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Comment by drewcrawford | Hacker News Reader

I was an intern for AMD a few years ago (these are my views and not AMD's). I was pretty skeptical about AMD's antitrust claims against Intel until I went to work there. I'm as free market as they day is long, but there's a whole untold story of the evil things that go on in the back meeting rooms, even outside of sales, where most of the public lawsuit claims are/were.

The thing to remember is that AMD is a small fraction of the size of Intel, and they have to cover the same market segments. If they try to specialize (say, servers, or notebooks), Intel will just sell that segment at a loss. AMD has to cover everything with only a fraction of the people to stay competitive, and it's really hard.

Even while I was there, we had what I suspect (but have no proof) were incidents of people leaking product plans, roadmaps, etc. (but no IP) to Intel. It's sad, really.

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"Even while I was there, we had what I suspect (but have no proof) were incidents of people leaking product plans, roadmaps, etc. (but no IP) to Intel."

I can't imagine Steve Jobs allowing this to happen at Apple. They have definitely caught people leaking things, and the consequences were swift and unpleasant for the leaker. Why can't AMD catch these people? Is there something preventing them from implementing the same kinds of measures to catch leakers as Apple?

(Using Apple just as an example, of course. I'm sure there are other companies who find leakers and make an example of them through the legal system.)

There was one guy who was strung up as a leaker ten years ago. Don't remember his name, but it was a big deal.

AMD's culture is just different than Apple's. For one, there are no "secret teams" like iPhone, iTablet, etc. (well, at least none that I knew about). For another, developers have real autonomy to make business decisions, something that would never happen at Apple. For instance, I, a lowly intern, redeployed software to the production line during an emergency. If something went wrong, chips would actually stop rolling out of the factory. I would imagine normal (non-senior) Apple engineers don't have that kind of autonomy.

The other major difference, which perhaps you caught above, is that AMD actually manufactures their own stuff. So, not only are there US engineers, but engineers overseas in the plants that AMD owns, engineers in Dresden, etc. Not to say that foreign engineers are somehow bad, but it is a lot harder to control leaks when you have engineers working literally 24/7 all around the world. And at the scale that you're making your own stuff, there are just more people than there are at Apple, and things are way harder to control. It's like herding cats.

> For instance, I, a lowly intern, redeployed software to the

> production line during an emergency. If something went

> wrong, chips would actually stop rolling out of the factory.

While I'm all for letting engineers react to things progressively, that you were in position where a screw up could have shut down a fab as an intern is nothing short of terrifying to me.

> That you were in position where a screw up could have shut down a fab as an intern is nothing short of terrifying to me.

To me, the converse is a lot scarier: what if I, feeling no personal responsibility for yield, wasn't there after-hours looking for bugs in the first place? Or what if I did find the critical bug, but had to wait weeks for forms before it was pushed through? Or was blocked by office politics?

There's nothing more disheartening as having a fix for something serious that you can't push through. I've worked at companies like that: taking away the power to break something means taking away the power to make it better.

Not to say that I somehow dislike code reviews or generally fly by the seat of my pants: the situation really was a real emergency. I can't talk specifics, but the bug had already cost more than the damage it would do to if I broke something.

Toyota have a very similar rule that they actively promote: every worker has a button with which they can shut the line down if they see something wrong.

It seems to work for them...

Culture is part of it. How many people there had worked for Intel in the past and how many leave AMD to go to Intel in the future? I'd expect that's part of it too.

The problem here is that you can easily detect leaks to the press. Tainted information gets published and you know who leaked by how the leak deviates from reality.

It's less so with leaks between companies. A company that deals this way will never allow the information it gathers to show up like that. Even analysts who will examine the leaked materials will have little (not so little in the case of Intel - they have like two competitors) information about the origins of what they are looking at.

"I can't imagine Steve Jobs allowing this to happen at Apple. They have definitely caught people leaking things, and the consequences were swift and unpleasant for the leaker."

Indeed, you don't wanna mess with Apple: http://news.cnet.com/8301-13579_3-10291701-37.html

Well AMD is a small fraction of the size of Apple as well. Even more, Apple's business isn't oriented towards cutting into the market share of a large competitor. And there have been significant leaks at Apple.

The thing to remember is that AMD is a small fraction of the size of Intel, and they have to cover the same market segments.

Not sure what you mean by this statement. Should AMD get some sort of special consideration because they are smaller than Intel?

The point does not stand alone, you are right. drewcrawford said "If they try to specialize (say, servers, or notebooks), Intel will just sell that segment at a loss"

That's the point & that is arguably anticompetitive. IE, they are small and they have to spread wide to avoid being open to predatory pricing.

Yes, but they voluntarily entered in to their business.

What is AMD's competitive advantage? The best I've ever seen is that they are cheaper than Intel for a given processor class/speed. However that doesn't seem to have gotten them much traction. Competing on price alone rarely makes for a successful company.

Back when the opteron and amd64 instruction sets came out, they were pretty convincingly beating intel in performance, and for quite a long time, and after that they made a big advertising push about their processing power/watt.

" Competing on price alone rarely makes for a successful company"

You sure?

Yes. It's fairly established that chasing down the lowest-price path usually doesn't make for a very stable business model in the manufacturing businesses.

This is even more significant when the competitive options are significantly limited (eg: processors). In larger markets (eg: automobiles) there is more room for low-cost competitors to make some money, but they are not often powerhouses of the industry.

If you have data to the contrary please post (and by data I mean more than just 1-off examples).

Well, first you said companies not just manufacturing companies so I would have pointed to Wal Mart. But since you have limited the range it's more difficult because manufacturing companies are not as high profile as retailers. I will point to China as a whole as a contemporary example. Chinese companies have consistently beaten the previous generation's manufacturers by achieving lower costs.

Anyway, since you say "it is fairly established" the burden should be on you to tell me where & by who. What I know is established is that internet marketing gurus speaking to small & micro businesses recommend finding non price differentiators. This arguably makes sense for small businesses where market size is not an issue. Most large companies however, need to go after large markets & that means lower prices.

My old marketing textbooks say that there are two broad positioning strategies & corresponding pricing strategies niche(differentiated) & penetration(low cost). The larger share of the pie usually belongs to the latter with high margins often going to the former.

I would argue that low cost strategies are probably more "stable" since they do not rely on innovation & other constant miracles. Even Apple may flop two or three major products in a row & die again.

Being a low cost producer is a great survival strategy, even for a new entrant. Walmart, Amazon, and PC vs. Minicomputer are good examples. You can either use your cost advantage to undercut prices profitably, or use your large margins to outspend on R&D, marketing, etc.

Selling at low prices given the same cost structure is not a good survival strategy. "We lose money on every unit but we'll make it up on volume!"

what about Honda vs.... I dont know.. Detroit ?

That is a good example of manufacturing companies winning on cost.

Honda, Toyota, et al got a leg up on the US Automakers by delivering a higher quality and more efficient product. They also managed to do it cheaper, but their competitive advantage was NOT primarily price.

Car companies that tried to deliver a low-cost product without the quality behind it (eg Yugo) ultimately failed.

Honda / Toyota advantage was cost. They produced a better product for slightly less money because they had lower production costs. If you look at early Toyota cars they where all low end and cheap because that's all they could make. Just look a the size of the Accord when it was introduced vs the Civic vs the Fit. It's all about starting at the low end of the market and working your way up to the less price focused customer.

PS: Don't forget the market decides price, you can only really control cost if you want to be more than a nitch player.

Yes but the Japanese strategy was not "sell at the lowest possible price". It was "we have good control over our costs, let's pick a price and see what we can deliver at that price". At that point in time, US automakers didn't even know what making a car cost them, they were so focussed on revenue they lost sight of the bottom line.

AMD voluntarily entered the desktop processor business, IIRC, at a time the US government required a second source before they could buy x86 chips. How does that make anti-competitive behaviour from a company many times their size nice?

It is anti-competitive to sell anything at a loss.

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