The CEO of AMD explains the patient, 5-year strategy she followed to take the chipmaker away from the edge of ruin and into Google’s, Microsoft’s, and Amazon’s data centers (AMD, INTC)
- AMD was a struggling tech company when CEO Lisa Su took over in 2014. Its stock soared this week after the company rolled out a new server chip.
- The upbeat response to AMD’s new product highlighted Su’s successful run as CEO of a major semiconductor company.
- AMD is just getting started, Su says. Her goal is to build on AMDs momentum with a more consistent, focused performance in its rivalry with Intel.
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AMD was crumbling when Lisa Su was named CEO in 2014. The chipmaker was virtually dead in the water in the market for data center chips, where it held 1% market share, which at times dipped even lower. The PC market, where it had slugged it out for decades for rival Intel, was imploding.
AMD stock was a little under $3 when Su took over, sinking even lower to about $1.60 a few months into her term. You could have bought a bag of chips for the same price as it would take to buy in to the ailing chipmaker.
Fast forward five years: a dramatically different AMD.
On Thursday, AMD shares soared 16% closing at $33.92. The stock is up more than 50% this year, 12-fold from when Su’s term began.
This week’s rally was sparked by AMD’s new server chip, the second-generation Epyc processor for data centers and cloud platforms, which quickly won rave reviews and highlighted a big win for AMD.
In a note to clients, Wedbush analyst Matt Bryson called the chip’s reported performance “clearly impressive,” while Rosenblatt Securities’ Hans Mosenmann said that the new Epyc chip would “destroy” Intel’s competing products with higher performance for less money.
So impressive, in fact Google announced that it was embracing the new Epyc processor for both internal use and to power some of its cloud-computing services. That meant AMD’s Epyc chip is now used by the three major cloud providers, including Microsoft and Amazon.
For Su, the product rollout capped a 5-year journey in which she led the Silicon Valley company from a struggling chipmaker into a more disciplined and focused competitor taking on a changing tech landscape.
“2019 is a very special year as it relates to seeing a plan come to fruition,” Su told Business Insider.
That plan was based on one mantra, she said: “Push the envelope on high performance computing.” PCs and graphics chips were important arenas, but the big prize for AMD was the data center market which was “going through tremendous disruption.”
Cloud computing was taking off, which boosted demand for high-performance server processors for new, more sophisticated data centers. As it was in the PC market, AMD had been the David to Intel’s Goliath in server chips — a smaller player that occasionally outmaneuvered its bigger rival with more impressive technology, but for the most part remained in the second-place spot.
By the time Su became CEO, even that underdog position had been undermined, with AMD at a severe disadvantage to Intel.
High performance chips
“We had almost zero market share or may be just 1% at the time,” Su said. “To say that we were going to build our strategy around high performance computing and data centers took conviction that we had the technology to do it.”
With the PC market sliding, both Intel and AMD had turned their sights on the data center market. In 2017, AMD introduced its first server processor under Su, called Epyc. Epyc put AMD back in the game in the data center market.
Not only was its technology deemed better than Intel’s, industry experts say that AMD also outpaced Intel in an area where its bigger competitor had long had an advantage: manufacturing technology. Intel historically has led the way in producing smaller and less expensive processors. But AMD has zoomed ahead of Intel in embracing a 7 nanometer process, referring to the manufacturing technology based on the line-width on chips.
AMD quickly regained lost ground. It had 1.1% share of total shipments of server chips in the last quarter of 2014 when Su became CEO, according to analyst firm IDC. By the fourth quarter of 2018, AMD had 3.7%.
“Our job was not to get distracted,” Su said. “When you’re running these large technology projects, you cannot get distracted. You cannot change your mind. You cannot say, ‘Hey, I want to do something faster.’ You can’t. It takes five years and you have to be patient.”
She learned about patience in her long career in tech and the chip industry. The daughter of Taiwanese immigrants, she moved to the US when she was around 2. Her parents — her dad is a mathematician and his mom is an entrepreneur — “steered her to the hard sciences,” she said. She also developed an early interest in tinkering with gadgets, once fixing her younger brother’s remote-controlled car.
She got a PhD in electrical engineering from MIT, and worked in the chip industry with Texas Instruments, IBM and Freescale Semiconductor. One important piece of career advice she got as a young engineer was: “You should run toward problems.”
“If everything’s going well, they probably don’t need you,” Su said. “Not only that, but it’s very difficult to distinguish yourself when everything is going well. If you volunteer for those tough challenges, those tough assignments, and you do well, then people will recognize that.”
That was the philosophy that led her to move from IBM where she was already a vice president for chip R&D to at another executive post at AMD in 2012.
Yes, that was an example of running to a problem, she said. But she found herself in a chip company that was struggling to get out of a rut: “I probably didn’t realize how large a problem it was.”
Being named CEO was a high point in her career, she said. “Putting aside the business challenges, it was what I trained for, a dream job.”
Su became one of the few Asian women to take on the CEO role, in an industry long dominated by white males. But she didn’t see that as a major hurdle, she said. “I do think there are not enough women in tech and I think the environment could be more conducive to women in tech.”
But she added: “The beauty of engineering is it’s very black and white. It’s clear when something works and it’s clear when something doesn’t work.”
‘I believe that we are more competitive today than we were then.’
And for AMD, Su’s leadership has clearly worked. After five years, the focus and hard work have paid off, especially as AMD emerged as a stronger player in data centers.
Intel remains dominant in that market, but AMD has regained its longtime position as a solid alternative supplier of server chips. Su acknowledged that AMD has had a history of out-innovating Intel, only to subsequently fall behind.
“The biggest knock on our company is we’ve been very cyclical,” she said. “We have ups and downs. And my goal is to try not to have so much oscillation and have a much stronger long-term growth trajectory.”
That suggests pushing for a bigger piece of the market, and changing the David vs. Goliath dynamic that has always defined the Intel- AMD rivalry.
She would not offer a specific market share goal, but Su said, “I think we can be a meaningful proportion of the business. What is meaningful? Meaningful is not 10%.”
It is not even the peak AMD reached in server chips around 2006 or 2007 when it had 25% of the market, Su said. “I believe that we are more competitive today than we were then.”
Despite the positive momentum, AMD under her leadership has struggled with serious challenges.
Last month, AMD reported a weaker-than-expected forecast that sent its stock sliding and sparked worries that the anticipated gains against Intel in the data center market may not be that significant. Both companies are also wrestling with a slump in the data center market and the uncertainty caused by the raging US-China trade war.
Recently, the Wall Street Journal also reported that AMD gave China access to state-of-the-art processors and violated US trade laws. The company has denied the allegation, and the episode has apparently done little to dampen enthusiasm for AMD’s momentum.
The accusations come at a time of growing paranoia about China’s influence on the US tech industry, highlighted by investor Peter Thiel’s claim of Chinese spies infiltrating Silicon Valley companies. In this context, Su affirmed, “AMD is a US company. I’m a US citizen. There’s no confusion. Our alignment is with US national interests.”
In fact, she’s committed to helping “extend US leadership” in tech. “We have the ability to out-innovate the world. I’m really passionate about that.”
On the other hand, she said she hopes the tense situation does not lead to any form of misguided prejudice against any community, including Chinese-Americans. “I really hope that doesn’t happen. What makes our industry so special is that we do have so many different cultures that adds to the technology and innovation,” Su said.
‘Best is yet to come’
On the other hand, her impressive run at the helm of AMD also triggered speculation about her future. Earlier this week, she denied via Twitter a report that she was looking to be the next CEO of IBM.
“I love AMD and the best is yet to come,” she said on her Twitter account.
She reaffirmed that denial this week: “Unequivocally, I’m here to stay at AMD. There is no discussion.”
“We’re on a journey,” she said. “My desire is to have AMD recognized as one of the premier franchises in technology. I don’t think we’re there yet. I believe we’re on a trajectory to do that. But there’s a lot of work to do.”
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