Intel is the leader of the CPU/GPU markets. According to latest data, Intel gets 99 percent market share in server chips, 95% percent market share in consumer CPUs, and it’s gaining traction in HPC market thanks to Xeon Phi chips.
So, Intel has the force to maintain its leadership: “How many times have you heard company people say it’s easier to get to the top than stay there? Forget it. That’s a myth created by people who are more interested in the study of sociology that they are in recognizing the realities of business competition. It’s far easier to stay on the top than to get there. The leader, the king of the hill, can take advantage of the principle of force. No other principle of warfare is as fundamental as the principle of force. The law of the jungle. The big fish eat the small fish. The big company beats the small company”. So, Ries and Trout make a clear example: “When you examine the mathematics of a firefight, it’s easy to see why the big company usually wins. Let’s say that the Red squad with nine soldiers meets a Blue sqaud with six. Red has a 50 percent numerical superiority over the Blue. […] Let’s also say that, on the average, one of out every three shoots will inflict a casualty. After the first volley, the situation will have changed drastically. Instead of a 9 to 6 advantage, Red would have a 7 to 3 advantage. From a 50 percent superiority in force to a more than 100 percent force superiority. The same deadly multiplication effect continues with the passage of time. After the second volley, the score would be 6 to 1 in favor of Red. After the third volley, Blue would be wiped out completely”.
So, when AMD commercialize some new stuff, Intel has just to counter attack showing its new stuff, or lowering its prices, in order to stop AMD to gaining market shares. And don’t be fooled to think that a better products could win. We have seen how this strategy works during Athlon64 times: “Another fallacy ingrained in the minds of most marketing managers is the belief that the better product will win the marketing battle. Behind the thinking of many marketing managers is the thought that the truth will out. […] Don’t be fooled. Misconceptions cannot easily be changed by an advertising or sales effort. […] The single most wasteful thing you can do in the marketing today is to try to change a human mind. Once a mind is made up, it’s almost impossible to change. […] Even if you succeed in convincing the prospect that you have a better product, the prospect soon has second thoughts. -hey, if your computer is better that IBM’s, how come you’re not the leader, like IBM is?-”. (You have to know that this book was written in 1998)
Intel is not just the leader, but it has the power of the brand. Intel is synonymous of reliability, power and compatibility. Do you remember the old ads where Intel said that AMD CPUs were not 100% compatible with Intel software? AMD spent a lot of money to state the contrary, but even today some people thinks that AMD CPUs are not 100% compatible!
So, Intel has the advantage of the superiority of the defense. If AMD attacks directly Intel, Intel has the possibilities to counter attack: “The larger the operation, the less the surprise. A small company might be able to surprise a big company with a new product. But the small company is unlikely to pull fast ones on big company. The friction of the whole machine gets in the way”. The perfect example is about AMD APUs. AMD was the first to talk about this kind of products, but Intel was the first to commercialize them!
However, “leaders get overrun when they ignore those warnings or pooh-pooh the efforts of the competition”. The case of the x86-64 extensions is the perfect example. AMD took by surprise Intel. Athlon 64 CPUs were available in large number, but AMD had a poor marketing machine, so Intel counter attacked minimizing the importance of 64 Bit extensions: “In marketing attack, transportation in usually not a problem. A company can deliver products to thousands of outlets in days. The bottleneck is communication. Getting a marketing message across to millions of customers can take months or years. There is often plenty of time for the defender to blunt the attacker’s sales message by undercutting it in one form or another”. Intel persuaded its partners (e.g. Dell) to not commercialize AMD PCs, or Microsoft to not give importance to Windows XP 64 Bit. The users thought that 64 Bit extensions were useless.
Another strategy is to sue the rival. From "Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk", by James Bessen and Michael J. Meurer: "Even simple delay can impose large business costs. Consider, for example, litigation against Cyrix, a start-up firm that introduced Intel-compatible microprocessors. Intel, the dominant maker of microprocessors, sued Cyrix and the litigation lasted four years (there were multiple suits). During much of that time Cyrix had difficulty selling microprocessors to computer manufacturers because most of them were also customers of Intel and they were reluctant to buy a product that might infringe. Cyrix also had difficulty finding fabricators willing to manufacture their chips - again, for fear of being sue themselves. In the meantime, Intel responded by accelerating its development of chips (the Celerons) that would compete against Cyrix's offering. In the end, Cyrix won the lawsuit, but lost the war, having lost much of its competitive advantage. In effect, Cyrix lost the windows of opportunity to establish itself in the marketplace. Litigation exacted a heavy toll, indeed". One year after the end of this litigation, Cyrix merged with National Semiconductor to avoid the bankruptcy.
So, we have seen that Intel is the King of the Hill, and it could destroy easily AMD. But why doesn’t Intel destroy AMD? Ries and Trout in Marketing Warfare talking about General Motors, the leader of Automotive market in 1998, wrote: “In terms of market share of market, automotive market is really the big one. General Motors gets 59 percent of the market. All the others don’t add up to the one of General Motors. In share of market, Ford has 26 percent of US market, Chrisler has 13 percent, and American Motors has 2 percent. Total for the little three: 41 percent. […] First, who are General Motors’ competitors? There’s the Justice Department, the Federal Trade Commission, the Secutity & Exchange Commission, and the U.S. Congress. General Motors can’t win by winning. If they wiped out one or more of their automotive competitors, the courts or the Congress would break them up. Witness what happened to that other big winner, the American Telephone and Telegraph Company. They were no match for Judge Greene and the Department of Justice. General Motors can only win by not losing. General Motors should wage defensive warfare. […] Good defensive warfare is offensive in nature with the clear objective of protecting a company’s dominant share of market”.
Intel has to follow just one rule, to remain the King of the Hill: “Strong competitive moves should always be blocked”. It’s not important to be innovative, because Intel has the power of the brand, the power of the market share and its marketing fire power. Ries and Trout wrote: “The U.S. atomobile industry illustrates this principle well. Says John deLorean in the book On a Clear Day You Can See General Motors: Even though Ford was superior to General Motors in product innovation during the time I was with GM and Chrisler surpassed it in technical innovation, neither firm made substantial cuts into GM’s half of the market. GM had not produced a significant, major automotive innovation since the hydramatic automatic transmission (1939) and the hard-top body style (1949). Ford pioneered in practically every major new market while Chrisler produced the significant technical innovations, such as power steering, power brakes, electric windows and the alternator”. But who gets the credit for engineering excellence? General Motors, of course. it’s the flip side of the “Truth will out” fallacy. […] There is also the psychological pressure that benefits the leader. […] The power of majority was indicated by the typical reaction in the Asch experiment: To me it seems I’m right, but my reason tells me I’m wrong, because I doubt that so many people could be wrong and I alone right”.
The main innovation made by Intel were the first microprocessor (Intel 4004) in 1971 and the first MOSFET SRAM in 1969. Integrated Memory Controller? Digital Equipment Corporation. Integrated GPU? MIPS. HyperTransport (and derived Quickpath)? AMD. FinFET? UC Berkeley. And so on.