Study on Intel and AMD Point of Difference, Strategies

followed and their position in market

Institute of Management Technology

Ghaziabad 201001

Submitted by

Ankur Girdhar – 10ex-04

Dilip Kumar Mallick – 10ex-013

 Acknowledgement

We would like to express our profound gratitude to Professor C K Shabarwal for giving us this
opportunity to work on Intel, which gave us a chance to study one more aspect of Strategic
position in branding. We would also like to express our deepest gratitude and appreciation
towards IMT authorities and IMT library for extending the resources necessary for the project.
Objective of the Study

The objective of this write-up and study is to analyze the points of difference of Intel and AMD
and their strategic positions taken so far. We have also analyzed and formed the road map for
both AMD and Intel in near future. The write up also comes up with the AMD strategic position
in terms of branding in B2B and how it plans to take some market share from Intel.
Executive Summary

The central processing unit, more commonly known as the CPU or simply, processor, is a pivotal

part of any computing system. Indeed, it would not be very far from truth to say that a computer

is what its processor is. The processor is the unit which reads and executes every program

instruction. Therefore, consideration towards the processor when purchasing a new personal

computer or laptop occupies the top rank among all other computer buying considerations. A

prospective buyer's choice of processor usually depends upon his/her computing requirement -

say, you may be looking for more gaming experience than storage, or you may be more into

speed than heavy graphics - and computer usage (low, moderate, heavy), besides individual

budget. Despite there being a large number of brands offering many good processors, the AMD

vs Intel battle is, by far, considered the battle royale, assuming leviathan proportions in terms of

comparison of processing features, price differences and market share. As part of our class

presentation we have discussed Intel branding and its postion. In this write up we are covering

the Point of difference between the Intel and AMD brand and their strategic postion they have

taken.
Contents

Objective of the Study.................................................................................................................................4

Executive Summary.....................................................................................................................................5
Product comparison (Points of Parity and Points of Differences)................................................................7
Branded House vs House of Brands............................................................................................................9
Flanker brand – Celeron............................................................................................................................12
Market share of Intel and AMD.................................................................................................................13
Intel Growth Strategy................................................................................................................................14
AMD Strategy to beat Intel........................................................................................................................17
Look Into the Future..............................................................................................................................20
Some of the key findings...........................................................................................................................21
Product comparison (Points of Parity and Points of Differences)

Intel is a big name today and it is clearly visible that Intel has dominated the market in the war
between AMD vs Intel processors. And that is because of its high efficient products and the high
sale figures. However, it's not like AMD doesn't do good business. It definitely does and has to
offer high performance with economical prices.

High End Processors

Intel Core i7 and AMD Phenom II X6

When it comes to the high end processors, Intel has its Intel core i7 and the AMD is armored
with the Phenom II X6. Intel's Core i series of processors are the newest and is of the latest
technology. The Intel i7 offers 2, 4 or 6 core and is of a 64-bit processor. It comes with Hyper
Threading, it is a technology which boosts the performance of your system. It also comes with
Turbo Boost Technology which increases the overall performance and takes into consideration
number of active cores, power consumption, processor temperature etc. On the other hand AMDs
Phenom II X6 is its first six-core processor, for optimized and highest level of performance.

Intel Core i5 and AMD Phenom II X4

Intel's Core i5 built on the same line of that of Core i7, is one level down of the Core i7. It is also
a 64-bit processor and of 2 or 4 core capacity. The i5 also comes with Hyper Threading and
Turbo Boost Technology, but then has lesser cache memory. AMD's Phenom II X4 is amongst
the latest AMD processors. It consists of quad-core Phenom II X6 chips which are built to
exceptional quality multimedia use and advanced applications.

Intel Core i3 and AMD Phenom II X3 & X2

Intel's Core i3 processor is relatively an economical processor in its class. It is one level down of
the Core i5 processor. As compared to other Core 2 processors, it of course has an upper hand. It
comes with Hyper Threading, but then does not include the Turbo Boost technology. Its
counterpart from AMD, the Phenom II X3 & X2 is said to be of a 3 or 2 core capacity. It is a
great value for money with great overall performance and is very economical.

Mid-Range Processors

Intel Core 2 Duo and AMD Phenom II X3 & Phenom II X4

Intel's Core 2 Duo has the reputation of being amongst the most sold processors because of it
efficiency and value for money price tag. Its efficiency lies in its two processing cores which
enhances the video, gaming and image output. AMD's Phenom I X3 & X4 forayed into
consumer class processors with these. They are triple and quad core processors along with 64-bit
computing capabilities.

Intel Pentium Dual Core and AMD Turion II / Ultra

Intel's Dual Core is a predecessor of the Core 2 Duo chipset. It is based on the Core micro-
architecture. It offers decent multimedia output. AMD's Turion II and Turion II Ultra did good
business for AMD, reason being their excellent multimedia output as compared to Dual Core as
they mostly come with AMD or ATI graphics and are economically priced.

Basic Processors

Intel Centrino/Centrino Duo and AMD Sempron

Intel and AMD processor comparison doesn't end only until here, but the differences can also be
made in smaller processors class. Centrino processors from Intel were the best for mobile-
computing. Best for small laptops within its class. Equivalent to the Centrino from Intel, the
Sempron processor is found in few low budget laptops and desktop. These processors are for
some basic computing uses like internet browsing, basic office work, email etc.

Intel Atom and AMD Athlon Neo / Neo X2

Most found in netbooks and nettops. Intel's Atom processor was designed to keep in mind the
power consumption and the price. As compared to other processors from Intel, it has got lesser
processing power. It has been made for the most basic computer use. Athlon Neo and Neo X2
are equivalent to the Atom processor which are found in netbooks and nettops. Since they
integrate themselves with ATI graphics, they also give decent multimedia output.

Branded House vs House of Brands

There are two main models for organizing brand portfolios. The first is a ‘house of brands,’
meaning a company that markets a range of separate brand names (Procter & Gamble). The
second model is a ‘branded house,’ meaning that the company itself is the brand, and its products
or services are subsets of the main brand (Hewlett-Packard).

The advantage of a house of brands is that each brand is free to fight its battles on its own terms,
unfettered by the meaning of the parent brand.

The advantage of a branded house is that all the products and services can share the same budget,
customer, and market position.”

In case of Intel and AMD, both have adopted the branded house strategy to back their product
offerings with their respective corporate names i.e. Intel and AMD. While the individual brand
names are well recognized by the consumers in terms of the product performance and the
enhanced processor speeds across variants, the extra credibility and reliability lent by the
corporate umbrellas of Intel and AMD is a catalyst for both these competitors.

Below are the branded houses of Intel and AMD.

 Intel:
Branded
House
 AMD:
Branded
House
Flanker brand – Celeron

A flanker brand is a new brand introduced into the market by a company that already has an
established brand in the same product category. The new brand is designed to compete in the
category without damaging the existing item’s market share by targeting a different group of
consumers. This strategy, also called fighter branding or multi-branding, is used to achieve a
larger total market share than one product could garner alone. Companies with multiple brands in
a single product category generally have the following types of products in their portfolios:

 A premium brand that offers high quality at a higher price.

 Value brands offering slightly lower quality or different set of benefits for a lower price.

Fighter brands are created to combat a competitor that is threatening to steal market share away
from a company's main brand. When the strategy works, the fighter brand not only beats the low-
priced competitor, but also opens up a fresh potential market.

Intel Celeron is a case in point. In spite of the

success of its Pentium chips, Intel faced a
major threat from competitors like AMD's K6
chips, which were cheaper and better-placed to
serve the emerging low-cost PC market. Intel
wanted to protect the brand equity and price
premium of its Pentium product at the same
time as stopping others gaining a foothold in
the lower end of the market. So it created
Celeron as a cheaper, less powerful version of
its Pentium chip to keep AMD out. Intel's 80%
share of the global PC market is testament to
the potential of a successful fighter brand to
help restrict competitors and open up
additional segments of the market.
Market share of Intel and AMD
Intel Growth Strategy

As part of our overall strategy to compete in each relevant market segment, Intel use core
competencies in the design and manufacture of integrated circuits, as well as financial resources,
global presence, brand recognition, and software development. It believe that they have the
scale, capacity, and global reach to establish new technologies and respond to customers' needs
quickly.

Some of key focus areas are listed below:

Customer Orientation. Its strategy focuses on developing our next generation of products
based on the needs and expectations of customers. In turn, its products help enable the
design and development of new form factors and usage models for businesses and
consumers. It offers platforms that incorporate various components designed and
configured to work together to provide an optimized computing solution compared to
components that are used separately.
Architecture and Platforms. It focuses on improved energy-efficient performance for
computing and communications systems and devices. Improved energy-efficient
performance involves balancing improved performance with lower power
consumption. They continue to develop multi-core microprocessors with an increasing
number of cores, which enable improved multitasking and energy efficiency. In
addition, to meet the demands of new and evolving notebook, consumer electronics,
and various embedded market segments, it offer and are continuing to develop SoC
products that are designed to provide improved performance due to higher integration,
lower power consumption, and smaller form factors.
Silicon and Manufacturing Technology Leadership. Their strategy for developing
microprocessors with improved performance is to synchronize the introduction of a
new microarchitecture with improvements in silicon process technology. They plan to
introduce a new microarchitecture approximately every two years and ramp the next
generation of silicon process technology in the intervening years. This coordinated
schedule allows them to develop and introduce new products based on a common
 microarchitecture quickly, without waiting for the next generation of silicon process
technology. They refer to this as our "tick-tock" technology development cadence. In
keeping with this cadence, they expect to introduce a new microarchitecture using our
32nm process technology in 2010.
Strategic Investments. They make investments in companies around the world that they
believe will generate financial returns, further their strategic objectives, and support
their key business initiatives. Their investments, including those made through our
Intel Capital program, generally focus on investing in companies and initiatives to
stimulate growth in the digital economy, create new business opportunities for Intel,
and expand global markets for our products. Their current investments primarily focus
on the following areas: advancing flash memory products, enabling mobile wireless
devices, advancing the digital home, enhancing the digital enterprise, advancing high-
performance communications infrastructures, and developing the next generation of
silicon process technologies.
Business Environment and Software. They believe that they are well positioned in the
technology industry to help drive innovation, foster collaboration, and promote
industry standards that will yield innovation and improved technologies for users. They
plan to continue to cultivate new businesses and work to encourage the industry to
offer products that take advantage of the latest market trends and usage models. They
frequently participate in industry initiatives designed to discuss and agree upon
technical specifications and other aspects of technologies that could be adopted as
standards by standards-setting organizations. Through their Software and Services
Group, they help enable and advance the computing ecosystem by providing
development tools and support to help software developers create software applications
and operating systems that take advantage of our platforms. Lastly, they believe that
the software expertise of its Wind River Software Group in the embedded and
handheld market segments will expedite our growth strategy in these market segments.
They believe that the proliferation of the Internet, including user demand for premium content
and rich media, drives the need for greater performance in PCs and servers. Older PCs are
increasingly incapable of handling the tasks that businesses and individual consumer’s demand,
such as streaming video, web conferencing, online gaming, and other memory-intensive
applications. As these tasks become even more demanding and require more computing power,
they believe that businesses and individual consumers will need and want to buy new PCs. They
also believe that increased Internet traffic and the increasing use of cloud computing, in which a
group of linked servers provide a variety of applications and data to users over the Internet,
create a need for greater server infrastructure, including server products optimized for energy-
efficient performance and virtualization.

They believe that the trend of mobile microprocessor unit growth outpacing the growth in
desktop microprocessor units will continue and that the demand for mobile microprocessors will
result in the increased development of products with form factors and uses that require low-
power microprocessors. They also believe that these products will result in demand that is
incremental to that of microprocessors designed for notebook and desktop computers, as a
growing number of households have multiple devices for different computing functions. Our
silicon and manufacturing technology leadership allows us to develop low-power
microprocessors for these and other new uses and form factors. They believe that Intel Atom
processors give them the ability to extend Intel architecture and drive growth in new market
segments, including a growing number of products that require processors specifically designed
for embedded applications, handhelds, consumer electronics devices, and netbooks. They expect
that their Intel Atom Developer Program will spur new applications that run on products using
Intel Atom processors, which will expedite their growth strategy in these new market segments.
The common elements for products in these new market segments are low power consumption
and the ability to access the Internet.

They are also focusing on the development of a new highly scalable, many-core architecture
aimed at parallel processing, the simultaneous use of multiple cores to execute a computing task.
This architecture will initially be used as a software development platform for graphics and
throughput computing (the need for large amounts of computing performance consistently over a
long period of time). Over time, this architecture may be utilized in the development of products
for scientific and professional workstations as well as high-performance computing applications.

In addition, they offer, and are continuing to develop, advanced NAND flash memory products,
focusing on system-level solutions for Intel architecture platforms such as solid-state drives. In
support of their strategy is to provide advanced flash memory products, they continue to focus on
the development of innovative products designed to address the needs of customers for reliable,
non-volatile, low-cost, high-density memory.

AMD Strategy to beat Intel

Whether you are a vendor trying to pass Microsoft in Software, Apple with MP3 players, Cisco
with networking gear, HP with Printers, EMC with data management or Intel with processors
getting ahead of an already dominant vendor is very difficult.   You generally can’t catch the
leading vendor from behind because they are not only in the lead, this leadership also gives them
economic advantages (particularly with hardware), because they can get lower costs due to
higher volumes for their components. Plus, their overhead costs, which are spread across a larger
revenue base, should be comparatively lower.

 In addition, a dominant vendor typically has better brand recognition as well as better third party
support  - because the more volume you have, the more potential customers are talking to you
and more people simply believe you are the safer choice as a result.   

Granted, dominant vendors can stumble, Sony should own the MP3 player space given they
owned the portable CD player space with the Walkman, IBM used to dominate Software, 3Com
used to dominate networking, and Xerox was the dominant company doing copying and should
have dominated printers.

In each case, the market moved and, when it did, the redefinition left the dominant vendor
behind. AMD is trying to create a market move and is trying to assure us that Intel won’t make
the cut. AMD’s strategy is based on three primary concepts:  Devalue the Intel brand, eliminate
Intel’s technical advantage, and be the OEM vendor of choice.    

Eliminate Intel’s technology advantage

Intel currently has a technology advantage associated with its processor design.   Intel also has
more R & D funding and, once in the lead, is generally expected to hold it.   AMD is competitive
in volume lines but these don’t currently include the lucrative mobile segment where Intel’s
battery life and system performance have a significant advantage.    

Intel, even though they dominate the volume graphics space, lags Nvidia and ATI significantly in
terms of graphics performance.   They have recently closed the gap somewhat but the
combination of a dominant position and poor performance is thought to be significantly slowing
down the existing market for laptops and low end desktop computers.   

AMD’s acquisition of ATI is an attempt to hit Intel technically where they are weakest and with
Nvidia being too expensive to acquire, Intel’s response of trying to catch AMD/ATI is going to
be very difficult to execute.   If they could complete the merger and have converged products this
year, AMD would have a significant advantage over Intel. Unfortunately it takes time to
complete a merger and it takes even longer to integrate the products that are providing the
greatest benefits – which were not expected until second half of 2008.
 
In addition, this has created a problem with Nvidia, which may become collateral damage as this
new fight erupts between AMD and Intel.   Nvidia will increasingly be pushed out of the
mainstream and into other markets or high-end niches.  

Of the strategy components, this acquisition is the most risky, however, it is this part that builds
towards market dominance and, without it, there is little chance AMD could move beyond Intel.   

Become the OEM’s vendor of choice

OEM’s, the companies that brand server and PC hardware, prefer vendor relationships where the
vendor knows they are a vendor and is clearly subservient to the OEM.   They are frustrated with
both Intel and Microsoft, because these two companies often don’t seem to understand they are
vendors and that the OEMs don’t work for them.     
AMD, on the other hand, makes a habit of asking what the OEMs want and is actually try to
deliver on it.   This takes the form of more flexible platforms and a wider variety of platforms
and, in some cases (HP Blade PCs) custom work.   

This focus on customer satisfaction, listening rather than telling, makes it more difficult to drive
commonality in the market, but it also develops loyalty with the vendors who, over time, are
becoming more comfortable with the firm. Currently, Intel does provide Apple treatment similar
to this, but the practice doesn’t seem to have spread yet to the other OEMs.  
Finally, the OEMs have learned that Intel will be more responsive, if they have AMD in the mix.
 

Wrapping up

Passing an entrenched vendor isn’t easy particularly one that is executing as well as Intel. 
However, every vendor has vulnerabilities and Intel is no exception.  AMD is targeting them
well, and in the first example, actually hitting one of their strengths.   
 
However, they are also taking a significant risk, the ATI merger isn’t easy and much of the
benefit is still months off.  Investors and customers aren’t known for their patience.  A great deal
hinges on AMD/ATI’s ability to create something new and new is never predictable with regard
to timing or execution.

 On the other hand, being second in a chosen market shouldn’t be acceptable to anyone if there is
a path to being first. AMD has found a potential path and Intel will have a race to hold them off.  
 

Look Into the Future

Intel is still way, way ahead as the global chip industry leader, followed by Advanced Micro
Designs (AMD), which appears to have lost ground.
According to research by Isuppli, Intel had an 81 per cent share of the global microprocessor
market last year, up by 0.4 per cent. That might not sound like much of a increase, but when you
consider the overwhelming dominance Chipzilla has that's still a pretty good year.

It is still a two-horse race, but the nag in second is falling behind as AMD's 2010 share of
microprocessor revenue fell by 0.8 per cent to 11.4 per cent. Intel's huge market share wasn't
much of a surprise, as its lead was built up across two decades and nothing spectacularly
changed in the PC market in 2010 apart from the welcome recovery from the previous year's
recession.

AMD holds only 12.1% of the global microprocessor market, compared with Intel's 80.6%,
research firm iSupply Corp said in March 2010.

 Both companies are pushing the technology world into the age of multi-core processors for
desktops and servers, but some of their most interesting battles have been fought in courtrooms
rather than research labs.The Federal Trade Commission filed a formal antitrust lawsuit against
Intel in December 2009, just one month after the settlement, alleging that Intel used illegal
tactics such as threatening to increase prices, end technology collaborations and shut off supply
and marketing support to manufacturers that purchased too many products from Intel's
competitors.

In recent months, technology battles between Intel and AMD have focused on chips for personal
computers, with the companies unveiling six-core desktop processors in March 2010. AMD has
struggled in the laptop market, but it is attempting to bridge the power and performance gap
between itself and Intel with new triple- and quad-core processors for mobile PCs introduced in
May 2010. While AMD's days of fighting court battles against Intel are over (for the time being),
the chip makers' rivalry on the technology front shows no signs of slowing down.

Some of the key findings

Strengths and weaknesses of the Intel Inside campaign

It was a brave and brilliant business move for Intel to distinguish itself from a ‘commodity’ like
position and establish itself as the ‘brains’ of the computer industry. Intel decided not to keep a
low profile and make itself known. CEOs tended to see sales of semiconductors and processors
as engineer to engineer type sales believing that they were simply fact based: who has the best
product after evaluation. They employed partnership marketing to build stronger customer
relationships and increase profits. Intel chose to have its logo on its customer’s products raising
the profile of lesser known computer manufacturers and at the same time leveling the field of
computer manufacturers. The campaign delivered results for the partners in a big way. It was a
gamble as the big three did not buy in initially. They worried that it diminished their standing.
Intel allowed the companies to independently choose their ads and they would pay up to 50% of
the cost to the point of 3% of sales. This was absolutely win/win for smaller manufacturers and
engendered great loyalty. It also comforted the most timid and least financially able consumer
and again engendered great loyalty. The campaign promised upgradability (a big problem at the
time as people were continually forced to buy a whole new computer to keep up), power,
affordability, compatibility and someone to stand behind the purchase. Major strength is that
Intel understood the insecurities of its ultimate market and addressed them reducing anxiety. In
the end it also forced the larger manufacturers to play Intel’s game. For consumers, in a fairly
new and scary world, the branding represented safety and quality. This was sorely needed at the
time when few consumers considered themselves qualified to choose a computer. A weakness is
that the Intel numbering system was not patentable and thus made them vulnerable. There was
significant free advertising in this controversy alone. The logo itself had a weakness in
translation to other cultures. The final weakness may be in giving up on the campaign too soon.