AMD: Fighting the unbeatable foe

Advanced Micro Devices' place in the annals of the semiconductor industry is now more or less fixed. The battle for dominance in the microprocessor market has been won and lost. The crown belongs to Intel—if this were medieval times, heads would already be rolling at 1 AMD Place in Sunnyvale, Calif.

AMD's future isn't clouded in any great mystery. The company is burdened with debt, is losing market share and appears destined to become an even smaller player in its core MPU market. Recent strategic moves at AMD are not making a dent in Intel's leadership: The acquisition of graphics IC vendor ATI Technologies hasn't lived up to expectations and becoming a fabless IC vendor isn't a game changer either.

But executives at AMD haven't yet come to terms with their second-place status. On the contrary, they continue to pursue actions they believe would level the playing field and make it possible for them to beat Intel.

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The bottom line is that AMD cannot beat Intel, not now and perhaps not ever. The company's top executives, including outgoing executive chairman Hector Ruiz, may believe they can continue to trade punches with Intel in this unequal slugfest but that strategy is, to put it bluntly, delusional. It has only brought misery to AMD and pushed the company into a spending contest it has no hope of winning.

While AMD continues its grandstanding, the rest of the industry can glean significant lessons from its experience. As observers ponder AMD's future, they must focus not merely on how the company arrived at its current disadvantageous position or even what it could do to reverse Intel's overwhelming edge, but on what they can learn from one of the most fascinating developments to emerge from the sector.

The AMD-Intel multidecade saga offers a great opportunity to examine the dynamics of competition in the industry; in particular, what roles marketing, R&D, product development, manufacturing efficiencies, financial resources and managerial expertise play into how effectively companies differentiate themselves in the marketplace. What makes one company a winner and another a distant second in a market clearly large enough to sustain at least two major competitors? Are process technologies and manufacturing efficiencies huge differentiators? Do varying administrative strategies have a significant impact? Finally, what role, if any, do marketing, public relations and mindset manipulation play?