Q4 06 Intel and AMD: Who Won?

Sometimes it is easy to pick a clear winner and sometimes it is more difficult. The fourth quarter of 2006 for Intel and AMD is hard to call because of conflicting numbers for revenue share and volume share.

I am always sceptical of changes in share in a rising or falling market. For example, if AMD gains in a falling market, the numbers can be inflated and make AMD appear to be doing better than it really is. Likewise Intel can gain temporarily in a rising market (if AMD hits its capacity ceiling) and appear to be doing better than it really is. I figured I would have to wait until Q1 07 to see if Intel held onto its revenue share. However, now I'm faced with conflicting numbers so it looks like the actual scenario is different.

In order for Intel to have a temporary gain in Q4 06 they would have had to gain in both volume and revenue share, but this didn't happen. Intel gained revenue share but lost volume share. So, it does not appear that Intel had a temporary gain. We have to assume that the revenue share increase was genuine and not temporary. However, AMD gained overall in volume share. Since we know that Intel was not at a capacity ceiling this gain too must be genuine. This is confusing. However, it gets even more confusing because Intel and AMD appear to have swapped strategies. In the past, Intel has had a priority strategy of taking volume share, usually by lowering the price of its chips. In contrast, AMD has targeted the server market and has taken server share for the past three years. Yet, in Q4 06 AMD cut its prices (reducing its margins) and gained volume share in both desktop and mobile. Meanwhile, Intel gained back a small amount of share in servers. Clearly, AMD's actions reduced its margins while Intel's gains were most likely due to the improvements with Woodcrest and Tulsa over older Xeons.

Since both gained there is no obvious winner in Q4. So, we have to consider where AMD and Intel can move from here. In other words, if one company gained a temporary advantage that would be lost in Q1 07 while the other had a gain that could be built on in the following quarter, the company with the temporary gain would be the loser. Basically, half a step forward followed by another half step is better than one step forward followed by one step back. So, let's look at where each company is now after Q4 06 and where they can go in Q1 and Q2 07.

AMD's profits were only about 1/3rd of what they were in Q3 06 so the obvious need is either to raise prices or reduce costs. Raising the prices after lowering them would be out of the question so the only option would be reducing costs. FAB 36 is still ramping and as it ramps a greater volume of the production is on 300mm which does reduce cost. Likewise FAB 36 is converting to 65nm and this too reduces cost. So, by continuing with the same strategy AMD could expect to have better profits in Q1 07 although they may not quite match the Q3 06 numbers. Presumably, AMD could introduce Barcelona in Q2 with a higher price tag and with continually dropping costs on FAB 36 this should make the Q2 07 numbers better than Q1 07. I can't see any problem with this strategy so it looks like AMD could hold onto its current volume.

Intel lost volume share in desktop and mobile. However, we want to re-examine the issue of capacity. Although Intel was not limited overall, it was limited in terms of Conroe and Merom. Some could speculate that Intel gained where the market segment was covered by C2D (servers) but lost where capacity was constrained (desktop and mobile). This could then lead someone to assume that Intel would simply take back mobile and desktop share as production capacity of Merom and Conroe increased. I suppose this is possible but I don't think it is likely. For example, Intel's server gain was only 1.4%. If there were a strong preference for C2D then it seems that this gain should have been larger. I think a more likely scenario is that desktop is a function of performance and price, mobile is battery life and price, and servers are more complex with performance, power consumption, density, price, and support all being factors. Essentially, at the bottom range of the desktop segment, price would be dominant with performance secondary, but performance would become more important as we go up until it becomes the dominant factor at the high range with price secondary. Likewise, with mobile, cost is important at the bottom with battery life dominating at the top. With servers price and support probably dominate at the bottom with power consumption and density becoming stronger factors at the top. Performance also becomes a stronger factor as average workload increases. For example, a 10% increase in performance matters much more for a server that spends most of its time at 70% capacity than one that only gets above 20% a few times a day.

It is possible that AMD only gained temporarily due to capacity contraints of C2D for desktop and mobile. If this is the case, then Intel wouldn't have to do anything since their C2D capacity is steadily increasing. If the market prefers C2D to K8, Intel would simply gain the lost desktop and mobile share back as it is able to supply more of Conroe and Merom. So, if this is the case then Intel's strategy is solid and it will gain back its lost share. However, it is more likely that price is the biggest factor on the desktop so Intel would have to lower prices in addition to increasing volume of Conroe. Likewise, it appears that AMD will released a lower power chipset for mobile and this will take away Intel's battery life advantage. This would mean that Intel would have to change strategy to gain back desktop or mobile share. And, Intel's gains in server share could be in jeopardy once Barcelona is released in Q2 07. Basically, AMD will release a new architecture in 2007 just as Intel did in 2006. However, in spite of its new architecture Intel shows very little in terms of market gains. With increasing competition from AMD in 2007 both from a new architecture and new chipset offerings it really looks like Intel will have to be the one to change strategy. In this regard I would have to put AMD slightly ahead in Q4 06 but not by much. AMD will still have to deal with increasing volumes of C2D during the year so AMD is not guaranteed to be able to continue taking share. However, overall I think it is most likely that AMD will continue to nibble at Intel's share each quarter while Intel steadily grows to regain its former 2005 levels of revenue.

Overall, in 2006, there is no doubt which company is the winner. AMD added a second FAB and the ability to produce its own chipsets while gaining revenue and share while Intel lost both revenue and share in spite of releasing a new architecture. This puts AMD in a much stronger position in 2007 than it was in 2006 and it gains a new architecture on top of that. This makes for a very strong offering by AMD in 2007. However, if we take Intel's bag of tricks for 2007, turn it upside down, and shake it hard, not a lot falls out. Intel will increase the ratio of quad cores on its server chips and it will introduce a robust albeit large and expensive quad FSB chipset. It will also add a server chipset that uses DDR2 registered DIMMs instead of FBDIMM to reduce system cost. Apparently these are to try to avoid losing more server share in 2007. There really doesn't seem to be anything new for either desktop or mobile. AMD however will have new offerings for server, desktop, and mobile. For servers specifically, Barcelona should remove Intel's advantages with power consumption, SSE performance, and Integer performance. Barcelona should match Intel in terms of cache so this advantage (particularly in benchmarks) disappears as well. Intel has also enjoyed advantages in benchmarking because reviewers have been using operating systems that have poor NUMA support. This gives Intel an obvious advantage on multi-threaded code. However, having four cores on a single socket removes this advantage since a native AMD quad does not require NUMA. This should mean that Intel will lose almost all of its performance advantage when Kentsfield is benchmarked again versus a desktop version of Barcelona.

The only fair edge that Intel could gain would be by having a higher clock which is certainly possible. However, I'm guessing that Toms Hardware Guide will put its thumb on the scale several times to make sure that Intel has additional advantages. These cheats will probably include using the Intel Compiler instead of the PGI compiler. Whereas the Intel Compiler is only optimized for Intel processors and even turns off some hardware features for AMD processors, the PGI Compiler can generate code optimized for either Intel or AMD, or code that runs well on both. Since it supports both 32 and 64 bits, C++ and Fortran, Linux and Windows, and generates parallel code automatically while costing the same as the Intel Compiler, PGI will almost certainly become the standard compiler for software development. Using PGI instead of the Intel Compiler would go a long way to establishing credibility for review sites that claim to be impartial. I don't expect Toms Hardware Guide to do this and probably not Anandtech either. And, THG has other cheats that it can use. They will probably use high clocking memory with slow timings since this favors Intel. I've never yet seen THG bother to get lower clocked memory with faster timings that would work better with AMD even though it is usually readily available for the same price. They probably will avoid loading the extra cores since this allows one benchmark to use all of the cache. This situation would be very rare for real code but can give quite an artificial boost to benchmarks. They will probably also use their favorite cheat of overclocking the Intel chip while leaving the AMD chip stock. Overclocking belongs in a separate article much like using aftermarket parts to boost engine horsepower does not belong in a regular car review.

2007 shouldn't be bad for either company. I expect Intel to keep growing and gain the revenue that is lost from 2005. I expect AMD to keep slowly expanding and taking more share. I guess if both companies make more money then neither one really loses. The two companies' offerings should be very close in performance and features by Q3 or Q4 2007 unless Intel manages to maintain a substantial clock lead. I am really hoping for some genuine reviews because this should be the best horserace we've had since PIII versus K7. However, I'm not optimistic that either Toms Hardware Guide or Anandtech will see the handwriting on the wall by then. So, we may still have to rely on other sites to get any proper test results. Although I'm guessing that THG will still be chasing the Intel advertising dollars six months from now I'll mention again what proper testing would be: no overclocked chips, match the DIMM timings to the processor, do proper core loading for multi-core processors, publish the cpu activity graphs as Tech Report does, use the PGI compiler, and either compile each for its own best performance or compile for good performance for both. I'll admit that NUMA testing is more complicated because they would either have to publish both interleaved and non-interleaved scores to show whether the OS has good NUMA support or they would have to include some Linux comparison scores. Much like the Sea Biscuit story, this is a horserace that everyone has been waiting for. It's just a matter of finding a review site where Intel won't have a five length headstart.