What's up guys and welcome to wall street millennial on this channel, we cover everything related to stocks and investing today we're covering the story of how intel lost its dominant market position in computer microprocessors to rival amd over the past five years. Amd stock has returned. Two thousand nine hundred thirty percent, while intel has returned a measly seventy four percent. This is despite them competing in the same industry, but this outperformance by amd has not always been the case.

Intel is an american semiconductor juggernaut that has been a dow component and dominated the pc cpu market throughout the late 2000s and early 2010s from 2009 through 2016 amd was a small cap stock that was not considered to be a serious competitor to intel during this time Period intel had dominant market share in the desktop cpu market selling, more than double the number of processors as amd. However, in 2017 the tides started to turn amd's processors dramatically improved and they started eating away at intel's lead in the first quarter of 2021. Amd has finally surpassed intel with a 50.8 relative market share. This taking of market share has resulted in amd's massive stock price.

Outperformance compared to intel in this video we'll go over what intel and amd do and how amd was able to take so much share from intel. We'll also go over the outlook for the two companies going forward. This topic was chosen by our channel members. Channel members.

Get access to our videos one day in advance and get to vote on some of our video topics. We will first look at how intel was able to grow into behemoth in the first place. Intel currently has a market cap of 230 billion dollars in annual revenues. In excess of 70 billion intel was founded in 1968 by gordon moore and robert noyce.

Gordon moore was a pioneer in the semiconductor space and he invented moore's law. Moore's law predicts that the number of transistors on microchips doubles every year. This results in exponential growth for computing power in 1969, one year after intel's founding they released their shotkey ttl, bipolar, transistor, random access memory, chip, static, random access memory or sram was revolutionary at the time as it allowed computers to recall memory twice as fast as other Memory chips at the time this allowed it to quickly take market share from fairchild semiconductors, which was the dominant chipmaker before intel by the 1970s intel was a dominant player globally. In the memory space, they opened factories in many developing countries to reduce their labor costs.

Today, their international locations include costa rica, vietnam, china and other countries. However, in the 1980s, the memory market got more competitive with the introduction of dynamic, random access memory and increased competition from japanese manufacturers memory chips became mass production, commodities and prices fell. Precipitously. This put pressure on intel's margins in light of the increasing competition in memory chips.

In the 1980s, ceo gordon moore made the pivotal decision to shift the company's focus away from memory and towards computer microprocessors. They developed the intel 386 microprocessor, which was a major success. Intel was the first mover in the pc microprocessor space supplying the microprocessors for ibm personal computers throughout the late 80s and early 90s pc adoption advanced rapidly. In 1984, 8.2 percent of u.s households owned a pc by the year 2000.

This number had increased more than 5 times to 51 being the leading supplier for pc chips. Intel benefited tremendously with its stock price, increasing 60 folds from 1990 to the height of the tech bubble in 2000.. However, in the early 2000s a little company called amd start to take market share from intel. Amv was growing rapidly and in 2005, actually surpassed intel in desktop cpu market share.

At the time, amd's chips were much lower quality than intel's. They competed at the lower end of the pc market and took share by undercutting intel on price. Intel, saw the competitive threat of amd and took aggressive measures to counteract this. Instead of reducing their own costs and competing with amd head to head, they decide to use their market power to implement an aggressive, anti-competitive strategy.

Their anti-competitive strategies included threatening customers with loss of benefits such as discounts, technical support, guaranteed supply and patent liability indemnification if they bought any cpus from competitors. Additionally, they made direct payments to pc manufacturers to halt or delay the launch of products containing competitors cpus. They designed their software compiler to generate object, codes that ran more slowly on competitors, cpus and falsely attributed the performance difference to the competitor's cpus rather than its compiler. They allowed industry benchmarks to be developed based on the compiler's work.

This unfairly damaged the reported competitiveness of rival cpus. Finally, they bribed a major electronics retailer to only stock pcs with intel cpus. These anti-competitive practices were highly effective and allowed intel to take back the market share that they lost to amd in the early 2000s by 2008. They had 75 relative market share compared to amd with their market position and pcs secure intel decided to expand its focus to the smartphone market in 2011..

In 2013, they announced a partnership with chinese phone manufacturer zte to develop processors for their next-gen smartphone. They created the intel atom processor to be used in smartphones. This put them in direct competition with established mobile chip makers. Broadcom and qualcomm intel's foray into smartphones ended up being a complete disaster.

They didn't have the core competencies to make a smartphone chip and the cost of integrating the intel chips into smartphones was much higher than competitors. The cost was so high that intel was forced to subsidize the smartphone manufacturers for incurring this extra cost. Their smartphone unit was burning cash in 2016. They finally decided to wind it down laying off thousands of employees.

This was not just a colossal waste of money, but it also distracted intel from their core business of desktop cpus. Things were not looking good for intel, as their anti-competitive practices were also finally started to catch up with them. The japan, fair trade commission gave them a cease and desist letter for abusing their market power amd, also sued them for unfairly abusing their market position to suppress amd sales. In 2009, an american court forced intel to pay a 1.2 billion settlement to amd the south korean fair trade commission fined intel 26 million dollars for illegally giving rebates to pc makers for not using competitors chips.

In 2009, the european commission fined until 1.06 billion euros in order them to cease their illegal practices. In most of these legal cases, intel denied any wrongdoing and fought the cases in court for years. But the increased scrutiny from regulators made it clear that the company's historical, anti-competitive practices would not be a viable business strategy going forward to maintain their position as a market leader intel decided to invest in a 10 nanometer cpu which they would call ice. Lake chips are made up of many small transistors, as the number of transistors increases the performance improves exponentially.

However, when the transistors become very small, it becomes more and more difficult to produce them in 2016. Intel promised to have iceland ready for deliveries by the end of 2017 at the latest. However, over the past few years, they have been distracted by their failed foray into the smartphone market, as well as fighting their numerous anti-trust lawsuits. Building the 10 nanometer chips proved far more difficult than they had anticipated and they announced multiple delays to production.

They didn't end up releasing their 10 nanometer chip until late 2019, three years after their initial target of 2016., but even when they did finally release it. There are manufacturing issues that delayed its full-scale production until 2021.. During this whole time, intel was forced to use their outdated 14 nanometer skylake infrastructure. Instead, while intel was focused on developing their hyper-ambitious, 10 nanometer design amd was embarking on a plan to take down intel's dominant position in pc chip technology.

In 2012 they hired jim keller to lead the seminole zen architecture project. This proved to be one of amd's best moves in decades. Jim keller is currently one of the world's best electrical engineers and chip designers. He spent much of his early career with a company called digital equipment corporation, where he worked until 1998., while at dec he was heavily involved in designing a large number of highly successful processors in 1998.

He went to amd where he was the lead architect of the ndk8 architecture as part of his work there. He led the design of the x86 64 instruction set. After only a year. He left amd to work on a new type of processor, with extremely fast interfacing.

At the company si byte soon after he started working there, si byte got acquired by broadcom after the acquisition. Jim stayed on as chief architect for four years. Throughout the 2000s, he held high-level engineering positions at several leading semiconductor firms, eventually ending up at apple working on the chips that were used in the iphone 4, 4s ipad and ipad 2.. By this point, it was clear that jim keller was an invaluable asset to any semiconductor company that wanted to get ahead of their competition in 2012.

Amd was able to get him back on their payroll with the primary task of leading development of an entirely new generation of processor. This new architecture would be called zen for three years. Jim helped amd develop this pivotal technology, which would eventually take down intel as a dominant player in the space by 2015, the design for the new chips had been finished and jim left amd once again in pursuit of the next phase of his career. But by the time he left amd, the zen micro architecture project had exceeded all targets and expectations.

One of the most ambitious goals of the project was a dramatic increase in what's called instructions per cycle, which basically indicates how many operations a processor can perform in one clock cycle. This would increase the performance of a processor. Even if the number of gigahertz clock speeds did the same, the original goal of amd was to improve the instructions per cycle count by 40 from previous architectures, when the zen architecture was officially introduced in 2017, amd announced that they had actually achieved a 52 increase smashing Their original target, the new architecture, was built on 14 nanometer node technology, significantly smaller than the 32 nanometer and 28 nanometer processes of previous processors from amd. The result is significant.

Improvements in energy efficiency and performance with the zen project amd was also able to close a gap in performance in other areas with intel for many years. Intel possessed a technology called simultaneous multi-threading which only they had. This was one of the proprietary technologies that held amd back from being considered as technologically capable as intel with the zen project amd gained this technology in its chips. A third highly significant development with zen was the ability to utilize ddr4 memory.

Ddr is a term of a certain type of interface between ram components with processors. It stands for double data rate synchronous, dynamic ram. This is an important factor in determining how quickly a computer can access ram with ddr4 in the zen project. Amd was able to take advantage of the fastest type of memory available, and it actually continues to be the fastest available for commercial, pcs and laptops.

As of the release of this, video, with the new zen architecture, amd was able to release the ryzen series of cpu, including the high-end summit ridge series. These processors pushed the envelope in terms of all the performance features that you could want out of a cpu in the performance enthusiast gaming circles. The ryzen 9 cpu has overtaken intel processors as the preferred high performance choice due to its high clock, speed and low power consumption, not to mention the large number of cores. It has become the higher performance option for many applications.

In fact, the intel competitors are now often seen as lower budget alternatives to the superior amd chips. Also based on the zen architecture, amd was able to design the mobile 4000 chip an insane 7 nanometer processor for mobile phones and tablets. It's the first ever seven nanometer. Eight core high performance processor for mobile and is also suitable for future ultra thin laptops with each year since zen was completed.

Amd has been able to come out with new and improved products that continue to push the boundaries of what was thought possible for innovation in cpus, with the zen architecture. Amd has officially pulled intel down from their dominant market position and now stands out more than equal footing with their decades-long rival. Last year it was reported that the ryzen processors were outselling, intel's chips, a historic turning point in the history of the two companies and it's all based on the success of the powerful zen micro architecture. But the success of the zen project could not have been possible without the vision and leadership of amd's.

Current president and ceo, dr lisa, with a phd in electrical engineering from mit lisa sue, has had an illustrious career across elite semiconductor design. Companies from texas instruments to ibm in 2014 amd announced that sue would be replacing. Then ceo rory reed, one of the goals that she asserted for the company at the time was to accelerate the development of new technologies and simplify the company on the announcement. Many analysts praised the promotion due to lisa's unparalleled experience in the space, in addition to overseeing the rise in chips.

Lisa sue also diversified the company significantly allowing amd to gain market share and other applications of semiconductors. Besides pcs, in 2016, sue announced that amd was investing heavily in a new technology called finfet to make microprocessors aimed at graphics chips, apus and processors for gaming consoles. In 2016, the investment in gaming started to pay off with revenue spiking due to graphics and gaming chip sales. Since the release of ryzen and other diversified product offerings, amd's revenue has skyrocketed, hitting a low of 832 million dollars in the third quarter of 2015.

It has been on an accelerating line upwards since then reaching 3.2 billion dollars in the third quarter of last year. That's a quadrupling in sales in just five years, thanks to both the success of new markets and gaming and graphics and the popularity and higher price point of the ryzen cbu line. Meanwhile, intel's revenue has not really made any excess progress beyond the growth of the industry. In the past 10 years, its revenue in the third quarter of 2020 was about 20 billion, much larger than amd's 3.2 billion dollars in the same quarter, but with almost no appreciable growth.

It's safe to say that amd is quickly closing the gap, but amd isn't even the only thing that intel has to worry about in november of 2020 apple released a new round of laptops and desktops that included a macbook air macbook pro and mac mini to the Naked eye, they all look the same as previous models, but with one major difference. The processors apple introduced the first chip designed in-house specifically for macs. They call it the m1 chip and it was originally designed for mobile applications like the iphone and ipad. But as a result of tim, cook's focus on bringing primary technologies under apple's control and ownership apple is trying to pivot away from using intel's chips for use in any of its products.

Apple has been investing heavily in its own semiconductor department for more than a decade. In the late 2000s, they hired jim keller, the same jim keller that spearheaded the zen project at amd in 2008 apple acquired pa semi, where keller used to work in order to bring more firepower to apple's in-house chip business. Now their in-house designs for cpus are getting good enough to put in some of their laptops. The highest and max are still using intel chips, suggesting that apple still has some ways to come before, being fully able to supplant intel in terms of raw performance.

But as the fourth largest distributor of personal computers today, if intel loses apple as a customer, it would be a huge blow to revenue, but intel isn't going out without a fight. In early 2021, a new ceo of intel, pat gelsinger, announced new plans for the company. In his plans, he emphasized the importance of intel's own manufacturing facilities. He's repeatedly cited publicly the fact that the share of american manufacturing at semiconductors has been shrinking in the past several decades in the national security, as well as economic risks.

To that, he has recently claimed that intel's seven nanometer process project is currently on track, which would theoretically allow to regain its technological advantage over amd. However, given the disaster of the previous 10 nanometer node process project, some may take it with a grain of salt. No matter what the reality is, it cannot be denied that intel now has significant ground to cover if they want to keep their status as an american tech giant. Alright guys that wraps it up for this video, if you like the content, make sure to smash that like button and subscribe for future uploads, also don't forget to check us out on wsm research, our second channel, where we post dd on high growth socks.

If you have any thoughts on intel and amd, let us know in the comments section below as always. Thank you guys so much for watching and we'll see you in the next video wall street millennial signing out.