INTC marketing. Warning another long post.
As far as I’m concerned this subject gets way to little attention on the boards since it is at the heart of why AMD has remained in sales purgatory for so long.
We constantly get numbers about market share from sources such as IDC, Gartner, etc. As far as I’m concerned the numbers are bullshit, particularly when the get into tenths of a percent. However, the numbers are probably in the ballpark. Personally, I tend to believe INTC has traditionally had about 85% of the market by volume and about 90% by sales $. Even when the K7 was at its prime AMD was only able to get a little over 20% of the volume and never really hurt INTC sales $s. These figures haven’t change much over the years, which incidentally is the basis of our own Mr. Fudds trading pattern.
A good question to ask is; just how has INTC managed to keep a monopolists share of the market through thick and thin? Well from my point of view there are 4 things that epitomize the stranglehold on the market INTC enjoys. Reason 1 is that INTC has traditionally had the best product, except for a few notable momentary lapses. 2nd, they have always had the superior infrastructure. By that I mean they have always been able to manufacture more than the market needed (artificial shortages aside) and that they were able to get the product to the purchaser in a timely manner. Anyone that has followed AMD knows that these 2 problems continue to plague AMD to this day. 3rd, INTC has been the consummate marketer. Through the deft use of advertising they have been able to make the company name “INTEL” recognizable to almost everyone and the logo “INTEL INSIDE” sought out as an almost revered mark of reliability and trust. 4th, largely because of the previous 3 reasons INTC has been able to charge more for its’ products which in a perverse sort of way has furthered the idea of INTC as a bastion of stability with both the public and Wall Street.
Ok, now having listed INTC’s strengths where are the chinks that AMD can exploit? Well the first thing one has to recognize is that the monopoly exists today is because it has worked in the past. Everyone got their back scratched and little matters of ethics (INTC’s monopoly) were no impediment to getting rich. What has been happening lately though is that the game has been changing in not so subtle ways. After the K7 debacle (from INTC’s point of view) INTC tightened up on the users in an attempt to guarantee that nothing like AMD’s market grab would ever happen again. What happened in JP undoubtedly happened worldwide. Of course INTC was abetted in this policy by the total incompetence of AMD in the manufacturing area, but that’s another story.
Anyway, it wasn’t until the superior K8 and the breach in the wall provided by the total insanity of INTC’s management ignoring X86-64 that AMD had another shot at taking market share. However, due to the strengthening of INTC’s market controls AMD found increasing market share a lot tougher than with the K7. On the plus side, this time around though things were different in that INTC didn’t have a P4 waiting in the wings. Because of the absolutely astonishing stupidity of INTC’s management in ignoring X86-64 they had provided AMD with a golden opportunity, but because of the market restrictions AMD found its’ path to greater market share blocked. Where AMD had expected a super highway to greater market share they found a sheep path.
Well Sunset Blvd. in Los Angeles was once a sheep path and over time it grew. I don’t think it was an accident that the JTFC investigation started about the same time the Opteron was introduced. The thing that screwed up INTC’s plans was that suddenly AMD had a superior product that INTC had no response to. As expected INTC’s response was to tighten the screws on the market and promise competitive product soon. So far that policy has worked fairly well. It really is ridiculous that given the clear superiority of Opterons they should only have 6% of the server market 2 years after being introduced. Clearly INTC has been playing for time while it has desperately tried to come up with a response to the K8s.
As I said before, a monopoly only exists with collusion. Every one has to be happy with the game even if they’re being led to the abattoir. With the intro of the Opterons suddenly cracks started to appear in what had previously been this seamless façade of impregnability. Suddenly the tier 2 and 3 guys had product that was in demand and the rest of the market was losing out on sales. INTC undoubtedly responded by limiting the availability of product that was available to these guys and in doing so effectively forced them further into AMD’s open arms. Also, as it became further apparent that Opterons weren’t just a shot in the dark and it became painfully obvious that INTC had no response there was suddenly an incentive to cheat that could easily be rationalized.
There were a few other things happening at the same time that affected the situation. Through the establishment of the Hyper Transport Consortium AMD gained a lot of respect as an industry leader and visionary while INTC’s steadfast backing of the Itanium was having the opposite effect. Slowly at first, but with increasing momentum, AMD has started gathering partners that are willing to risk incurring INTC’s wrath. Mostly these are little guys with the balls to ignore INTC or companies that were having their existence threatened by the voracious black hole from which none ever escaped.
Enough with history, what’s happening now? Well as far as I can tell the commitment to the K8 line up by third parties has never been stronger. There’s hardly a day that goes by without some sort of blurb about someone getting into bed with AMD about something. Further while INTC has attempted to respond to AMD, so far the reply has been woefully inadequate. Further INTC seems to be continuing their marketing support for the bifurcated policy of Itanium at the top and Xeon at the bottom leaving the rich underbelly of the middle of the server market to Opteron. From my point of view cracks are appearing all over the dam and it’s only a matter of time until the whole thing explodes.
But having said that it is obviously imperative that AMD keep ahead of INTC with superior technology. All INTC has to do is appear to catch up for the wall to magically recompose.
Concerning the other INTC advantages listed above. Well they’re mostly chicken and egg things. With more sales comes better infrastructure. Fab36 will do a lot to alleviate the supply problems, but getting the product to the purchaser in a timely manner will still be a problem that will again be relieved by greater sales. AMD is basically an unknown to most consumers; something increases in advertising will help, as funds become available. And as far as prices go, while it appears that AMD is continuing its’ long established policy of pricing 25% below INTC I doubt that it really is that much when INTC kickbacks are taken into account. Superior products will eventually lead to superior pricing.
In case anyone is wondering why I write these tomes, it’s primarily for my own edification as I find it very helpful in organizing my disparted thoughts. If anyone else finds value so much the better.
AI
