Amd - Intel Duopoly After

AMD - Intel Duopoly After almost two decades of supremacy in the microprocessor market, Intel is finally beginning to sense a threat to its domination. The market has transformed into a duopoly with the rising influence and growth of AMD. Today, almost 25 of the 100 large fortune 500 companies use AMD's Opteron servers. [David Krikpatrick] This growth was not simple and straight. Prior to the success roll, AMD had suffered three straight years of losses entering into the millennium.

This situation turned around and the company managed to create a turnover of $5 billion in 2004 compared to only $3.5 billion in 2003, a significant 40% increase. [DAVID KIRKPATRICK] by the third quarter of 2004, AMD had already secured a 6.9% on the X86-based server market, which is practically double the market share in the previous year. The statistics for the Q4 2006 released by Mercury research reflect this growing presence of AMD. AMD's market share for desktops stood at 29.1%, which is an increase from the 26.6% share it held the previous year.

Even in the notebooks segment AMD gained its foothold with a market share of 19.4% improving upon its previous year share of 16.8%. [Tony Smith] As Porter's five forces Model indicates, the market structure is subject to pressure from new entrants, substitutes, Buyers, Sellers and the intensity of rivalry between competing firms. According to Porter's model having substitute products and new entrants is definitely a winning situation as far as the consumer is concerned, as prices have to be under check in order for competitors to stay in business.

Also, in a market with multiple players cost and performance are vital factors that decide the level of success of the business entities. AMD's big thrust came when it ventured into the 64 bit processor market with the launch of its AMD64 Opteron processor for servers in April 2003, as an ideal competition for Xeon server chips from Intel. In the very same year AMD also launched Athlon in September 2003 for the desktop market.

Opteron became a strategic success for AMD as it not only provided the 64 bit capabilities but also was compatible with existing 32 bit based applications. [David Krikpatrick] During this time though Intel was concentrating on Itanium-based workstations, which unfortunately were incompatible with 32 bit applications and allowed them to be run only in 'emulation mode'. This implied that Itanium systems required coding changes for 32 bit applications to run normally. [DAVID KIRKPATRICK] Intel was finally forced by market demand to mimic AMD and produce 64 bit chips that actually perform well with 32 bit applications.

HP was collaborating with Intel on its Itanium-based workstations, and hence it is a credit to the performance of AMD Opteron processor that now HP has become one of AMD's important clients. Mark Hudson, the HP Server marketing manager says, "Opteron has sustained legs in the marketplace." [David Krikpatrick]. Proving right Porter's model for market dynamics this new alliance with AMD has sent strong signals to Intel to be more competitive, cost effective and customer friendly.

To quote Hudson again, "Our interactions with Intel since we announced our Opteron products have actually become better. They realize we have an alternative. That's something they really need to take seriously." [DAVID KIRKPATRICK] Further, AMD Opteron processor had one more advantage over Intel's processor. With a technology known as 'silicon on insulator' AMD processors used less electricity and produced little heat and were therefore much compact than Intel's processors that required more space for additional cooling fans.

[DAVID KIRKPATRICK] AMD's processor also proved superior to Intel when it came to high data intensive computing such as the Wall Street trading operations. Performance gains are stated to be, "anywhere from 40% all the way up to several hundred percent" [David Krikpatrick] Not long ago, AMD's speciality was confined to selling fast processors for consumer desktops, but today the company has diversified its product lines with chips catering to every segment of the market namely desktops, notebooks as well as servers.

As semiconductor analyst Dean McCarron of Mercury Research puts it, "AMD used to be a weed to be chopped down every now and then. Now it is much deeper in the market."[David Krikpatrick] the recent business deal with Dell has added another important feather in AMD's cap bringing all the three major PC producers as its clientele. Kevin B.

Rollins, the CEO of DELL reported, "The competitive dynamic has been more intense than we expected." [Cliff Edwards] So it clearly transpires that AMD has emerged from under the shadow of Intel, and has begun to play a significant role in the microprocessor market. Conclusion The battle is clearly on. Intel, the old warhorse can no longer rest at ease with its previously unchallenged market dominance.

The Arrival of AMD in a big way on the microchip scene has clearly propelled research and development drastically, and transformed the microchip market from monopoly to a duopoly. Both companies are vying with each other to come up with.