through knowledge sharing about the advantages of APU. • Segmentation of consumers as done by marketing team for VISION brand, would make more sense with the launch of two different microprocessors catering to different segments. Cons: • AMD would lose out on its market share if Intel comes up with products with APU technology • Losing out on the revenue for a year just by waiting • Intel’s Atom processors are already in the market Launch Brazos now, Launch Llano later (Alternative-1) Launch both Brazos and Llano later (Alternative-2)
- 6. SOLUTIONS • Based on the alternative assessment, AMD must approach with Alternative-1, i.e. launch Brazos immediately and wait for Llano to be launched later. STRATEGIC • Brazos was categorised to cater to netbooks, low performance notebooks and desktops. The competitive advantage over the existing Atom processors (limited graphics capability) of Brazos would require them to be launched immediately. MARKETING • Product Differentiation (A shift from CPU to APU) would challenge the industry benchmarks on which processors were previously judged. But however, AMD could always bank on the higher graphic capabilities of the newer product. • Alternative-1 would also bring out the perfect mix of enhanced graphic experience and the sufficient technical aspects and benefit of the APU to the end consumer through OEMs in print ads (Exhibit 10). • AMD customer funding allocated 90% of the of the funds to OEMs (Exhibit 11). This share can be reduced and allocated to a more effective marketing campaign for “The Future is Fusion” through sponsorships. FINANCIAL • Revenue had declined from 2008-09 from 5.8 billion to 5.4 billion. However the net profits had grown from a loss of $3 billion dollars to $0.3 billion dollars profit. This included a legal settlement of $1.25 billion dollars. This is a non-recurring income and AMD would have to launch Brazos in order to maintain/gain profit.
- 7. REFERENCES • Reversing the AMD fusion launch, Johnson. R., Harvard Business Review. • http://i0.wp.com/images.lazygamer.net/2013/08/wpid-amd-vs-intel-2.jpg?resize=730%2C547 • http://www.thinkcomputers.org/articles/ces11_amd/main.jpg • http://elstatico.divx.com/files/images/amd-vision.png
Editor's Notes
- 1969: Jerry Sanders, who was working for Fairchild Semiconductors, founded Advanced Micro Devices (AMD) in Sunnyville, California. 1982: On receiving license for producing microprocessor’s, AMD was able to produce and sell clones of Intel’s chips. 1992: In the years 1987-92, there were severe misunderstandings between AMD and Intel over the second source licensing, which led to arbitration being pursued by AMD. They finally got settled in 1992, when arbitrator granted more than $10 million to AMD in compensation as well as royalty-free licensing to Intel’s processors. Intel finally recognized AMD ‘s right to manufacture 80386 & 80486 by 1995. In return AMD agreed not use any Intel code on any further processors and refrain from cloning Intel’s future technology. 1995: K5, the in-house designed microprocessor, was meant to compete with Intel’s Pentium, but due to delay in release and poor performance, it could not meet customer expectations. 1997: K6, on the other hand, was comparable to Pentium, and was relatively low priced. This led AMD to gain a 60% market share of the chip market for PCs priced below $1000. Yet AMD was not able to meet market demands due to fall in manufacturing yield. As a result, they could not capitalize on the corporate and consumer markets, which were highly profitable. 1999: Athlon release came as a surprise to the industry, especially Intel. As a counter response, Intel tried to launch a new product to the market which did not work out due to low manufacturing yields. In the process, AMD’s overall market share increased over 20% in 2001 2003-06: Launched in April , Opteron found success in competing with Itanium and Xeon processors of Intel. By 2205, the dual-core Opteron processor was released which was a technological advance over Intel’s product. It was energy efficient and with no competitor in the market, it helped boost AMD’s marked share to a record high of 25.3% in 2006. 2008-09: A transaction named, Asset Smart, involved creating a new fabrication plant, meaning AMD would no longer manufacture its own chips. VISION brand was subsequently launched in 2009 as “Vision Technology from AMD” with a ‘new logo’ and ‘brand name’
- At the Company level The big delay in finalization and the launch of Llano from 2009 (expected due date) to mid 2011 was one of the biggest issues relating to product development and R&D that really affected the company in monetary as well as market share in the microchip business. The hype built up for the Fusion launch had to be thought over again due to delays. The low-cost, low performance chip, Brazos, however, was ready to be manufactured. This resulted in a situation whereby the company had to choose whether to continue waiting for both Llanos and Brazos launched together or carry out a reverse launch. Profits and Stagnant market share (explained in Slide 6) Marketing Campaign: The marketing campaign ‘The Future is Fusion’ largely accounted for payment to OEMs for print advertisements (90% of budget allocation was to OEMs). Direct contact to end consumers was very limited thus resulting in dependence on the OEMs for the communication of the benefits and aspects of Fusion range of chips. OEMs and Consumers Consumers wanted a simple, straightforward way to distinguish between computers. AMD aimed providing better experience to customers with respect to applications like video surfing, gaming etc via its graphics processing unit .But the OEM’s were contradicting with their view point as they felt it would create confusion among consumers considering the fact that Intel had used ingredient branding to convey its reliability, quality features. Perception and interpretation of the words ‘dedicated’ or ‘discrete’ in various markets was significant, ‘integrated’ graphics was often looked down upon by the consumers in China and Europe. The use of term “discrete level “ to describe the graphics capability would create ambiguity and competitors could take advantage of this.
- Launch Brazos now and launch Llano later Pros: The financial situation of AMD was deteriorating as a result of lower product launches and cuts in the selling price of the existing products in order to keep market ,share. AMD had posted losses in the years 2007 and 2008 and also would have indicated losses in 2009 if not for the legal settlement that they won. Therefore suggesting a necessary launch of a new product in order to bring financial stability to the company The Brazos chips had been researched and developed based on current requirements. Waiting for Llano to complete its research and development would result in the obsolescence and redundancy of certain features of the chip considering the rapid changing technology of the time. The launch of the chip currently would result in the increase in the market share of the AMD chips in the netbooks and low performance notebooks due to the superior performance aspects as well as graphic superiority of Brazos over the existent Atom chip by Intel. With the launch of the Fusion chip through Brazos we felt that AMD would have two significant benefits in terms of understanding the market response to their first APU launch in the market and additionally learn and adapt during their launch of Llano in the coming year. Sandybridge which had only 25% proportion of GPU and the remaining was focussed on the speed oriented CPU as compared to 50% of the GPU which AMD Brazos focussed on. Cons The long term promotion of the latest AMD fusion range had created a hype and expectation in the processor market. The launch of Brazos as a single chip would result in not living up to the expectations set out by the previous promotion. Launch of Brazos as well as Llano later Pros: The additional time received by AMD through the launch of Brazos along with Llano in mid 2011 would enable the company to further optimise existing applications for the Brazos chip through various collaborations with Microsoft, Adobe, Etc. The launch of the AMD fusion range of microchips in mid 2011 would provide AMD additional time to position and promote the brand and suitability device a strategy to ensure the communication of the benefits and aspects of the APU microchips over the CPU chips Segmentation of consumers as done by marketing team for VISION brand, would be better justified with the simultaneous launch of two different microprocessors catering to different segments. Cons: Currently, none of the chip manufacturers had launched the technology of and integrated CPU as well as GPU in one chip. If AMD, who already possesses the technology, delays the launch of the Brazos chip and Intel developed and launches the chip, It would result in further losses in the market share of AMD AMD, who already possessed the APU technology waited an additional year for the launch, this would in turn result in the loss of revenue from one year worth of netbook and low performance notebook sales. Due to the presence of the exiting Atom processor currently present in the existing market from 2008.
- Strategic Implications: Intel already had the Atom processor in the market which was well accepted by consumers. The only limitation of the Atom processors, which gave the Brazos an edge was its graphic capability. Launching Brazos would definitely fulfil the short-comings of its competitor’s product and help AMD to gain a market share in the category of netbooks and low performance notebooks. Marketing Implications: Market Research studies have shown that customers valued improvements in gameplay over all other improvements (Exhibit 12). Thus, by instilling the ‘enhanced graphical experience’ component in their marketing strategies would benefit AMD immensely (Derived Demand).