Tuesday, November 27, 2007

How Foolish of Me

I have been thinking for a while about writing an article about my mistakes and the learning process that made me turn 180 degrees. I hope my personal experience may help other investors. I have written about my screwups several times, especially in the recent article "Exploration", but this subject has not been covered comprehensively. Anyway, I was a bit too ashamed to really get done with it, waiting in hopes to get a bit of vindication from the market, which happened recently. Also, somebody posted a comment for my last post pointing out some of my mistakes, the author actually did some research of old posts of mine, and his help giving me a cue has been "the straw that broke the camel's back".

I began as an "staunch" AMD supporter and wrote profusely about the chances this company had to displace Intel, both in technology and finances. Nevertheless, Eventually I renounced my own opinions, after losing lots of money and having several changes of mind. I finally settled at pretty much the opposite opinion, that AMD is collapsing, although I have been very consistent about AMD's deterioration this whole 12 months. I also anticipated the market with my investments, which recently led to significant gains, so, I got half vindication, perhaps I am not a total fool after all.

Still, the most expensive mistake in my whole life has been to be dismissive of the Core µarchitecture from late February to October of 2006. You may go back to my posts explaining why I made the mistake, but from July of 2006 on, the process of discovering how wrong I was is very well chronicled in this blog and you may find a good summary in "Exploration". There is one thing I have been half-right about Core, though: I said that Intel will be relying solely on shrinks to improve speeds and performance, which has been half-true, it hasn't been just shrinks, but overall silicon process improvement, and a new µarchitecture with substantially different features like point to point interprocessor communication and integrated memory controller is approaching. Anyway, I think this subject has been well covered in the blog, so, I am going to concentrate on other aspects:

The fellow commenter quoted from "Third Factory" (late May of 2006) this list of reasons for "AMD to get to over 50% market share":

  1. Good, proven management
  2. Good, proven, exciting technology
  3. The brand name has appreciated significantly, creating a loyal customer base
  4. Technological leadership assures media exposure, free good publicity, public awareness, toghether with the enthusiasm of partners in the ecosystem
  5. The ecosystem itself
  6. Production Capacity!
I was right on several of these items, or at least there weren't too many reasons to think otherwise:

Was AMD's Management good, up to May of 2006? -- Yes!. For the most part, the people in high positions at AMD are either those who saved the company and succeed big time with Hammer or their chosen successors. Hammer was quite a gamble, full of technical and market very hard challenges at which AMD triumphed. With the good work this people inherited, they broke barrier after barrier, taking the company to a position of undisputed leadership. But, as I explained in "Exploration" and many other posts, they later demonstrated to be clueless about how to capitalize on the leadership AMD attained and overstretched the company's resources for tragic consequences. In late May 2006 there weren't many indications of the catastrophic decisions to come, if anything, only the dull launching of AM2 and the insidious denial of the Core µarchitecture threat. Yet, as I explain in "Exploration", I had every intellectual tool to suspect that AMD's management could fail miserably with AMD in a position of leadership, that was terrain unfamiliar to Management, thus, on top of making a huge mistake, I missed my unique opportunities to realize it before it was too late.

AMD still has the exciting technology. You only have to read "Cove3" posts in the Investor Village AMD message board to get convinced, Cove3's unfailing hopes on an eventual AMD superiority still have a bit of chance due precisely to the design superiority.

How is it that AMD still holds to a larger than historic market portion, especially now that every single AMD processor is very far from Intel offerings, that Intel is providing better value, and the new processors are as mediocre or worse than the old generation?: AMD enjoys the inertia from the massive momentum it generated the days of K8's rule, the brand awareness expansion, the opening of business with all major OEMs, etc.

How was I supposed to predict that AMD's management was going to kill the "Virtual Gorilla"? I am still puzzled by the irrationality of the ATI acquisition!

Regarding production capacity, at the time AMD had a credible schedule of capacity growth and having production sold out, even after Core-based processors were launched.

So, I wasn't quite wrong from the point of view of my analysis of the possibilities of AMD, just that Management did very weird things with those possibilities. Conversely, what I identified as Intel mistakes turned out to be Grand Slams because AMD made turds of its possibilities, I still don't think that I was all that wrong regarding Intel. That was yesterday, things now are totally different, Intel rules and AMD tries to follow.

Also from "Third Factory", I was quoted this:
Confirming that AMD is closer to the bleeding edge of technology than Intel, there is the potential of things such as Z-Ram (Zero Capacitor RAM with 5 times higher densities than regular six-transistor flip-flops). I don't know about the introduction rates for semiconductor technology, but it seems that very soon, like in the scale of one or two years, AMD will be able to include Z-Ram either as L2 or L3 cache memory. All that separates AMD from glory (and Intel from demise) is 8 Mb of cache internal to the µ-proc. Z-Ram may be precisely that. Remember that the gigantic L2 caches is the snorkel that prevents the already shit-submerged Intel from drawning, Z-Ram may nullify that...

I screwed this up. But still, the greatest single contributor to Core superiority is the large shared L2 cache. AMD, due to its pathetic incompetence to both evolve the K8 architecture towards shared L2 cache and to manufacture large caches, led to the cache architecture of K10 with its performance hits of inefficiency (half the cache, the four L2s are not shared), small size (2 MB shared L3, 4*512 KB L2 not shared/L1 exclusive, 8*64Kb L1 total for a quadcore), and the introduction of a third level with its associated latencies. I may have adopted the thesis that the shared cache could led to race conditions, but I think I quickly grew out of it, the shared caches are superior, period. Another thing is that I had faith on Z-Ram, only recently I lost confidence on it, the same way I lost confidence on SOI (more about this in a minute).

The commentator wrote the following:
And here's a secret for you - EVEN if AMD implemented high K, immersion litho ADDS NOTHING TO PERFORMANCE - it is merely another technique to print the same size 45nm features (Intel chooses a 2 pass process on the critical steps instead). In the end the feature size is the same. Immersion is just another PR gimmick to make it seem like AMD is ahead, while the scary truth is Intel has far superior litho capabilities as they are able to EXTEND AND REUSE the older dry litho one generation further. Sorprisingly even with a 2 pass process, it is still cheaper than a single pass immersion process as the immersion tools are nearly 2X higher price, run at slower speeds and are less mature than existing dry litho technologies.

I never said that immersion would give AMD any performance edge. It is true that, if anything, immersion gives production costs advantages; but my thesis has always been that AMD should prioritize performance over everything else, then power efficiency and only then production economies. Unfortunately, the company chose, apparently, exactly the inverse order of priorities. Recently I have hypothesized about the reasons: AMD assumed it was going to be capacity-bounded, even after the early warnings regarding the Core µarchitecture, and kept executing plans that assumed extraordinarily strong demand for entry level/mid level performance even in the face of mounting evidence that Vista was a flop, the market was saturating due to Intel's "osbornization" of Netburst and AMD-specific demand deteriorating fast.

AMD's management insistence on prioritizing efficiency over performance always stroke me as "fishy", being production costs easy to misreport and power efficiency an easier goal than absolute performance. Then, when the highly anticipated 65nm launch happened late, in scant quantities, fat (75nm equivalent shrink), slow, worse IPC, and saying bullshit to explain the worse IPC, I finally got conviction for the Bear case.

Until then I had trusted AMD's Management. I had increasingly stronger disagreements with Management regarding strategy issues like not launching the "coprocessor revolution", not being decided to make the Linux market an stronghold, but I always gave them the benefit of the doubt. I took the assumption of the "triple challenge", together with its difficulty and its "unnecessariness" as evidence that AMD's manufacturing capabilities were superb. I couldn't conceive that Management could be so irresponsible as to commit the whole company to this without having guarantees of success, but the bad 65nm process was overwhelming evidence to the contrary. This had staggering implications: If AMD's management could be that irresponsible, there was no reason to suppose they knew what they were doing when they acquired ATI, the single die quadcore couldn't possibly be any good, no new good processor would be launched this year, ATI would hemorrhage its Intel-based market share to nVidia without mitigating increased AMD-based market share, the finances of the company would deteriorate to the point of mortgaging the R&D and capital expenditures necessary to accelerate the development of Fusion and to escalate the investments the 45nm and beyond feature sizes would require. This would become a vicious cycle, an exponentially accelerating decline, and, finally, the kludge-but-practical approach of the double-duals would become a great instrument for Intel domination and a bridge to architectures that would close the design disadvantage. Metaphor: AMD tried to jump ahead of Intel but stumbled and fell, suffering life-threatening polytraumatism.

I was yet to be disappointed once more by AMD's management: the Analyst's Day last year in December. I got fooled because I still thought Management could not lie so shamelessly as to promise all the things they promised. The market was fooled too, the price momentarily shot up, but very soon reality took over.

When AMD's 90nm process was no worse than Intel's 65nm process in early '06, there were reasons to think that the upcoming 65nm process would be vastly superior, and that SOI had inherent advantages over strained bulk silicon. Within that frame, "65nm is Intel Marketing" made sense. The key argument there was that there is a problem of "diminishing returns" for ever smaller feature sizes, and I misidentified Intel's strained silicon as more vulnerable to this problem than SOI. I still would like to know what is so special about AMD's 90nm process that makes it superior to its successor, but given the evidence, it seems that the diminishing returns in SOI are more acute than strained silicon, perhaps the heat dissipation disadvantage of SOI aggravates more than the inherent advantages of smaller feature sizes, and I realized very late the significance of Intel's R&D muscle when applied in full force, the great advances of metal gate/high K transistors.

I am particularly ashamed of "Good time to buy AMD", published in October 19, 2006. That the price actually went up until December is besides the point, that article reflects doubts about the Bear case/optimism, like trusting Management on several topics ranging from the merits of the ATI acquisition to seeing them capable of great initiatives like the "coprocessing revolution" while they already had farted the "Quad FX"; seeing strength of AMD demand while all there was was simple inertia; not understanding that although Intel was in a reactive position, AMD's successes and failures at so many innovations gave Intel a clear view of what to prioritize, just what it needs to allocate its resources efficiently to ultimately bring formidable competition.

I wasn't clueless in the AMD-Intel periphery: Dell crashed, the Dell-AMD deal apparently turned out not so good for AMD, Vista flopped, Sun solved its personality complex, VMWare turned out the sensational IPO (although I was too timid to join in early and tried to milk volatility at the worst moment), Apple is triumphant with its iPhone, Google has gone stratospheric,... I developed a partial model concerning price manipulation that actually boosts my already successful and proven "money pump" system... But I can talk about those subjects with concrete predictions in subsequent posts

Monday, November 26, 2007

AMD's 65nm Process Hurts AMD

In our blogosphere neighborhood Roborat64 addressed the topic of the involution of AMD's product line. I would like to complement his words with a bit of updated concrete evidence.

In "New > OLD" [ Note: I tend to shorten the names of articles if they are properly linked to, this article originally is named "The Fundamental Law of Progess [ sic ] NEW > OLD" ], Roborat64 says: "the fundamental law of progress [...] demands all NEW PRODUCTS [TO] BE BETTER THAN OLD PRODUCTS", but "it is increasingly alarming how AMD seemed to be moving backwards". "The introduction of slower 65nm CPUs and now K10's inferior performance to K8 are just some of the bad habits AMD seemed to be developing".

If we rewind one year to the introduction of 65nm K8, we will see that, from the point of view of the customer, AMD offered worse new products: Processors with some increased L2 cache latencies, that is, an slightly smaller IPC, and clocks not as fast as the fastest 90nm products. At that time, some people thought that AMD emphasized low production costs over higher premiums because AMD was production bounded, especially due to the possibly great increase in demand coming from Dell [ Many other posts contain abundant references as to the catastrophic consequences of this strategy ], and then the optimists assumed that there was no problem with AMD's 65nm process, the company was going to be able to quickly jack up clock speeds in the new process. But that didn't happen. The optimist then insisted on the superior power efficiency of the 65nm, but unfortunately the market cares very little about this parameter and they don't want to accept this fact.

I predicted serious problems with the speeds of the 65nm as soon as I saw AMD's explanation for the increased L2 latencies in 65nm K8: Supposedly, the architecture increased the latencies to leave room for future L2 expansions. Taking into account that the L2 of Brisbane already was half the capacity of the high end 90nm, 512MB versus 1MB per core, and that AMD "could cross that bridge when it got there" for a subject as simple as L2 parameters, there was no other way to interpret AMD's explanations as bullshit, that the company was forced to cut corners because it could not do a good shrink. Taking into account that the 65nm was introduced later and in smaller quantities than expected, I hypothesized that the problems were serious. To confirm this appreciation, AMD has launched ever more disappointing processors, and contrary to any tradition, the products of highest clocks are all old process!.

We must visit AMD's official pages to confirm this highly unusual situation, go to http://products.amd.com/en-us/DesktopCPUFilter.aspx and select both "90nm" and "65nm" in the "Manufacturing Tech (CMOS)" pull down list:

90nm top of the line: 6400+: 3.2 GHz with 2 MB L2, 1.35/1.40 V, 125 Watts.

65nm top of the line: 5200+: 2.7 GHz with 1 MB L2 (half the size), 65 Watts (half consumption, or roughly 61% power consumption accounting for the speed difference, much better, but then again, what does it matter that it consumes less power if things are slower?)

It may be argued that the top of the line in 65nm product is the Phenom 9600, the quadcore @ 2.3 GHz. Too slow, that is what I say. It is so slow, that it has been proven slower in many workloads than AMD's own dual cores... [ link may be found here ]

A very similar thing happens in Opterons:
No 65nm dual core Opteron, measly 2.0 GHz top of the line Quadcore, the 2350 and 8350 [ link ], and a top clock of 3.2 GHz for the 90nm top of the line dual cores, the 8224 SE and 2224 SE [ link ]

AMD's own price lists demonstrate the horrible catastrophe the company is in:

Family Model Process Freq QC/DC Price Price per core
Opteron 2350 65nm 2 QC $389 $97.25

8350 65nm 2 QC $1,019 $254.75

2224 SE 90nm 3.2 DC $873 $436.50

8224 SE 90nm 3.2 DC $2,149 $1,074.50
Athlon 64 X2 6400+ 90nm 3.2 DC $220 $110.00

5200+ 65nm 2.7 DC $125 $62.50
Athlon 64 FX FX 74 90nm 3 DC $300 $150.00

An interesting first observation is that the price per core of 90nm may be more than four times (!!!) the price per core of 65nm processors...

We know that 65nm processors take more than half the die area of 90nm processors because the shrink was to an equivalent node size of over 70nm, we must also expect the yields of the 65nm process to be smaller, and the binsplits to be worse. Furthermore, in the case of quadcores, we also know that the yields and binsplits are quadratically worse than dual cores. From the point of view of production costs, the 65nm are not even twice as cheap, but from the point of view of ASPs, they are way less than half the 90nm, it is clear from the table above that the 65nm is actually hurting AMD! because it is more expensive to manufacture the 65nm product to obtain a smaller selling price.

It may be argued that this is a biased explanation because AMD chose the 65nm process for volume and 90nm for premiums, but this is illogical:
  1. We know that the market is saturated by entry-level crap (Intel Netbursts still being purged, Celerons, and even Yonah/Sossaman Core Duo/Solo incapable of 64 bits), thus the product moves only through steep discounts, thus if AMD would be able to, it would target the 65nm product for the upper segments.
  2. 65nm should have many inherent advantages regarding performance, by insisting on the semi-exhausted 90nm product for top of the line performance, AMD is mortgaging the future of the company.
AMD's words that they already shifted the focus to the 45nm process is a very laughable statement: It has been pretty much demonstrated that there is something serious on the 65nm process that hasn't been solved, why would it be any different at the 45nm process?. Perhaps it is something like that 65nm didn't allow for the same performance of the 90nm process due to inherent limitations, perhaps, the power consumption didn't go down in the same magnitude the heat dissipation problems of SOI went up, I don't know, I am just speculating, but what I do know is that there is a serious problem and AMD is denying its existence.

I feel as if I were beating a dead horse by saying that if the 65nm process didn't scale, it is of very little relevance that AMD will make immersion 45nm if it doesn't have the excellent advancements of High-Dielectric-Constant / Metal Gate transistors Intel is bringing to the market. It is also beating a dead horse to point out that K10 demonstrated that it is a dubious improvement on IPC due to the increased latencies in the L3 cache because Intel comes with Integrated Memory Controller/Point to Point interprocessor communication architectures with enlarged caches and higher clocks!. But what AMD and its cheerleaders are doing, of pegging new hopes on the 45nm process and the dual core K10 to come, is like putting the cart ahead of the horse.

Tuesday, November 20, 2007

Exploration of the Business Space

[ Article Preview ]

In the parallel evolution of AMD and Intel, the advantages of Intel's economies of scale express in several ways that are not very obvious. This post will explain one of those forms that I didn't fully take into account when I was bullish on AMD, and from this principle I extract an important lesson regarding investment in the stock market.

How was it that Intel regained the absolute leadership of the processor market? At the heyday of the Netburst architecture, and with the company absolutely committed to its development, Intel still gave the P6 architecture chances to develop. Not only that, but the company also persevered at the Itanium while quietly it kept developing the strategic plan B of Yamhill, what eventually was christened 'EM64T', the AMD64 clone. So, while officially the future of Intel was the Itanium architecture, and the Netburst architecture represented the required transition; the company still kept going forward with architectures that were their antithesis: the AMD64 ISA capable Netburst and what is much more remarkable, to insist in the apparently exhausted P6 architecture [full line here].

At times I thought that it was a gigantic waste of resources to expend R&D on so many dead ends. I mean, after I studied the Itanium architecture it became clear to me that the thing was going nowhere [ too complicated to implement, too disruptive for the industry, and it had too many 'brain damaged' features to exclude the competition ], and I became a fervent supporter of the original Athlons because it was obvious that Netburst was all marketing gigahertz, but although I disagreed with the directions that Intel took, I still thought they knew what they were doing, that is, I thought that Intel could somehow force the market to become a monopoly of very inferior products the way Microsoft forced the Operating System market to turn into the monopoly of the worst Operating System of its time.

By contrast, AMD's plans seemed crystal clear, and sound: To concentrate 100% energies into an evolutionary approach (AMD64), to capture the best features of the architectural propositions of the time, like the Point to Point interprocessor communication that implied integrated memory controller, SOI versus plain ole' bulk silicon, and so on. That is, I though that although Intel had several times the R&D budget of AMD, since Intel was so wasteful and AMD so focused, the underdog had plenty of chances to topple Intel from its leadership position for good.

But needless to say, I was wrong, and paid a dearly high price for it. My mistake was to overlook that the competitive situation between these two companies is so complex that it was justified to expend R&D money in several contradicting approaches, no matter how improbable their success may seem. I should have known better, because I have worked too much in the field of Artificial Intelligence, thus, of all people, I should've realized that Intel was conducting extremely valuable "search" (exploration) of its business space. That the more contradictory the approaches it followed, the higher the assurance of ultimate success. And sure enough, although they grossly miscalculated their priorities assigning them to Itanium and Netburst (and in that order!), the 'Plan Bs' of Yamhill (EM64T) and P6 saved their skin and allowed them to ultimately restore their leadership and monopoly.

On the other hand, AMD enjoyed immense success at focusing at the right things and following the sound design principles embodied in K7 and K8. It seemed as if the success was going to break Intel's monopoly for good, and anticipating that, I vested my money aggressively into that thesis, and lost acutely.

Now, again, why did I lose?
I explained that I always understood what a great challenge (the triple challenge of "Does AMD...") it was the single die quadcore, and that naïvely I thought that AMD's management knew what they were doing, I couldn't conceive that AMD's management could be so irresponsible as to gamble the company at this huge undertaking if they didn't have guarantees of success. Then, it was clear that they didn't have any guarantees, as a matter of fact, no reason whatsoever to suppose the single die quadcore/new process/new architecture challenge was going to be successful, but it was too late already, two thirds of my money had gone.

Did I have any chance of being right, though?
Not really. I should have followed my convictions to their conclusions. Not only the single die quadcore represented a huge challenge, it was a totally unnecessary one too, and again, I thought that AMD's management knew better than me:

I knew in 2005 that the market will not require full quadcore performance as early as 2007, not even 2009; the reason is very easy to grasp for a seasoned software engineer: The combinatorial complexity of multithreading software. To do software that makes effective use of two threads is more than twice as hard than single threaded, to do software that makes effective use of four threads, is more than 10 times harder than two threads, no exaggeration. I knew that the cores will be severely underutilized in the vast majority of applications, in the vast majority of the market. Since the market won't need full quadcore performance, the logical conclusion was to bet on practical approaches to the quad core issue, that is, multi chip processors. Either double duals, like Intel's, or four cores in a die and a large shared cache at an adjoining die. I also knew that the K8 architecture as it was had bandwidth a plenty and short enough latencies for quadcore processors in Master/Slave configuration of dual core dice. Then, the approach of the single die quadcores wasn't called for at all and that should have been more than enough to erode my confidence in AMD's plans.

But that is not all. Although very late, I saw that AMD was in denial of the threat of Conroe. Even though I heard Henri Richard to speak with deference about Conroe, that somehow AMD's management had internalized that the product was very threatening, that didn't express into any change of plans. AMD went ahead with all sorts of plans that assumed massive market share gains, including negotiating the New York fab, to consolidate flex capacity through Chartered, and to acquire ATI (that wouldn't have made sense if AMD would not be able to compensate lost ATI Intel-based business with extra AMD-based), so, the company greatly overstretched its resources anticipating a great demand that never came; but more than that, it was the absence of a contingency plan, AMD's management never cared to tell us, the people who care and supported the company, what it was going to do if Conroe turned out as good as it seemed; Management only spoke on dismissive terms about the threat. Improvement-less AM2 should have been another late warning.

While it is still a mystery for me why the company went the perilous single die quadcore route for no good reason, we can all be sure that it greatly contributed to the catastrophe the inflexibility of AMD's plans. And this inflexibility is inherent to the scarcity of resources to try experiments, business experiments, to explore the business space. Once AMD chose an strategy, there was nothing else to do but a prayer and to work as hard as possible to make it succeed, mid-term revisions were pointless. If you know that AMD is in "projectile" trajectory, that once it fires all is inertial flight, as I knew it was in April 2006, it was possible to determine whether it has reached a top or not -- it had, because the improvements of the K8 had become smaller and smaller until non-existent. Today, you may readily appreciate that AMD is in free falling, 'cos it fired the K10 and the shot fizzled, from here on, it is nothing but accelerating decline.

I have been referring several times to the discrepancy between my opinions that derived from fundamentals and the strategies decided by the management of both Intel and AMD; You may be wondering how to determine what is the superior analysis, because that is key for successful speculation, and here is how: Decide for the thesis of the most informed.

If you have enough knowledge to reach a conclusion from pure fundamentals, such as "Itanium is not possible to implement satisfactorily", "Single die quadcores are not necessary", then, in the absence of concrete evidence that contradicts conclusions from fundamentals, follow your instincts. I find it fascinating that a pedestrian may understand certain key issues of multi billion companies better than their managers, but it happens all the time. The reason is that there is a disconnect between management and reality. While from the point of view of software engineer you are seeing the real stuff, the real value of an architecture, the CEO, despite all of his privileged information, is not seeing the real thing, but third or fourth level interpretations (the opinion on the opinion on the opinion of someone about something) , and there may be interests to distort his information.

On the other hand, if it is something like "I think the P6 architecture is exhausted, that it is impossible to substantially increase its performance", but at the same time a huge organization like Intel does a 180 degree turn to commit to a P6 derivative architecture developed by a group of people out of the power rings of the organization, you can be sure that their architecture is so fucking good that its objective merits prevailed over the intense politicking of a big organization, that is, your opinion is wrong.

A closer example: When a national investment company throws 600 M$ to AMD when you think the company is doomed, who is right, the Arabs or you?: Answer: Think about "what do the Arabs know about the semiconductor industry?", "are they in the centers of power that decide stock prices, media spin?", and also: "Has this organization explored the semiconductor business?" if you get to the conclusion that it is not likely that such organization has privileged information, you may be right. It would be much better if you also had a model to explain why the organization put the money in AMD.

Sometimes it is a much tougher call. For instance, "will Microsoft succeed at DRM?" I meant whether Microsoft will succeed at becoming the de-facto multimedia distribution channel by temporarily jeopardizing the Operating System monopoly with DRM restrictions that allienate the customers. Microsoft is a company that routinely fails at home-grown initiatives, despite following many different routes or covering all the bases. This is evidence that although Microsoft thoroughly explores its business space, its "business cartography" doesn't make its way to management all the time. Why would that happen? If you watch the "developers" video of Steven Ballmer, you get a hint. And Bill Gates quotations about the internet are a famous example of business myopia -- This could be a problem of management personalities that do not allow information that contradicts them to flow. Looking even closer into Microsoft successes, such as the Internet Explorer in the browser wars, you may see that sometimes, when Microsoft is actually threatened, it does the right things; perhaps only when management is willing to admit being wrong, the company may capitalize its thorough knowledge of its business. The problem is that from the outside it is nearly impossible to know if the company is using the business cartography or not.

Apple Computer is another example: I may have the opinion that Mac OS X should be licensed to run in non-Apple personal computers, but I must be wrong: Steven Jobs surely has much better information about this topic, Mr. Jobs has demonstrated that he learned the lessons of his long penitence after being fired from Apple and losing an arm and a leg in NeXT, and Apple continually demonstrates how well it understand its business space. Thus, I have to keep studying Apple to improve my model of that company.

Going back to AMD and its management, it is clear that those guys don't have a clue about their business space. Once they got out of their traditional "value proposition" space, they made blunder after blunder:

  1. Never capitalized on the enormous significance of AMD64 by continuing to partner with Linux to force Microsoft into promotion of AMD64 for all segments, beginning with mobiles [ what did it take to finance the development of Linux drivers for the few wireless chipsets that ran on AMD-based laptops? AMD could have become the "centrino" of Linux, and this would have induced multiple effects that would have turned AMD64 into premiums ]; this because AMD never knew how to behave like an industry leader when it had the undisputed leadership.
  2. It tried to create the consumer market for coprocessors only too late and too timidly, while having had years upon years of all the elements for coprocessing in place.
  3. It didn't capitalize on the desperate need that platform partners had to support AMD (because Intel is treacherous and tries all sorts of nasty tricks to block competition to get into its platform business). Contrary to all rationality, they went ahead and became the direct competitor of its second best partner (nVidia) and destroyed half the business of its fourth best partner, ATI. I think here that AMD's management were not ready for the big leagues. They were scammed by Wall Street into a disastrous acquisition the way hustlers scam the farm boys when they go to the big city
  4. It showed that they were ignorant of how to deal with big OEMs because in periods of high demand for their products, rather than making lots of profits, the preference to OEMs expressed into the destruction of loyal, historical and natural channel business and losses!, then, they fell in the trap of overproduction instigated by the OEMs to have cheaper products.
  5. Having gambled the company with the "triple challenge".
Business Space Exploration has a cost and an expected benefit. The cost does not increase with company size, the benefit gets multiplied by company size: It is a much better option for large companies than it is for small companies, another form of economies of scale. For a company as small as AMD, and being so expensive to explore the market with several architectures, it is not cost-effective for AMD to explore its business space. But this doesn't mean that small companies don't have a chance: On the contrary, they should have the advantage of having their management closer to reality, that is, a better chance to succeed following best principles. When you see a small company like AMD straying from the best principles (such as going the route of the triple challenge), "short" the stock, statistically you will succeed.

P6 Line:
Pentium Pro, Pentium II - Klamath, Deschutes, Tonga, Dixon, Xeon Drake, Pentium III - Katmai, Coppermine, Tualatin, Xeon - Tanner, Cascades, Pentium M - Banias, Dothan, Yonah/Xeon Sossaman, 'Core' - Conroe, Allendale, Kentsfield, Woodcrest, Clovertown, Tigerton, Harpertown, Merom, Penryn, Yorkfield

Monday, November 19, 2007


I said that Barcelona (and Phenom) as a strategy implied absolute confidence to succeed at three important challenges:

  1. Extraordinarily good 65nm silicon process, to try to close the competitiveness gap to Intel
  2. A new architecture developed without the help of a thoroughly understood process
  3. The single-die quadcore feature that implies a hit of yields and especially binsplits
Since it is now very clear that AMD failed at all three, it is easy to find articles in the press that detail the situation, and I would like to compile some of them.

Adrian Kingsley-Hughes writes "AMD's Phenom - For suckers only". There we find a reference to "Tom's Hardware" that demonstrates that the 6400+ X2 (3.2 GHz, 90nm [you may go here and select the 6400+ model to confirm the specifications]) beats the fastest Phenom, the 9600 2.3 GHz at a variety of tests. That is, even today, a year after the launch of 65nm product, it is the 90nm products the ones that have the performance crown of AMD. No wonder that the highest selling price processors [AMD's official price list], both Athlon and Opteron, are all 90nm. Not only the 65nm processors are slow and the company sells them on the cheap, but inexplicably, the 65nm K8 are an involution compared to the 90nm, even taking into account that the company has five and more years of experience with the K8 design. The 65nm is not slightly better, but slightly worse, AMD cut corners like increasing the L2 cache latencies.

Rumors have surfaced regarding bugs in the K10 architecture that have delayed its introduction [example]. AMD has had to develop the silicon process at the same time it tries to debug the new architecture, that's the recipe for low yields, unacceptably slow speeds, and late introduction. There are good improvements in the K10 architecture, but I think the existence of a third cache level could be the culprit of the K10 lukewarm performance: The K8 had a an architecture of two levels that due to the exclusivity of the L1 resembled more the delays of a 1.5 levels, but now, rather than having a large shared L2 cache, as the successful Intel approach demonstrates, the K10 has three levels. Why? my speculation is that a quadcore design requires a large shared cache and I think AMD didn't dare to try this radical change at the L2, so, it came with a third level that offers dubious performance advantages. Do you see? A shared cache is more natural in a single die design, yet, AMD has insisted in a less efficient independent L2 and that forced it to introduce a third level, shared, creating an inefficient three level hybrid.

We also know that AMD will launch triple-cores, speaking volumes about its dramatic failure at the challenge of single-die quadcores. To further illustrate the principles that dictate exponentially worse yields and binsplits in single-die multicores, AMD is launching an overclocking application that allows the user to control individually the speeds of every individual core.

Yet, AMD didn't need to to follow this route at all. It could have developed 65nm not with the intention of increasing numbers but premiums. AMD speaks of "Asset Light" today because it has plenty of production capacity of low performance products of which the market is saturated but doesn't have any high-premium product; perhaps because AMD saw the 65nm process as a tool to minimize production costs and increase production volumes rather than the process for the new generation of flagship products. The emphasis on volume/cheap production costs rather than performance while developing the 65nm process may have its origins on AMD's "pharaonic" plans of having to supply all the OEMs with plenty of product, especially the production capacity increase that Dell meant. Perhaps performance had to wait. But not even that strategy worked: we know what happened when AMD, a year ago, gave preferences to Dell and other OEMs rather than the channel: the destruction of the loyal and natural businesses of AMD.

AMD didn't need a new architecture to market quadcores, it had several MCM options at its disposal. It is clear today that the excellent interprocessor bandwidth of DCA and CCHT would have been more than enough to have processors with two dual core dice in which only one has interface to memory and the other communicates through CCHT. Actually, AMD had every advantage to put quadcores in the market before Intel; but of course, the company decided the strategy of skipping all intermediate steps for the big leap of the single die quadcores and this catastrophe happened.

Also, the company may have opted for a new architecture that actually increased performance. The most pathetic thing of all is that K10 quadcores, even having the large advantages of single dieness integration and point to point (busless) interprocessor communication, is actually SLOWER per clock than the Intel double dual kludge. When you try not to improve performance, but to solve the problems that derive from single-dieness, you may end up with an architecture that is good for nothing.

Adrian Kingsley-Hughes again: "So really, what’s the bottom line? AMD have put time, effort and truck loads of dollars into developing a quad-core processor that really isn’t that good".

Now, let's look at Phenom versus Intel products:
Anandtech (referenced by Kingsley-Hughes): "While AMD just introduced its first 2.2GHz and 2.3GHz quad-core CPUs today, Intel previewed its first 3.2GHz quad-core chips", "Intel is currently faster and offers better overall price-performance (does anyone else feel weird reading that?). Honestly the only reason we can see to purchase a Phenom is if you currently own a Socket-AM2 motherboard".

Tarinder Sandhu @ HEXUS.net (also referenced by Kingsley-Hughes): "
We've disseminated all the various enhancements that make Phenom a better clock-for-clock proposition than Athlon 64 X2. We've identified that the design is elegant[.] But what we've also seen is that AMD cannot match the clock-speed of Intel's slowest quad-core processor and, worse still, can't match Core2 Quad's performance on a clock-for-clock basis either." and "the Spider platform - where AMD tries to harness the innate synergies of its processors, chipsets and GPUs - can be bettered by a mix-and-match assortment of Intel and NVIDIA" -- so much for the "synergies" of the ATI acquisition, over a year later, there is unanimous agreement that Intel+nVidia is superior.

But the real problem is not that Phenom (and Barcelona) stinks: Intel is busy finishing a new busless platform and architecture. AMD demonstrated that most of DCA and CCHT are overkill for the vast majority of computers, that is, Intel doesn't have to do something as fancy as DCA and CCHT, but something just good enough to get rid of the most important limitation that their architecture has: The front side bus. Also, from the "pure muscle" point of view, Intel is already putting processors with metal gates and high-k dielectrics (that is, much more efficient and faster) while AMD is still trying to catch up to its own 90nm!; so, the competitive position of AMD will become worse, much worse!

Jason Cross @ Extremetech (also ref. by Kingsley-Hughes) mentions this in passing: "As Yorkfield CPUs mature and come down in price, the only way for these Phenom chips to compete will be to offer much better clock speeds without blowing out the power envelope, and they won't get there on 65nm. AMD simply can't afford to let Intel's Nehalem redesign hit the market, mature, and come down in price before bringing out a wide range of 45nm Phenom CPUs."

I think that nobody should be talking about AMD's 45nm products when the company is still flunking repeatedly the 65nm grade.

Anyway, regarding AMD's future, things are turning hopeless: It can't get rid of the fabs it owns due to either x86 licensing restrictions or contractual obligations with Dresden, thus, no "Asset Light", but expensive Fabs that will be less and less competitive to what Intel is doing. nVidia keeps getting ahead relentlessly in the graphics business while ATI is still shedding Intel-based market share and no synergies in sight. AMD can only move product on price, but it is already enduring losses of nightmare; all while Intel comes with vastly more competitive products and AMD already used up its best ammunition...