Leaked Intel internal memo highlights fear of cheaper and faster AMD Ryzen 3000 CPUs

Comments

The impending threat of AMD’s 7nm Zen 2 CPUs has clearly got Intel feeling the pressure. A new internal document has surfaced, one which Intel has been circulating around to employees warning of AMD’s impressive strides with its high-end CPUs.

Intel’s effectively hunkering down in the war bunker as the warning sirens blare. An internal employee portal called ‘Circuit News’ posted an article for Intel staff acknowledging the imminent launch of AMD Ryzen 3000 CPUs which are expected to provide stiff competition for Team Blue.

Titled ‘Why AMD is now a formidable competitor”, Intel’s internal memo admits AMD is a growing market force with two years of greater than 20% annual revenue growth thanks to the success of Ryzen and EPYC. AMD’s share value has boomed over the last 2-3 years, while Intel has remained relatively stagnant. That’s not the sort of news that pleases shareholders, presumably prompting this call-to-arms of sorts.

Written by Intel’s Circuit News managing editor, Walden Kirsch, the piece breaks down how AMD wasn’t even seen as much of a threat at all a few years ago, although things have changed rapidly as of late. From Intel, the message is clear – they need to start taking AMD seriously once again.

To be honest, there’s an absolute ton of scandalous info in here than demonstrates Intel is really sweating right now. Rather than condense it all down, here’s the full shebang for your reading pleasure:

(TLDR: Ryzen 3000 CPUs expected to beat Intel in multi-threaded workloads. Intel Xeon server CPUs under threat from EPYC’s high core count. Intel believes its far larger size and higher employee count are its greatest strengths and will help to deliver a better experience for end users.)

Why AMD is now a formidable competitor

AMD is getting bigger. The company’s most recent annual report notes that 2018 marked the firm’s “second straight year of greater than 20% annual revenue growth,” in large part due to its newest Ryzen products for desktop, and EPYC for enterprise, cloud, and datacenter.

As Intel’s major CPU competitor focuses on Intel’s enviable share across several market segments, AMD is attracting increasing interest on Wall Street. It was the best-performing stock on the S&P 500 in 2018, and to date this year the stock price has risen significantly.

What accounts for AMD’s resurgence as a formidable Intel competitor? In part, it may be the company’s strategic re-focus on premium high-performance products for the desktop, datacenter, and server market segments.

Key AMD competitive threats are from high-end products

At a high level, the experts on Intel’s Performance, Power and Competitive Analysis team say that the competitive threats that AMD poses to Intel can be summarized as follows:

AMD offers high-performance CPUs, posing direct competition to Intel in both our core client and datacenter CPU businesses. With our announced ambitions to bring new discrete graphics to market, we are bringing new competition to both AMD’s and NVIDIA’s graphics businesses. AMD has recently been gaining some traction in winning public cloud offerings. And competition from AMD is shaping up to be especially tough in high-performance computing. HPC performance is usually driven by the number of cores and the number of memory channels (or memory bandwidth). Intel is challenged on both fronts. AMD’s upcoming next-generation Zen-core products, codenamed Rome for servers and Matisse for desktop, will intensify our desktop and especially server competition. The latter is likely to be the most intense in about a decade. At Computex, AMD announced that Matisse, the company’s 3rd Gen Ryzen 3000 series processors, would be available starting July 7. (See “Related links” section below for details on Intel’s Computex news relating to our gaming and client competitiveness.) Outside of desktop and servers, Intel’s competitive position in notebooks and business PCs is stronger as customers value specific aspects such as productivity performance, battery life, and overall manageability where Intel has clear advantages versus the competition. By leveraging TSMC’s 7nm manufacturing – AMD no longer manufactures its own chips – AMD can drive higher core counts and higher performance than it could previously with Global Foundries as its in-house manufacturer. These 7nm products will amplify the near-term competitive challenge from AMD. At Computex, Intel launched our own 10nm “Ice Lake” products – 10th Gen Intel Core – to strongly positive reviews.

Challenging period ahead

What is Intel’s positioning regarding these multiple competitive threats? Today and into the near future, says Intel’s AMD competitive expert Steve Collins, “we will be facing tough competitive challenges.”

These are a few key points on how Intel’s products compare to AMD’s, points that Intel will be underscoring in the challenging period ahead.

Intel 9th Gen Core processors are likely to lead AMD’s Ryzen-based products on lightly threaded productivity benchmarks as well as many gaming benchmarks. For multi-threaded workloads, such as heavy content creation workloads, AMD’s Matisse is expected to lead. In the longstanding industry debate over benchmarks – whose to use? – Cinebench is often used by AMD, since it favors high core/thread count and represents one of the best-case benchmarks for AMD. Intel believes that Cinebench is not a representative benchmark for general platform evaluations and real life workloads. Intel continues to work with press on using real applications for evaluating performance, to produce pieces such as this one from PCPerspective. In general, Intel’s mainstream Xeon server products will be challenged on throughput-oriented benchmarks that scale well with core count. Architecturally, AMD’s Rome product for servers is improved over 1st generation EPYC, but Xeon is still expected to have cache and memory latency advantages. For this reason, Intel still expects Xeon to be competitive on applications that require fast response times and are sensitive to memory latencies like database, analytics, web serving, and so on.

Intel’s secret sauce

Intel’s secret sauce is not a single ingredient. Rather, it is the six pillars of innovation – process, architecture, memory, interconnect, security, and software – that the company laid out at last year’s Intel Architecture Day. Intel is uniquely positioned, given our assets, to to deliver leadership products leveraging these six pillars.

Our competitive experts believe that Intel’s ambition to achieve long-term leadership will hinge on successful execution to these six pillars.

Software, one of the six pillars, has long been an unheralded Intel advantage. A key piece of our company’s competitive strategy is to highlight our software smarts vis-à-vis AMD. Intel-designed software or software code contributions – which can touch everything from the Linux kernel to Adobe Lightroom – can capitalize on unique features in Intel architecture.

These often under-the-hood software assets differentiate Intel from AMD and can deliver a better experience to end users and customers. One metric of Intel’s software strength: Our company’s 15,000 software developers. That number is more than all of AMD’s employees.

A final but essential point that Intel’s competitive team underscores is that Intel versus AMD is not just a chip-to-chip matchup. Intel’s unique strengths lie in the unequalled breadth of our overall portfolio across business, mobile, desktop, gaming-as well as platform advantages including Optane memory, WiFi, Thunderbolt, Turbo Boost 2.0, and other technologies.

A high-profile example of Intel’s focus on platforms is Project Athena, a multi-year innovation program that aims to deliver a new class of advanced laptops. Another key Intel advantage is all the built-in acceleration for emerging workloads such as networking and AI. Features like Intel Deep Learning Boost, along with all the software and framework optimizations, create clear differentiation versus AMD.

Steve Collins Q&A: Why AMD is resurgent, and what we must do next

To provide additional color and context on the Intel-AMD competitive environment, we talked recently with Steven Collins. He is the Director of the Data-centric Competitive Assessment group on our company’s Performance, Power and Competitive Analysis team.

Why does it matter that AMD is going to TSMC for manufacturing?

It means that they have the flexibility to use whatever process technology they want, whatever process is best for their products. TSMC offers an advantage in terms of process node advancements. [See the Circuit News competitive profile on TSMC.] They’re using their 7 nm process, and with that they get a per-core frequency bump and lower power, which means they can scale to more cores per processor. On top of that, AMD made improvements in their 2nd generation Zen core and their disaggregated chiplet-based architecture scales cores efficiently. Therefore, on workloads that are heavily threaded, including heavy content creation and most server workloads, they’ll get great performance results. And on price, we expect their pricing to be significantly below ours. So they’ll likely get good performance-per-dollar. That’s what they’re going to compete on, and that’s the risk to Intel.

So that raises the obvious point: How do we respond when people say “Wow, AMD is charging a lot less for their products than Intel.”

It’s not well understood that Intel actually offers the market a larger selection of product pricing. While the press often likes to focus on Intel’s top price points being higher than AMD’s top price, few people recognize that Intel also offers lower entry pricing than AMD. So Intel offers more price point choices to our customers. Additionally, I would say users don’t buy a chip. They buy a system. They buy a whole solution that includes software enabling, vendor enabling, validation, technical support, manageability, out-of-box experience, supplier sustained consistency, and more. So, yes, while an OEM or ODM might buy a chip, the end user doesn’t generally buy only a chip. We believe that our product pricing vis-à-vis AMD reflects the great deal of added value that specifically comes from buying Intel with our decades of unmatched investments in validation, software, and security. Especially for enterprise customers, acquisition cost is just one part of the total cost of ownership. Customers using an alternative solution may need additional validation, optimization, debugging, and certifications – all normal cost adders when introducing a new solution in an IT environment. Additionally, some software is licensed per core and therefore more cores from the AMD solution results in higher licensing costs. Performance challenges absolutely exist, but we will continue to position our value and our advantages. Some innovations we bring to the table that deliver customer value may not always result in higher performance benchmark scores, or the value of the innovation goes beyond standard benchmark results. We price to what our customers value. Intel is a premium brand. At times, and on some workloads, we might dip below on performance, like the second half of this year. At other times, and on other workloads, we are 3x or more the performance. Our pricing will continue to reflect the value we deliver to our customers.

What accounts for AMD’s competitive resurgence? Did TSMC turn AMD into our biggest competitor, or is it AMD’s focus on higher-end desktop and server parts?

From 2006 to 2017, AMD had positive net income only three of the twelve years. I’m not sure we can point to a single thing that turned AMD around. But I do think it’s was absolutely rooted in the strategic changes AMD initiated in 2015/2016 that narrowed and simplified their focus. AMD shifted to focus on higher margin or premium segments, specifically high-end client, datacenter, graphics for gaming. And they continued their investment in their semi-custom and console business. Rather than going after lower-margin, low-end products, they refocused on how to win higher-margin business. AMD added much-needed clarity since they were previously distracted by markets that didn’t align with their strengths. They simplified their investments and roadmap and started leveraging best-in-class foundries. Most importantly, they executed to that strategy. Having a clear focus and direction helps enable great execution. I also believe AMD’s comeback was a result of being very product-centric. A top priority for AMD was building great products – high-performance compute and graphics solutions – from definition to development to delivery.

How do you think we should be looking overall at the Intel-AMD competitive picture right now?

Well, first, it’s clearly a challenging time. We have significant competitive challenges to navigate. That said, I think we have a great strategy and a great roadmap. While it has been a number of years since we’ve faced a similar competitive environment (in the early 2000s with 1 GHz barrier, integrated memory controller, 64-bit, and so on) Intel has risen to every situation and almost always emerged better and stronger. Our focus needs to be on getting our execution in shape as soon as possible. We’re in a competitive time partly because of our execution issues, whether that’s related to our process technology node, or to our products that intercept those nodes. So I think that execution to our roadmap and strategy will help tremendously. Beyond product execution, we need to lean on our software expertise and strength and amplify our software differentiation – now more than ever. Finally, in competitive times, overall marketing, ensuring our customers understand our differentiated value proposition, along with customer obsession, are critical. Now more than ever, we need to lean into our sales and marketing teams to help carry us through these product challenges.

And your last point touches on our cultural transformation, too.

Yes. AMD’s next gen 7nm-based products amplify our competitive challenges. While it has been a number of years since we’ve faced similar competition, Intel has risen to every situation and almost always emerged better and stronger. Are we acting as One Intel or are we stepping on each other’s toes? Are we facing our challenges with truth and transparency? Are we listening to our customers and designing the right things in the first place? I think it all goes back to these things. As we succeed at these cultural transformations, I believe our overall competitiveness will improve too. I’d encourage all employees to browse the Intel resources at the bottom of this story, especially competition.intel.com. This is where, for example, we will publish data on AMD’s upcoming Zen 2-based systems. Finally, I would say that even in the face of strong competitive challenges, when all 107,000 of us behave as One Intel, as CEO Bob Swan has said, we are unstoppable.

The upshot to all of this is when companies start fearing for their future, the customer usually starts getting a better deal. Through this memo, we can begin to build up a picture of how Intel viewed its place in the CPU market, and how, inevitably, this would’ve bled through to Intel’s pricing strategies. AMD has turned up the heat lately, and things could be positively scorching by the time July 7th rolls around.