AMD Founder Steps Down Swinging

Posted on March 22, 2002

For all the brouhaha that has surrounded the Microsoft antitrust trial, it’s a little surprising that there isn’t more mention of the other great monopoly in the PC industry — the CPU headlock held by Intel Corp. Over the years, over 15 companies have challenged Intel’s dominance in this sector, and each one has gone down in flames.

Except one — American Micro Devices (AMD). Over the years AMD has gone from a simple sub-contractor, building 386 chips under an agreement with Intel, to its position today as the maker of the most technically and economically impressive microprocessors available, the Athlon and Duron CPUs.

And now, as AMD gears up for its next great battle with Intel over who will dominate the market for 64-bit microprocessors (all PC processors have been 32-bit since the introduction of the Intel 80386 in the late 1980s), the man who built the company from nothing to where it is today, CEO W.J. “Jerry” Sanders, is finally handing over the reins to a successor. It’s truly the end of an era in Silicon Valley.

If you’ve bought a computer in the last ten years, you should pause and think a kind thought for Jerry Sanders — even if there wasn’t a single AMD chip in it. Why? Because the very fact that AMD was there nipping at Intel’s heels forced the Home of the Pentium to drive prices down and performance up much faster than they ever would have if left to simply milk their monopoly in peace, as Microsoft was.

For many years, AMD’s offerings were probably best viewed as nothing more than that — chips that served an important purpose simply by existing, but which couldn’t compete with Intel’s offerings on a head to head basis. That’s because Intel tried to nail AMD to the floor with lawsuits, insisting that since AMD had built 80386 chips under contract for Intel, they couldn’t go on to make future chips that had the 80386 design at their core — which would have been a death blow if upheld, since every Intel design since has basically been an upgraded 80386, so AMD would have been forced to build chips that couldn’t run Windows applications. Sanders fought back in court, but he knew that by the time the legal battle was resolved his company would be out of business, so he struck back on another front as well — he set his company to the arduous task of designing a next-generation chip that was 100% compatible with Intel’s 80386-based CPUs, while simultaneously using a completely different design than the one they had licensed from Intel in their sub-contracting days.

When the resulting chip hit the market, it was like the Shot Heard ‘Round the World. AMD had managed to do the seemingly impossible — develop a chip that was faster than Intel’s then-fastest chip design (the Pentium II), that worked with standard PC motherboards (Intel had forced PC hardware makers to build special Pentium II motherboards so they could squeeze a few more pennies out of them), and which cost less than an equivalent Pentium II to boot. This new giant-killer was called the Athlon. And it gave AMD a weapon with which to blast the CPU market wide open.

Intel fought back with all the tools a good monopolist has at its command. It threatened PC makers that they’d never see another Pentium from them again if they sold any PCs with Athlons inside. It tinkered with basic performance benchmarks (like clock speed) to make Pentiums seem faster than they really were. It dumped tens of millions of dollars into advertisements for Pentium II and III and IV that trumpeted those chips as the ultimate CPUs ever built, without ever naming a single way in which they beat the equivalent Athlon model.

These measures are why it’s still difficult to get an AMD-based system from the PC giants like Dell and Gateway. But millions of systems from smaller companies have been sold with Athlons inside. The AMD chips have become the chips of choice for technically savvy PC users — especially since they almost always are substantially cheaper than Intel’s slower offerings. This price difference has become even more pronounced with the introduction of AMD’s budget line, the Duron, which was launched to compete directly with Intel’s budget Celeron line. Duron chips regularly blow Celerons away in nearly every benchmark — and the top-end Durons have even come close to matching the performance of the MUCH more expensive Pentiums in some applications.

So what does all this mean in the end? It means that the market worked. Today PC users have great chips at a low cost to power their computers. The Athlon and Duron are simply amazing pieces of technology for the price. And even Intel’s chips are better because of the competitition, as the chip giant has been forced to innovate to keep its customers from hemorraghing away. When AMD first started building chips under sub-contract for Intel, they were building 80386s which ran at the then-blistering top speed of 16 megahertz. Today both AMD and Intel’s flagship CPUs top out at about 2,000 megahertz — and most of that gain has just been in the last couple of years, as the Great Chip War raged. And all of that performance can be traced directly back to Jerry Sanders’ decision not to be bullied out of business by the local 800-pound gorilla. It’s a remarkable legacy, and a truly American success story.