Is AMD the new Intel?

You just gotta love a Cinderella story. Advanced Micro Devices is the hardscrabble kid who came to Silicon Valley with a dollar and a pack of Luckies and ended up in a building with its name on top. AMD’s rapid rise from startup to $5 billion semiconductor powerhouse is, as Humphrey Bogart’s English teacher once said, the stuff of which dreams are made.

AMD went after those dreams with an unabashed moxie that would always be the company’s trademark, from its first clone of Intel’s 8080 to supercharged chips that enjoy a cult following among hard-core gamers. In the process, AMD has become known as the company that kept Intel honest, the Linux of the semiconductor world. Competition from AMD has reversed the trend of rising prices and stagnant innovation that characterize a controlled market. AMD is responsible for $500 desktops, $1,200 rack servers, and multigigahertz mainstream microprocessors, despite the fact that most of them have Intel’s logo on them.

Today, AMD’s pluck is paying off bigger than ever before. After decades of aping Intel architectures, the AMD64 architecture, rooted in Opteron and Athlon 64 processors, has actually been imitated by Intel in the form of Nocona, Intel’s 64-bit version of Xeon. In a stunning reversal of fortune, Intel was forced to build that chip because Opteron was invading a server market that the Intel Itanium was supposed to dominate.

Suddenly, Intel is feeling a breeze where its pants used to be. But with Intel mad as hell and hot on AMD’s heels, can AMD grab enough sales traction to hold up to the punishing onslaught everyone knows is coming?

Anyone shopping for servers needs to consider that question seriously because Opteron creates a new 64-bit path to follow -- one that continues the x86 tradition rather than, as Itanium does, consigning that architecture to the dustbin of history. To understand the crossroads at which AMD finds itself and what the implications are, shrewd observers must take a hard look at the company’s technologies and market position now and in the past.

My friend, my enemy

AMD has had a massive impact on the market, but prior to Opteron, it showed a disappointing lack of ingenuity in its PC processors. That copycat tendency stretches all the way back to the early ’70s, when AMD built the 8080A, a knockoff of Intel’s 8080. Shortly thereafter, Intel and AMD struck up cross-licensing deals spanning 17 years, knighting AMD as Intel’s chipmaker-in-waiting when demand exceeded supply.

Despite highly successful semiconductor product lines and plenty of engineering wins of its own, AMD came to be known as just another maker of CPUs based on Intel’s blueprints. AMD was one of a pile of x86 licensees that included Cyrix, NEC, and Nexgen. There were glints of cleverness such as AMD’s short-lived RISC approach to an Intel-compatible CPU. But overall, Intel held the reins on its licensees, and they were all content with that.

Then things took a horrible turn for AMD: Intel pulled the plug on its AMD agreements before they expired. Intel no longer needed or wanted a second source, and AMD was getting a little too creative with its variations on Intel’s designs. AMD was forced to persevere without Intel’s blessing.