Advanced Micro Devices, Inc. History
Sunnyvale, California 94088
Telephone: (408) 732-2400
Toll Free: 800-538-8450
Fax: (408) 774-7023
Sales: $2.54 billion (1998)
Stock Exchanges: New York
Ticker Symbol: AMD
NAIC: 334413 Semiconductor & Related Device Manufacturing
We at AMD share a vision of a world that is enhanced through information technology, which liberates the human mind and spirit. AMD is a leading supplier of critical enabling technology for the Information Age. In concert with our customers, we empower people everywhere to lead more productive lives by creating, processing, and communicating information and knowledge. We are our customers' favorite integrated circuit supplier.
Advanced Micro Devices, Inc. (AMD) is one of the world leaders in the microprocessor industry, ranking second behind Intel Corporation. Although AMD's roughly ten percent share of the overall market pales in comparison to Intel's 80 percent, the Sunnyvale, California company is considered a fierce competitor. AMD is considered especially strong as a supplier to the low-end PC market, where it commands a nearly 60 percent share. Nonetheless, AMD's future health seemed dependent on diversification beyond its traditional markets and products. In addition to microprocessors and integrated circuits, the company also produces flash memories, programmable logic devices, and products for networking and communications applications.
Finding Opportunity: 1969--74
In 1968 Jerry Sanders (who had previously worked for Intel founder Robert Noyce) left his position as director of worldwide marketing at Fairchild Semiconductor. By May 1969 he and seven others officially launched Advanced Micro Devices, Inc. The company was incorporated with $100,000 with the purpose of building semiconductors for the electronics industry.
Although the company was initially headquartered in the living room of one of the cofounders, John Carey, it soon moved to two rooms in the back of a rugcutting company in Santa Clara, California. By September of that year, AMD had raised the additional money it needed to begin manufacturing products and moved into its first permanent home, in Sunnyvale. In May 1970, AMD ended its first year with 53 employees and 18 products, but no sales.
The firm initially acted as an alternate source of chips, receiving products from other firms such as Fairchild and National Semiconductor and then redesigning them for greater speed and efficiency. Unlike other second-source companies, however, AMD was one of the first Silicon Valley firms to stress quality above all else, designing its chips to meet U.S. military specifications for semiconductors. At a time when the young computer industry was suffering from unreliable chips, this gave AMD an advantage. The firm began to cater to customers in the computer, telecommunications, and instrument industries who were growing quickly and who valued reliability highly enough to pay for it. AMD avoided producing chips for such inexpensive consumer items as calculators and watches, determining that these were only short-term markets.
Sanders, the driving force behind AMD, also began instituting price incentives, relying heavily on salesmanship to keep the company afloat. To do this, he kept the company decentralized, breaking it into several product profit centers. As a result, engineers and designers were more aware of the business implications of their work than were their counterparts.
A flamboyant leader who flaunted his love of materialism, Sanders used his personality to push his small company into the public eye, giving it a larger presence than its size merited. While attempting to motivate employees through the desire to be as rich as he was becoming, Sanders stressed respect for those low on the company's totem pole. He threw extravagant Christmas parties for everyone in the company and one year held a raffle, awarding $12,000 a year for 20 years to the winning employee--and showed up with a camera crew to record the prize delivery. These practices contrasted markedly with those of AMD's more conservative competitors, including Intel and National Semiconductor, and quickly gave the firm an aggressive reputation.
In September 1972 the company went public, selling 525,000 shares at $15 a share, bringing in $7.87 million. In January of the following year, the company's first overseas manufacturing base, located in Penang, Malaysia, began volume production. By the end of AMD's fifth year, there were nearly 1,500 employees making over 200 different products, many of them proprietary, and bringing in nearly $26.5 million in annual sales. To commemorate its five-year anniversary in May 1974, AMD began what was to become a renowned tradition, holding a gala party, this one a street fair attended by employees and their families, in which televisions, ten-speed bicycles, and barbecue grills were given away.
Defining the Future: 1974--79
AMD's second five years gave the world a taste of the company's most enduring trait, tenaciousness. Despite a dogged recession in 1974--75, when sales briefly slipped, the company grew during this period to $168 million, representing an average annual compound growth rate of over 60 percent. Part of the success of the period was due to the implementation of a 44-hour work week for the company's staff. This was also a period of tremendous facilities expansion.
In 1975 the company received an infusion of cash ($30 million for 20 percent of its stock) from Siemens AG, a huge West German firm who wanted a foothold in the U.S. semiconductor market. In 1976 the company signed a cross-license agreement with Intel. Two years later the company formed a joint venture, called Advanced Micro Computers (AMC), with facilities in both Germany and the United States, to develop, produce, and market microcomputer products. The venture was dissolved a year later, in March 1979, and the company purchased the net assets of the domestic operations of AMC. Also in 1978, the company reached a major sales milestone of $100 million in annual revenue. In 1979 the company's shares were listed on the New York Stock Exchange for the first time under the ticker AMD; that same year, production began at AMD's newly constructed Austin, Texas facility.
Finding Preeminence: 1980--83
The early 1980s were defined for AMD by two now famous corporate symbols. The first, called the "Age of Asparagus," represented the company's drive to increase the number of proprietary products offered to the marketplace. Like this lucrative crop, proprietary products take time to cultivate, but eventually bring excellent returns on the initial investment. The second symbol was a giant ocean wave. The "Catch the Wave" recruiting advertisements portrayed the company as an unstoppable force in the integrated circuit business. And unstoppable it was, at least for a time. AMD became a leader in R&D investment and by the end of fiscal 1981 the company had more than doubled its sales over 1979. Plants and facilities expanded with an emphasis on building in Texas. New production facilities were built in San Antonio, and more fab space was added to the Austin plant as well. AMD had quickly become a major contender in the world semiconductor marketplace. In 1981, AMD's chips went into space aboard the space shuttle Columbia. The following year, AMD and Intel signed a technology exchange agreement centering on the iAPX86 family of microprocessors and peripherals. That same year, in a minor setback, a group of engineers left the company to found Cypress Semiconductor. In 1983, the company introduced INT.STD.1000, the highest quality standard in the industry, and incorporated AMD Singapore.
Weathering Hard Times: 1984--89
In 1984 the Austin facility added Building 2, and the company was listed in a new book entitled The 100 Best Companies to Work for in America. The following year, AMD made the Fortune 500 list for the first time, and Fabs 14 and 15 began operation in Austin. AMD celebrated its 15th year with one of the best sales years in company history. In the months following AMD's anniversary, employees received record-setting profit sharing checks and celebrated Christmas with musical groups Chicago in San Francisco and Joe King Carrasco and the Crowns in Texas.
By 1986, however, the tides of change had swept the industry. Japanese semiconductor makers came to dominate the memory markets--up until now a mainstay for AMD--and a fierce downturn had taken hold, limiting demand for chips in general. AMD, along with the rest of the semiconductor industry, began looking for new ways to compete in an increasingly difficult environment. In September 1986, Tony Holbrook was named president of the company; the following month, weakened by the long-running recession, AMD announced its first workforce restructure in over a decade. In April 1987, AMD initiated an arbitration action against Intel. Later that year, the company merged with Monolithic Memories, Inc., acquiring the latter's common stock in exchange for over 19 million shares of its own, a trade valued at $425 million. By 1989 AMD Chairman Jerry Sanders was talking about transformation: changing the entire company to compete in new markets, a process which began in October 1988, with the groundbreaking on the Submicron Development Center.
Making the Transformation: 1989--94
Finding new ways to compete led to the concept of AMD's "Spheres of Influence." For the transforming AMD, those spheres were microprocessors compatible with IBM computers, networking and communication chips, programmable logic devices, and high-performance memories. In addition, the company's long survival depended on developing submicron process technology that would fill its manufacturing needs into the next century.
By its 25th anniversary, AMD had put to work every ounce of tenaciousness it had to achieve those goals, growing to be either number one or number two worldwide in every market it served, including the Microsoft Windows-compatible business. AMD became a preeminent supplier of flash, networking, telecommunications, and programmable logic chips as well.
In May 1989, the company established the office of the chief executive, consisting of the top three company executives. In March 1991, AMD introduced new versions of the Am386 microprocessor family, breaking the Intel monopoly. A mere seven months later, the company had shipped its millionth Am386. That year, Siemens sold off its interest in AMD.
In February of the following year, the company's five-year arbitration with Intel ended, with AMD awarded full rights to make and sell the entire Am386 family of microprocessors. Early in 1993, the first members of the Am486 microprocessor family were introduced, and AMD and Fujitsu established a joint venture to produce flash memories, a new technology in which memory chips retained information even after the power was turned off. In July the Austin facility broke ground on Fab 25. In January 1994, computer reseller Compaq Computer Corporation and AMD formed a long-term alliance under which Am486 microprocessors would power Compaq computers. A month later, AMD employees began moving into One AMD Place in Sunnyvale, the company's new headquarters, and Digital Equipment Corporation became the foundry for Am486 microprocessors. In March 1994, a federal court jury confirmed AMD's right to use Intel microcode in 287 math coprocessors, and the company celebrated its 25th anniversary with Rod Stewart in Sunnyvale and Bruce Hornsby in Austin.
From Transformation to Transcendence: 1994--97
In January 1996, the company purchased Milpitas, California-based NexGen, Inc., a smaller semiconductor manufacturer founded in 1989. For fiscal 1998, the company posted net sales of $2.54 billion, a 7.9 percent increase, but also recorded a painful net loss on income of $104 million. In mid-1999, Hillsboro, Oregon-based Lattice Semiconductor Corp. purchased AMD's semiconductor manufacturing unit Vantis Corp. for $500 million in cash.
With Microsoft holding the software market in one fist, and Intel holding the microprocessor market in another, companies like National Semiconductor bowed out of the microprocessor manufacturing business in the late 1990s, refocusing their efforts instead on core competencies. Other companies, according to Kathleen Doler's August 1999 editorial in Electronic Business, "lost money six out of ... nine fiscal quarters." Indeed, AMD reported a 1999 second quarter loss of $162 million. With "68 percent of its revenue [derived] from microprocessors and related products," Doler said, it seemed only prudent that AMD would diversify into other products in order to stay alive in the 21st century.
Principal Subsidiaries: Advanced Micro Devices Inc. Customer Specific Products Division.
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