Before the launch of its Zen-architecture processors, AMD had fallen to basically zero percent market share in the server and data center space. At its peak, AMD held 25% of the market with the Opteron family, but limited improvement in performance and features slowly dragged the brand down and Intel took over the segment, providing valuable margin and revenue.
As I have written many times, the new EPYC family of chips has the capability to take back market share from Intel in the server space with its combination of performance and price-aggressive sales. AMD internally has been targeting a 5% share goal of this segment, worth at least $1B of the total $20B market size.
However, it appears that AMD might be underselling its own potential, and Intel’s CEO agrees.
In a new update from analyst firm Instinet, the group met and spoke directly with Intel CEO Brian Krzanich and found that Intel sees the future being brighter for AMD in the data center. Krzanich bluntly stated that Intel would lose server share to AMD in 2018, which is an easy statement to back up. Going from near-zero share to any measurable sales will mean fewer parts sold by Intel.
In the discussion, Krzanich stated that “it was Intel’s job to not let AMD capture 15-20% market share.” If Intel is preparing for a market where AMD is able to jump to that level of sales and server deployment then the future for both companies could see drastic shifts. If AMD is able to capture 15% of data center processor sales that would equate to $3B in revenue migrating from incumbent to the challenger. By no measurement is this merely a footnote.
For months I have been writing that AMD products and roadmaps, along with the impressive execution the teams have provided, would turn into long-term advantages for the company. AMD knows that it cannot compete in every portion of the data center market with the EPYC chip family as it exists today, but where it does offer performance advantages or equivalency, AMD was smart enough to be aggressive with pricing and marketing, essentially forcing major customers, from Microsoft to Tencent, to test and deploy hardware.
Apparently Intel feels similarly.
Other details in the commentary from Instinet shows the amount of strain Intel’s slowing production roadmap is causing product development. Intel recently announced during an earnings call that its 10nm process technology that would allow it to produce smaller, faster, more power efficient chips was delayed until 2019.
Krzanich claims that customers do not care about the specifics of how the chips are made, only that performance and features improve year to year. Intel plans updates to its current process technology for additional tweaking of designs, but the longer Intel takes to improve manufacturing by a significant amount, the more time rivals AMD and NVIDIA will be able to utilize third party advantages to improve market positions.