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Politics : Formerly About Advanced Micro Devices
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To: Paul Engel who wrote (52839)3/18/1999 2:37:00 PM
From: Yougang Xiao  Read Replies (1) of 1578615
 
RE: AMD's future.

Paul: <<You seem to ignore AMD's competition and the ability of that competition to out-perfrom, out-manufacture, out-design, out-market and out-maneuver AMD.>>

Intel has done a great job to deny/minimize AMD's profits as of today, as of Q1, maybe Q2, no doubt.

The question is whether Intel can continue denying/minimizing AMD's rightful profits beyond Q2.

Depends on whether the "Segmentation Strategy" can hold.

Segmentation is nothing new for Intel:

When AMD was a generation behind, Intel had the "Mhz Segmentation Strategy" based on single CPU's various speed grades where Intel's lowerest Mhz went against AMD's highest. Case in point: Intel's 486 Vs. AMD's 386 and Pentiums Vs. AMD's 486 and K5. Starting from these early days, Intel always enjoyed the luxury of using high end to subsidy the low end. Nothing new here!

When AMD closed the historical performance generation gap which is a tremendous achievment in its own right, Intel developed the "Brand Segmentation Strategy".("BSS") The basis and success of the "Brand Segmentation Strategy" is solely because of AMD has been a ONE CPU product as of late ever since the introduction of classic K6. Look: K6 Vs. MMX and P Pro and K6-2 Vs. Celeron PII and Xeon.

With the upcoming arrival of K7, it will be a historical AMD achievement where AMD not only match Intel's performance but match Intel's CPU product lines as well.

Upon that time (some time in Q3) when AMD's offerings backed by meaningful volumes match all of Intel's CPU products, can Intel still deploy the "BSS" to fend off AMD?

Here are some senerios:

1. Keep"BSS" as it is: AMD's retail market share will decrease, but overall market share will increase and so will be the increase of ASP. Math is simple here.
2. Intel develops new Segmentation Strategy: The problem here is what that new segmentation will be based on. You either diffentiate on Mhz or brand name.
3. Kill the "BSS" and go back to "Mhz Segmentation Strategy" at least in desktop aera -- Highly possible for two reasons.
(A) Intel probably will be slightly in Mhz race
(B) Intel is still volume leader even if AMD grabs 30% market share.

The overall impression for AMD investors is that the odds of Intel to KILL AMD is gone; to deny/minimize AMD's profits is coming to an end soon and the rise of AMD as a profitable MPU player is in sight.

Only because of AMD's brilliant counter-BSS based on K6-II and K7.

K6x saved AMD from extinction.

K7 will be the ticket for AMD investors to many trips of "SPLITLAND
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