The semiconductor market is weak. How will AMD respond?

As we all know, the semiconductor market, known as the "Super Cycle", has been growing until last year. However, the slowdown in the Chinese market and changes in the smartphone market have caused the semiconductor market to weaken. However, the semiconductor industry, which has huge investments and huge production capacity, cannot easily adjust its production. In order to avoid the vicious cycle of "weak market, but continuous production of products → price drop → weaker market", it is necessary to wait for the market to recover and clear the inventory.

The semiconductor market cycle is also known as the "Silicon Cycle". In the past, it lasted for about 4 years in a certain pattern. Although it is generally believed that it has a certain correlation with the macro economy, extreme situations such as "hot selling" and "slow selling" often occur. People in the industry are all people who have stepped over these extreme situations step by step. This time, I would like to introduce several examples of "slow selling" that AMD has experienced.

AMD's "SWAT"

I joined AMD in 1986. Before that, I knew nothing about semiconductors. What I didn't expect was that a large-scale semiconductor recession would occur the year after I joined AMD.

Before 1987, the development of the semiconductor industry was rising in a straight line, but this year became the Great Depression of the "Silicon Cycle". Through the coordination of AMD headquarters, the "SWAT" activity was carried out. The original meaning of "SWAT" is "Special Weapons And Tactics". AMD called the sales staff in the company "SWAT (Sell What's Available Today)", and the result was "anything goes, just sell the products on hand first". At this time, AMD headquarters also said every day "no matter what, sell the products first"! Sales staff with good performance also received a lot of commissions and bonuses. At the same time, AMD announced "Product A Week" to the outside world. At that time, AMD once announced to the outside world that "AMD will release a new product every week in the next year". At the new product launch conference, the then CEO Jerry Sanders made a bold statement to the outside world that "35% of AMD's sales are used for research and development (R&D)".

"Release a new product every week" was unimaginable to the outside world. Even at that time, it was a very new topic. If you ask whether the products released every week were new products, they were not. By updating the specifications of previously released products and making the packaging materials extremely different, AMD released 52 new products in that year. I still remember what AMD headquarters said, "This is a new product, sell it quickly!" When product sales are not good, sometimes you need to rely on the "drive" of sales staff to increase sales.

AMD's massive "Product A Week" campaign in 1986.

(Picture from: mynavi. The picture is collected by the author)

The arrival of Am5x86 

Time flies, and it was 1993 again. AMD released its independently developed new Micro Processor "K5", which adopted a new architecture based on superscalar technology. AMD ambitiously said that it would improve the performance by 30% over Intel's Pentium. At that time, Pentium could be said to dominate the CPU market in the PC market.

However, this ambitious K5 faced many problems in design and production, and was delayed in being put on the market. Finally, when the first batch of new products was released in 1996, the K5 was announced, and its performance was far less than what was previously advertised, which put AMD in a dilemma. This crisis (Pinch) ended with the birth of K6 (for details, please refer to my previous article: https://news.mynavi.jp/article/k5andk6-2/). From the debut of K6 in 1993 to 1997, AMD fell into the dilemma of "the promising K5 could not be sold, and the K6 had not yet been produced."

At this time, AMD's marketing department thought of "Am5x86". At that time, in order to compete with the fifth-generation Pentium, it was necessary to use the number "5" in the product name. In fact, Am5x86 is a CPU that doubles the internal cache size of Am486 (equivalent to Intel 80486 CPU) to 16KB.

Due to the doubling of cache, the comprehensive performance of actual applications is slightly better than Pentium. Therefore, it was undoubtedly a "bitter tactic" to sell it as a fifth-generation (rather than fourth-generation) product! However, they did not want to deceive customers, so they marked "Am486-DX-133" under the product logo. Because this product was very consistent with the needs of the cheap market, it was very popular. It was the "mainstay" of AMD before 1997 (the debut of K6). It is indeed a product with AMD's "SWAT" spirit.

Speaking of "Am5x86", although it has the same performance as Pentium, it has been an important existence for AMD in the past three years. (Picture from: mynavi. The picture is collected by the author)

Triple Core Phenom

Later in 2009, AMD was faced with the release of the industry's first quad-core CPU, Phenom. The multi-core competition with Intel began in the dual-core era and basically continued in the quad-core era. AMD hoped to surpass Intel in technology by releasing Phenom.

However, there were problems in production. The core (die) that maintained the operation of the four cores had a yield problem, so AMD's marketing department decided to launch a three-core Phenom. If it was three cores instead of four cores, its yield would be improved. Adhering to the principle of "three cores are better than two cores, and the power consumption is lower than that of four cores", the "Phenom X3" was launched. The semiconductor industry is basically a binary (binary, dual) world. It is indeed a bit puzzling to suddenly propose the odd number "Phenom X3", but there is no choice. What is not there is not there. When I brought this product to customers who are committed to widening the gap with competitors, the general reaction of the customers was "although it is a bit abrupt, but it also depends on the price." I still remember the scene when customers included "Phenom X3" in the temporary product lineup.

Later, a fatal bug occurred in AMD's quad-core CPUs, including servers. "Under certain conditions, the CPU would read the internal cache and the computer would hang," which forced a second mask change. When AMD announced that it had fixed this problem in Phenom, the 3-core CPU no longer existed.

When the market is bad, semiconductor salespeople need to "sell first, don't worry about anything"; when the market improves, they need to "raise prices"; when demand exceeds supply, they need to "reject everything". Salespeople in the semiconductor industry have experienced all kinds of hardships. However, no matter which era, semiconductors are the "rice of industry". If you only make cutting-edge products, you still can't form a market. There are always "customers in the gap" in the market. We believe that the market has both good and bad sides. Although it may not look good, I personally still hope to carry out marketing like "weeds".