[Apple Shockwave](37) Apple and AMD 'Meggi Effect'... The Chip Warring States Period

The Shaky Heyday of Intel CPUs
Fabless Transition AMD Says, "Intel's Foundry Strategy Faces Challenges"
Qualcomm Unveils Chip for PC Market Entry
Samsung Shows Interest in Qualcomm's PC Chip
The End of the X86 Era and the Dawn of ARM PC Era
Microsoft Likely to Actively Support ARM Camp
Apple Announces Surprise M3 Reveal, Signaling Defense

Editor's Note[Apple Shockwave] is a content series that examines the upheaval caused by Apple entering the semiconductor market. You might wonder, why semiconductors from Apple? Apple is no longer just a company that makes smartphones and computers. After long efforts starting from the founder Steve Jobs, Apple has designed world-class semiconductors used in mobile devices. If Intel was the key player in the PC era, Apple has become the top predator in the mobile era semiconductor ecosystem. Amid the global semiconductor supply chain crisis and massive investments in semiconductor production facilities, we will carefully examine the upheaval and prospects in the semiconductor market brought about by Apple Silicon to broaden our readers' insights. Apple Shockwave will visit readers every weekend. After more than 40 installments, it will be published as a book.

"Real men have fabs." (Jerry Sanders, AMD Founder)

"(Intel's foundry business strategy) will absolutely not succeed." (Darren Grasby, AMD EMED CEO)

The first statement was made in 1992, and the latter in 2023. This 30-year gap clearly shows how the perception of a company's semiconductor fabrication plants (fabs) has changed over time.

Over these 30 years, the semiconductor market landscape has completely transformed. Since the emergence of Taiwan's TSMC, the coexistence of fabs and fabless companies has become the norm, and the status of giants in the chip market has shifted.

In particular, Apple Silicon has made the trend of 'de-Intelization' dominant in the semiconductor market. After Apple introduced its self-developed application processor (AP) for the iPhone and then, in 2020, the 'M1' chip that abruptly replaced Intel's CPU, three years later, the central processing unit (CPU) market has entered a 'Warring States' period.

In the past, consumers had only one choice when purchasing a PC. If they chose a PC manufacturer brand, they only had to decide between Intel's CPU or AMD's CPU. Microsoft's Windows operating system (OS) offered no alternative. Even after AMD's rapid growth post-2010 expanded choices, Intel's monopoly was nearly absolute in earlier times.

An AMD advertisement flyer featuring Jerry Sanders, the founder of AMD, dressed as Harrison Ford, the protagonist of the movie 'Indiana Jones'.

For example, it was just over ten years ago that Samsung Electronics introduced a laptop PC using AMD's CPU. It was newsworthy that Samsung, which had only used Intel CPUs, was selling PCs with AMD CPUs. Supplying CPUs to Samsung was a core management goal for AMD Korea.

Of course, the situation today is different. While Intel, which led the market in adopting advanced fine processes, faltered after 2015, AMD underwent continuous transformation.

AMD's greatest innovation was giving up on manufacturing CPUs themselves.

Jerry Sanders, AMD's founder, once said:

"Real men have fabs." (Real men have fabs.)

This statement became a stumbling block that hindered AMD, which was already financially constrained. Since its founding, AMD could not compete with Intel in scale. Although hit products like Opteron and Athlon emerged after 2000, establishing some competition with Intel, AMD never had the resources to invest heavily in manufacturing to keep up with 'Moore's Law.'

Sanders played a significant role in founding AMD and sustaining its presence in the semiconductor market for over 50 years, but AMD's turnaround began only after abandoning his doctrine.

AMD Stock Price Trends. Source=Google

In 2005, when the author visited AMD's fab in Austin, Texas, it had already lost competitiveness. It was operated as a memory semiconductor line under subsidiary Spansion but faced limitations. Similarly, IBM's fab in East Fishkill, New York, visited by the author in 2005, was in a similar state. These fabs eventually became restructuring targets and were sold.

AMD's decline deepened after Intel introduced its 'Core' series. Catching up seemed impossible. The turning point came from an unexpected place.

Four years after Sanders retired, in 2008, AMD decided to sell its fabs. AMD's fabs later grew into GlobalFoundries, a foundry-specialized company. GlobalFoundries is currently among the top three foundry companies.

Giving up fabs turned out to be a masterstroke. After divesting all shares in GlobalFoundries, AMD entrusted production to TSMC. GlobalFoundries had already announced it would stop investing in processes below 10 nanometers.

AMD CEO Lisa Su, who had successfully introduced copper processes at IBM, understood the importance of fine processes and actively pursued CPU development based on TSMC's FinFET technology.

After starting cooperation with TSMC, AMD launched the new 'Ryzen' product based on its self-developed 'Zen' core. Known for being cheaper yet outperforming Intel CPUs, AMD's market share began to soar.

At the end of 2017, AMD's stock price was barely around $10, but by the end of 2021, it once reached $155. This means a 15-fold increase in just four years. In contrast, Intel's stock price fell from the mid-$40s to the mid-$30s during a similar period, highlighting AMD's dramatic growth.

Having experienced giving up manufacturing, AMD views Intel CEO Pat Gelsinger's aggressive foundry business with skepticism.

Darren Grasby, AMD EMED CEO, points out that Intel's foundry service (IFS), which aims to produce competitors' chips, deviates from the success model of modern chip design companies.

He diagnosed that AMD's transition to fabless created the capacity to invest in advanced technology.

"Strategic R&D investment in products ultimately brings the best returns." He emphasized that entrusting semiconductor processes to foundries while focusing solely on chip design was the key to AMD's success.

When asked if Intel's IFS strategy would succeed, he replied:

"Absolutely not."

Intel bears the heavy responsibility of 'Made in America semiconductors.' Massive investment is inevitable. Intel's recent stagnant stock price reflects investors' caution about large-scale investments.

Intel also faces the challenge of blocking further AMD advances. Although overshadowed by Nvidia, AMD is a strong player in the graphics processing unit (GPU) field. Samsung Electronics even uses AMD GPUs in its Exynos chips.

Recently, AMD introduced AI chips based on GPU technology. Notably, Microsoft, which secured ChatGPT, has agreed to collaborate on AMD's AI chip development. This strategy appears aimed at alleviating the enormous chip costs caused by Nvidia's dominance through AMD.

Remembering the past perfect partnership between Intel and Microsoft, this is a revolutionary change. Microsoft's change of heart does not stop here. It is the advent of ARM PCs.

Even Qualcomm Enters the CPU Market... Apple Silicon Changes the Chip Order

Qualcomm is a leading company in modem chips for mobile communications. Starting with CDMA, Qualcomm's modem chips remain strong in the 5G era. Apple has tried to produce its own modem chips but has repeatedly failed over several years and still uses Qualcomm's chips.

Qualcomm did not focus solely on communications. After the smartphone era began, it established itself as a leading company in the Android smartphone AP market. The Snapdragon 8 Gen 2 AP used in the latest Samsung smartphones was also designed by Qualcomm.

Qualcomm's chips no longer target only smartphones. Instead, they aim at Intel's market: the so-called ARM-based PCs.

Apple's M1 and M2 chips consume low power while delivering excellent performance, causing a sensation especially in the laptop PC market. These chips are not based on Intel's 'x86' chips but on ARM designs. While Intel chips still dominate desktop PC-level CPU performance, Apple's chip offensive is powerful in the mobile sector. Apple outsources production of its self-developed chips to TSMC, lowering chip costs and surprising consumers by offering laptops with similar performance to Intel chips at better price-performance ratios. Apple's long-standing tradition of being less cost-effective has been reversed by Apple Silicon, turning Apple PCs into 'cost-effective' products.

Qualcomm is the company best positioned to follow this strategy. Apple's M chips are ultimately based on the design of the iPhone's A chips. Snapdragon chips are also ARM-based. Qualcomm is well-prepared to lead in developing low-power, high-performance chips for ARM-based laptops to compete with Apple's MacBook camp.

Market attention is focused on Qualcomm's recently introduced 'Snapdragon X Elite' chip, reflecting this era of change. This chip relies on the Oryon CPU from Nuvia, a company founded by former Apple A chip designers. Qualcomm acquired Nuvia to enter the PC chip market.

Qualcomm's target is clear: Intel rather than Apple. Apple would never make PCs using Qualcomm chips. Naturally, the target is Intel PCs. We can expect laptops or tablet PCs using Qualcomm's Snapdragon X Elite instead of Intel CPUs. These PCs are expected to be available by 2024.

At the recent 'Snapdragon Summit 2023' held in Hawaii, Samsung Electronics MX Division Brand Marketing Group Executive Director Im Ji-hoon stated, "Qualcomm Snapdragon X Elite has excellent AI and 5G performance, so Samsung Electronics is very interested."

Since Samsung has already introduced the Galaxy Book Pro 360 PC using Snapdragon chips, launching new products with the new chip should not be difficult. Lenovo, Microsoft, Dell, and HP are also expected to release PCs using this chip.

The arrival of Qualcomm PCs signals that the PC market, which has used chips from Intel, AMD, and Apple, will shift to a four-player structure.

However, the key here is the movement of Microsoft (MS), which controls the OS. MS must properly support the emulation function for ARM-based Windows PCs to ensure proper performance. No matter how powerful the chip is, without sufficient software support, the development of Qualcomm PCs and ARM-based Windows PCs will inevitably be slow.

Apple minimized consumer dissatisfaction by providing ways to use programs designed for Intel chips when transitioning to its own chips.

Apple is expected to unveil a PC featuring the M3 chip at the event announced for October 31, 2023. The M3 is the first PC chip to use a 3-nanometer process.

Apple has also begun responding to the joint offensive by Qualcomm and Microsoft. On the 31st (local time), Apple is expected to unveil a new PC using the M3 chip at a scheduled event. The M3 is the second consumer 3-nanometer chip following the A17 Pro chip used in the iPhone. Initially expected to be unveiled at the end of 2023, recent forecasts suggested a delay to next year, but Apple has suddenly announced the M3's debut. Analysts interpret this as a strategy to counter Qualcomm, which has hired Apple's personnel to develop competing chips.