AMD: Shaping the Future of Semiconductor Processors

Founded in 1969, Advanced Micro Devices (AMD) has grown into a major player in the semiconductor industry. Originally a second-source supplier with its own fabs, AMD has over the last decades transitioned into a pure fabless design company. Under the leadership of Lisa Su, the company has evolved into a processor specialist, with its Ryzen, Radeon, and EPYC products powering devices worldwide. Dive into AMD's journey and discover how it has become one of the largest semiconductor companies globally.

• Interesting background: AMD was founded in 1967 by former employees of Fairchild Semiconductor, a legendary American semiconductor company.

• Intel connection: Initially formed as a partnership, AMD's relationship with Intel has soured over time. Today, the two rivals dominate the semiconductor CPU market, forming what is widely regarded as a near duopoly.

• Visionary leadership: CEO Lisa Su has played a pivotal role in transforming and streamlining AMD into the global company it is today.

The story of AMD has its origins in the heart of Silicon Valley and the pioneering company Fairchild Semiconductor. Fairchild Semiconductor was formed in 1957 as 8 young Ph.D graduates, known as the “Traitorous Eight”, left Shockley Semiconductor Laboratory following a dispute with founder and leader William Shockley.

The newly created company quickly became a leader in the rapidly growing semiconductor industry and an incubator for Silicon Valley innovation. From the “Traitorous Eight” came groundbreaking advancements, including the invention of the integrated circuit (co-invented by Robert Noyce) and the formulation of Moore's Law (from Gordon Moore), but also the creation of new corporations. Fairchild Semiconductor was directly or indirectly involved in the creation of dozens of corporations that have had a major impact on the industry.

These spin-offs have come to be known as “Fairchildren”. These include Intel, National Semiconductor (acquired by Texas Instruments in 2011), LSI Logic (acquired by Broadcom in 2014), and many others.

Another one of the “Fairchildren” is the company of this story. In 1969, seven engineers left the semiconductor pioneer to start a new company: Advanced Micro Devices. Early on, their former Fairchild colleague Jerry Sanders joined the new company as president and CEO. Bringing Sanders on board turned out to be a pivotal decision, as he went on to steer the company for several successful decades before stepping down as CEO in 2002.

With expertise on board and positioned in the center of the U.S. semiconductor evolution, AMD quickly gained momentum in its early years. Initially, the company acted as a second-source supplier, producing microchips originally designed by Fairchild and National Semiconductor. However, AMD soon expanded its focus, developing and manufacturing its own products, including microchips, RAM chips, and microprocessors.

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During its first decade, AMD maintained close ties with its peer and fellow Fairchild spin-off, Intel. Through cross-licensing and second-sourcing agreements, AMD manufactured Intel's circuits and processors, leveraging the partnership to enhance its technical expertise and strengthen its market presence.

The relationship between AMD and Intel deepened in 1981 when IBM chose Intel's x86 microprocessors while developing its first personal computer. To ensure supply stability, IBM required a second-source manufacturer, which proved a great opportunity for AMD. In 1982, Intel and AMD signed a 10-year technology exchange agreement. Under this deal, both companies could license and manufacture each other's semiconductor products under specified conditions, with the original developer receiving royalties.

However, tensions grew as Intel began to view AMD more as a competitor than a partner. This led to the dissolution of their collaboration and a series of legal disputes over intellectual property rights. In the long run, the agreement provided AMD with the foundational knowledge to develop its own line of x86-compatible processors, ultimately strengthening its market position and setting the stage for direct competition with Intel in the CPU space.

Further reading: Monopolies and Duopolies: Competition is for Losers?

Since its early relationship and subsequent dispute with Intel, AMD has undergone significant changes. For many years, the company operated as an integrated Device Manufacturer (IDM), designing and producing its own chips in-house. During the unbundling of the semiconductor value chain in the late 1980s and 1990s, CEO Jerry Sanders famously stated, "Real men have fabs," reflecting the belief that owning fabrication facilities was a competitive advantage. However, this notion has since been disproven, as many companies in the industry have shifted toward specializing in specific segments, allowing them to compete more effectively.

In 2009, AMD fully diverted from Sanders' statement, by spinning off its manufacturing operations into a separate company, GlobalFoundries. Maintaining expensive fabs had become increasingly challenging due to the complexity and rising costs of semiconductor manufacturing. This divestment allowed AMD to transition to a fabless model, focusing entirely on chip design and innovation.

After streamlining its operations, AMD directed its efforts fully on its line of processors. A key product segment is the company's central processing units (CPUs) where its Ryzen processor is the flagship product, known for its strong performance, multi-core architecture, and energy efficiency. Companies such as HP, Dell, and Lenovo use Ryzen in their consumer and professional laptops and desktops.

Another important offering from AMD is its graphics processing units (GPUs), particularly the Radeon series. These GPUs are integral to AMD's graphics portfolio, providing high-performance hardware for both gaming and professional visualization. Radeon GPUs are widely used in gaming systems and data centers for their robust capabilities. A notable example is Apple's Mac Pro, which utilizes the Radeon GPUs for demanding graphic and computing tasks.

Furthermore, AMD produces server processors under its EPYC line, which play a critical role in data centers and cloud computing. Demand for EPYC chips has surged in recent years due to their strong performance and scalability. Major cloud providers, including Amazon Web Services, Microsoft Azure, and Google Cloud, rely on EPYC processors to power their cloud infrastructure.

In addition, AMD offers semi-custom chips for gaming consoles, including Sony's PlayStation and Microsoft's Xbox. These custom-designed system-on-chip solutions combine CPU and GPU architectures, custom-made for the application.

Leading AMD in the competitive semiconductor industry is Lisa Su. Having joined the company in 2012 as senior vice president and general manager, she was promoted to CEO in 2014. At that time, AMD faced significant challenges with financial losses and intense competition. Su's strategy to reverse the company's trend centered on capitalizing on AMD's strengths in high-performance computing and graphics, with a focus on developing innovative products in desktop, server, and graphics processors.

Although initial efforts saw limited results, perseverance paid off, and in 2017 AMD was making a resurgence. Under Su's leadership, the company launched the Ryzen and EPYC lines of processors which have been major successes for the company and key growth drivers in turning AMD into what it is today. Additionally, Su has been a strong advocate for R&D investments to drive innovation and maintain competitiveness against main competitors Intel in CPUs and NVIDIA in GPUs. This commitment is reflected in AMD's 2023 annual R&D spending of $5.87 billion, representing roughly a quarter of the company's total revenue.

With roots in the rise of Silicon Valley and Fairchild Semiconductor, AMD's history is closely tied to the evolution of the American semiconductor industry. From its early days as a second-source manufacturer and its steadfast belief in in-house production—epitomized by former CEO Sanders' quote “real men have fabs”—AMD has come a long way. Under the leadership of Lisa Su and powered by its successful Ryzen, Radeon, and EPYC processors, the company is well-positioned to continue expanding its market share.

Further reading: The 10 Largest Semiconductor Companies in the World