No match for Intel's resources
AMD has been outspent, outgunned and outmaneuvered for decades. The foundry joint venture it set up in October with Abu Dhabi-based Advanced Technology Investment Co. (ATIC) won't remove the humiliation AMD executives must feel, knowing they fired the company's last and most potent weapon and still left their competition largely unscathed.
As it turned out, Intel was more concerned about the disruptive effects of the ongoing credit crunch than about the balance sheet improvement actions of rival AMD. "Our future operations involve a number of risks and uncertainties—in particular, current economic uncertainty, including the tightening of credit markets, as well as future economic conditions," Intel noted in its third-quarter regulatory filing.
Industry analysts hold a similar view of AMD's situation. "AMD's market position remains substantially unchanged," said Lucy Patricola, an analyst at Standard & Poor's. "The increased liquidity [from the JV] extends the time during which AMD must address substantial marketplace pressures, including its second-tier position behind industry leader Intel."
Other analyses confirm AMD must undertake a tough task to match Intel's spending power. Bill McClean, principal analyst at IC Insights, made it clear that AMD executives had poured scarce cash into an unwinnable war with an opponent whose resources were vastly superior. AMD, McClean noted in a report, spent $6.4 billion on capital equipment from 2004 to 2008, compared with Intel's budget of $25.6 billion during the same period. "Intel's capital expenditures over the next five years will total about $30 billion, which would be five times [AMD's] Foundry Company's most optimistic plan of investing $6 billion over that time," McClean said.
The conclusion, McClean said, is that "AMD's new strategy and business model keeps them in the MPU game—however, it will not shift the balance of power in the MPU or foundry segments of the IC industry over the next five years."