In modern day computing, the central processing unit (CPU) is critical to any computer’s performance. Currently, AMD and Intel are the two major corporations that are competing in the CPU market. Both companies are pushing forward with their next generation of CPUs, which are expected to be released by the end of 2017. It is acknowledged that AMD has been – and still is – the underdog in this competition with Intel, however, AMD has made a resurgence with its new Ryzen CPU architecture; this introduction has boosted AMD’s market share to 25% – the highest in the last 2 years. To understand the complex relationship between AMD and Intel that lead to Intel’s domination of the CPU market, one must travel back 40 years.
In the spring of 1977, Intel released a game changing CPU. The 8080 processor adopted a new x86 architecture and established the foundation for the modern-day CPUs. The architecture attracted the attention of IBM and was extremely favored in 20th-century computers. In the 1990s, x86 architecture would prove vital in the rapid growth and intense competition of the tech industry. Intel’s signature “Pentium” chip was born in 1993 and cropped out a large chunk of the CPU market at the time. Meanwhile, AMD was able to take advantage of Intel’s groundbreaking x86 architecture by signing an agreement with IBM and Intel. This agreement allowed AMD to manufacture Intel’s chips as a second-source manufacturer and became the gateway for AMD into the CPU market. However, by 1991, AMD had become an independent manufacturer of its own chips, and aggressively poured resources into research and development (R&D). By creating its own chips, AMD directly began competing with Intel.
After the turn of the century, competition between Intel and AMD was fierce. Despite the seemingly dominant market share of Intel, it was not prepared for the PC boom during the next few years. This is because in the early days of computing, personal computers were effectively non-existent, and the majority of CPUs were designed for business applications. As the x86 architecture was made for businesses (who could actually afford them at the time), Intel’s investment into it would prove disastrous for the personal computing boom. At the same time, AMD had moved away from business CPUs and jump-started its design and manufacturing of CPUs designed for PCs. This market transition for AMD can be seen with the release of the Athlon 64 in the spring of 2003. As AMD snowballed their head start in the PC CPUs market, Intel lost much of its market share. From 2004 to 2006, AMD and Intel had been very evenly matched, with AMD only lagging behind about 10% in terms of market share.
At this point, AMD was ahead of Intel in their PC CPU design and manufacturing. In 2005, the Athlon 64 surpassed any chip that Intel had to offer at the time, however, sales were practically non-existent. This is not a marketing failure on the part of AMD, rather, Intel used dirty business practices to stifle AMD’s sales and revenue, and crippled the company. Although AMD manufactured superior chips due to their huge investment in R&D, Intel bribed computer manufacturers not to use AMD chips and devastated AMD’s sales. Computer manufacturing companies like Dell took the bribe because the amount of money obtained from the bribe would outweigh the amount Dell would receive from customers buying faster computers. As a result of this, AMD could no longer afford the costly R&D investments and quickly fell behind of Intel in the years following 2005.
Indeed, market share shifted heavily in favor of Intel for the next decade or so with AMD only capturing less than 30% of the CPU market. Following the 2005 business scandal, AMD filed the antitrust lawsuit against Intel. This lawsuit was settled in 2009 in favor of AMD, and Intel agreed to pay $1.25 billion to its rival. However, this development came too late to save AMD, and Intel had skyrocketed ahead technologically. In 2015, Intel launched the Skylake architecture, which further consolidated Intel’s lead. This forced AMD to undercut Intel in terms of pricing in an attempt to be competitive in the CPU market.
Fast-forward to early 2017, and it is clear that Intel has stagnated without its lack of competition. Despite Intel’s enormous investment into R&D – surpassing AMD’s R&D budget by ten-folds in 2016 –, the anticipated Kaby Lake architecture featured only a clock speed improvement from its predecessor Skylake. At the same time, AMD released its Ryzen chip, which featured the best price-to-performance ratio at the time. Leveraging Ryzen, AMD has clawed its way back into the market and rekindled competition to the CPU market. While market share is still heavily in favor of Intel, it will soon start to bleed customers to AMD as the public renounces Intel’s company image for AMD’s superior chips. Despite Intel’s astronomical R&D budget, AMD is technologically on par with Intel. And, with the 8th generation of chip architectures on the horizon, AMD seeks to reclaim its leading position in the CPU market with better performing—and often cheaper—chips.