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Advanced Micro Devices has had a few tough years as it struggles to stay afloat financially and compete with Intel, the world’s biggest chip maker.
Yet Lisa Su, chief executive of the Sunnyvale, California-based chip design company, remains an optimist. She told us in an interview that 2016 is going to be a good year for AMD, with products that are in the pipeline finally seeing the light of day. Among those is AMD’s new ARM-based 64-bit processors for data centers, which are being launched in volume sales today.
AMD is also working on new chips based on the FinFET manufacturing technology, which will result in a whole new line of microprocessors, accelerated processing units (APUs, which combine graphics and processor on a single chip), and graphics chips from the company’s Radeon Technologies Group.
But like we said, it’s been a struggle. AMD sold off part of its test and manufacturing business in October for $436 million. Su’s predecessor, Rory Read, left the top post earlier than expected in October 2014, in part because of AMD’s continuing financial struggles. Su didn’t talk much about financials, as the company is reporting its earnings on January 19 for the fourth quarter of 2015. AMD is expecting revenues to drop 10 percent in the fourth quarter, compared to the previous third quarter.
One of the bright spots is AMD’s semi-custom business, which includes the accelerated processing units that it builds for all three major video game console makers — Sony, Microsoft, and Nintendo. And AMD has more semi-custom chip designs in the works.
We participated in a small roundtable of journalists in a Q&A session with Su during the 2016 International CES, the big tech trade show in Las Vegas last week.
Here’s an edited transcript of our interview.
Question: How are things going?
Lisa Su: 2016 is going to be a good year. The notion of what we’re trying to do at AMD is about bringing out great technology, great products. 2015, we level-set a bunch of things in terms of what we wanted to do with the product road map, particularly the key transitions over the next 18 to 24 months. There’s a lot of payoff that should be coming through in 2016 and the first half of 2017. We’re very excited about that.
I know that there was a lot of conversation about our Polaris launch here at CES. Hopefully you’ve all seen the demos and the numbers. When I step back and look at what’s important to AMD, it’s about graphics leadership — visual computing leadership — as well as a strong computing experience. We have the capability to integrate those two together.
On the graphics side, this Polaris beginning for us is one of a number of things that you’ll see us do in the graphics business to elevate the importance of strong hardware coupled with software in an open ecosystem, to bring together the best that visualization can do. We’re very excited about it. I know many of you have met Raja Koduri. He’s a visionary in the industry. We see giving him the keys to our Radeon technologies is going to be very exciting for the industry and for us over the next 12 to 18 months.
On the computing side, there’s a lot of anticipation for Zen. We’re very much committed to deliver Zen on the time scale that we have previously stated, which is: 2016 you’ll see samples, hardware, some early volume, but 2017 is the first full year of volume in servers and desktops. We’re excited. You have a road map that’s very compelling. It’s on us to execute. That’s where I’d like to be, starting in 2016.
Question: What would you like people to be saying this time next year about AMD?
Su: I’d like them to say AMD is back.
Question: Do you feel like you have enough coming to create that?
Su: I do. It’s never one thing that makes the difference. It’s the combination of years of work on the CPU road map, getting to a competitive CPU standpoint. That’s critical for us. On graphics, the overall industry is excited about what’s possible with virtual reality, immersive computing, augmented reality. That makes graphics overall very exciting, but particularly relative to AMD.
We know what it’s like to be number one. We’ve been number one before. We have every opportunity to get back there. We’re very focused on these core markets, where some of our competitors are focused on many other things.
Question: If you had to look at, say, three years, what sort of company is AMD at this point in time? Is it the culmination of the trends you’re talking about, or do you plan to expand in other areas?
Su: We have three core focuses. Graphics leadership across the market segments — if you look at consumer, professional, and integrated, that’s a key focus area for us. Strong computing leadership relative to both servers and PCs. We think computing will continue to be important as mobile has gone up and saturated.
The thing that differentiates us a bit more is our ability to integrate those for custom applications. I view us as a strong partner for those companies that want to vertically integrate. The best example is game consoles, but there are many other examples of companies that want to vertically integrate, that know you have to optimize hardware, software, and systems together. AMD is the best partner in the world for that. That’s how we see expanding into different applications. Whether that’s cloud and enterprise, or consumer focus, there are lots of opportunities for us.
Question: You mentioned that this past year has been about setting some plans for the future. It’s been a relatively quiet year in terms of people talking about AMD. Does that mean 2016 is a really important year for getting people to talk about AMD again and be excited about the future for AMD?
Su: Absolutely. The way I think about it is, what excites people is great products and great technology. When you think about the transitions we’re going into in 2016, bringing out a whole new set of FinFET products across all of our product lines starting in 2016, that affords a step function improvement in performance and performance per watt. Bringing out some of the new architectural features, both hardware and software, that we’re talking about.
The foundation that we were setting in 2015 is: We’re going to focus on our products. As a result, we took some time. We weren’t out there saying that we’re going to take over the world. Not until we have something to show you. But the plans were, we wanted to be able to show you FinFET product at CES. I’m proud of the team for doing that. We’ll ship that in the middle of 2016. We see everything on schedule. You’ll hear more about Zen progress as we go through 2016, but it’s very much — we want to show the world what AMD is capable of in 2016.
Question: What do you think you’ve learned from the game console cycle? You guys dominated that last generation, made all these chips, and moved on to more semi-custom businesses. What are you learning from game consoles that you’d take to that larger business?
Su: A lot of the initial game consoles were — let’s call it consolidating some of the AMD IP that was there. Going forward we’re seeing that the innovation may very well come from the custom applications. The drive that these leading OEMs have in terms of where to take the business gives us a unique view into road maps five years out. That comes back and is very synergistic with our standard product business.
I see the two as hand in hand. We have a standard product business that’s very much based on industry, market trends, and then we have a custom business that’s very much based on divisions of some of the leading OEMs in the industry. You bring those two together and you have a lot of visibility into what’s important.
Question: Would it be fair to say that semi-custom business for the console market is your most stable business at this point in time?
Su: Because of the game console cycle being a five- to seven-year cycle, it affords a bit of stability once you get into it. But I wouldn’t take anything for granted. It’s extraordinarily competitive in this market. The importance of having strong IP, strong relationships, and setting a five-year vision for where we’re going is critical to these customers.
Even today, you still see PlayStation 3 and Xbox 360 selling. There will be a lifetime for these consoles going forward.
Question: One thing that’s happened in previous generations of the console business, there have been changes in the architecture of the chips mid-cycle in some consoles. Will that happen in this cycle?
Su: Without talking about any particular console road map, because our console customers are very sensitive, there will be opportunities to cost reduce. As we know, the consoles tend to be very sensitive to price point. As the price comes down, the console volume goes up. There will be opportunities to do that in this cycle as well.
Question: Do you think you’re building up enough new IP to justify new generations of consoles?
Su: It’s less about our IP and more about the user. Are there user benefits to more graphics horsepower? I think the answer is yes. For that reason, if there’s an application that can use it — I don’t know if you guys visited our booth, but I spent 15 minutes there with some of the guys and they showed me the latest Oculus and HTC demos. They’re good, but there’s a lot of room. Those things are still very expensive relative to the consumer price point.
Both console and PC gaming have a long way to go yet to make those $199 price points. When you think about the real mainstream market, when you get to $199 a lot of people have access. There’s a lot of opportunity yet.
Question: Is VR going to be a core focus for you, to aid these companies that are bringing VR to the mainstream?
Su: Absolutely. Both from a hardware and a software standpoint. VR is a great showcase for technology. The focus has been very much around gaming, but there are many other interesting applications outside of gaming when you look at medical, education, other interactive opportunities. We can do a lot on hardware to get the price point into the right range. We can do a lot on software to enable developers to work more efficiently.
Question: When can we expect to see enough content to drive mainstream users to VR?
Su: That’s the question. It’s going to evolve over time. We’ll have some early stuff in 2016, but as we go through the next couple of years we’ll need to really get the content going where it needs to be.
Question: Whenever you mention VR to many consumers, they think of those ‘90s headsets and the collapse of VR. Do you feel like this generation will be the one to hit the mainstream?
Su: I believe this generation is very credible. My perspective is, over the last 12 to 18 months, we’ve been watching the progress. It’s gone so fast. Every three months the content is better. The user experience is better. The feeling of it is there. The way people react to it — you guys have all seen it. It’s very easily accessible. You don’t have to imagine what the VR experience is.
So yes, I absolutely think this generation is capable of becoming mainstream. We have to continue to work hard on all the pieces of the ecosystem. You guys have seen it. There’s groundswell in all parts of the ecosystem.
Question: I wonder if we can connect this to some of the larger tech trends at CES. We have half the market declining in smartphones and PCs, the established categories. But then these new ones are bubbling up. They almost seem like custom businesses from your perspective, like robotics or drones or wearables or VR. I wonder if you then have to think of semi-custom businesses in each of these categories.
Su: They’re very synergistic. It’s the same types of components that you need. You need computing horsepower at the right performance per watt. You need visualization capability at the right pixel density. Whether you’re talking about drones or PCs, I’m not sure the CPU is all that different. There are a lot of things that are similar in that view.
Maybe the difference in how AMD is approaching it is — look, I like the traditional business. As much as we talk about it as a declining business, it’s a technology driver. It’s the volume driver that affords the ability to develop all that technology. And then yes, we will veer off into a VR ecosystem. We may veer off into a robotics ecosystem or an AR ecosystem. But the basic technologies are very similar. That’s the way we’re approaching it.
Question: You mentioned the traditional business. It seems like there was a time where AMD was talking a lot about increasing the portion of revenue coming from embedded and semi-custom. There were some goals on that and a big push. It sounds more like you’re emphasizing desktop APUs and graphics now. Has there been a change in strategy there?
Su: It’s certainly a change in what we talk about to you guys. When we were 95-5, we needed to make sure that people understood that there’s an AMD outside of the PC business. We’ll end 2015 roughly 50-50. That’s a good place to be.
I want to emphasize on that point that the traditional business is still a great opportunity for us. When you look at our share in certain segments of the market, we’re underrepresented for our capability. I view that as an opportunity for growth in 2016. When you look at the custom business, I love that business. But the custom business could not be there without a strong IP portfolio from the traditional business.
Question: Some of what you described also sounded like where you’re different from Intel and Nvidia. Nvidia is putting a very big focus on cars. Intel has the Internet of Things. They’re customizing their line for all these brand new businesses.
Su: It is different. Our focus is on the basic technology and the IP. That’s a place where we have a lot of room to grow. You’re right. We’re not talking about self-driving cars.
Question: Do you think that’s a benefit?
Su: I think it is. We’re very clear on: When you ask what we want people to think about when they think about AMD, I want you to think about AMD as a technology powerhouse. It’s delivering great products in the segments we’re in today. There’s more than enough opportunity, given our size.
Question: Nvidia still likes to put out a big part for graphics and gamers, staying on that bleeding edge, but you guys have all the console business. Is that an insight you had a while back, that the console business would not be on that bleeding edge? Or do you have to have that high end to get other business?
Su: I don’t think you need the high end to get in the console business. But I think you need leadership performance per watt capabilities. Any APU, any discrete GPU, will benefit from performance per watt. We were behind. We’ve significantly accelerated where we are with our new technology.
From the standpoint of the king of the hill product, that’s always important in the channel business and the add-in board business. That was where we targeted Fury with our initial high bandwidth memory. We’ll continue to have a king of the hill part that competes in that area.
Question: Is there any time frame for that? Is there a 2016 king of the hill product?
Su: Give me a few more weeks into 2016 before I have to answer that question. We will update the entire portfolio in FinFET, including the king of the hill. But timing will be updated.
Question: I assume some of that is also dependent on the development of second-generation high-bandwidth memory (HBM)? How is that coming along?
Su: It’s coming along well. We learned a lot in the first generation of HBM as far as the manufacturing and the bring-ups. HBM 2, we’re very much committed to it, committed to this 2.5D architecture. It makes a lot of sense going forward.
Some people were expecting that we might update the entire road map immediately with high bandwidth memory. That was never the plan. There was always an expectation that there would be high bandwidth memory first at the high end to get the technology out there, and then as the cost points get better — it’s still very costly.
Question: Is graphics going its own way more?
Su: I wouldn’t say it’s going its own way within AMD. It’s not second fiddle. If you think about the evolution over the last five or six years, with the integration of ATI there was very much a focus on APUs as the center of the universe. APUs are very important. Don’t get me wrong. If you look at the bulk of our revenue, it comes from APUs. But the graphics technology is so fast-moving and has so much leverage across the APU business, the discrete business, as well as just pure intellectual property, what I wanted was more of a focus. You have two first sons, is the way I would describe it.
Question: But not necessarily positioning it to be on its own?
Su: No. I would say we’re positioning graphics to be in as many applications as possible. Some of them will be paired with AMD CPUs. Some of them won’t. That’s OK. That’s what we’re doing.
Question: Product and technology have been one thing. The financials have been something else. At one point in time you were an integrated manufacturing company and that’s gone. You’ve had step after step after step. The latest one last quarter was the joint venture with Integrated Test. How many more levers do you have to pull, or do you have in your pocket to pull? It seems like year after year goes by and little pieces of AMD just keep getting partitioned off or sold off or partnered off so you can raise capital to keep going.
Su: There’s no question that the financials are the judge of how well we’re doing, how well the technology is doing. We’re very clear about where we add value to the industry. That’s in the technology. Relative to the China joint venture we did in terms of the back-end assets, I think it was a great deal. It allows us to leverage the asset from an overall standpoint. We weren’t completely utilizing the asset. Being able to partner with someone who can utilize it brings value into the equation.
I don’t view that as a pure “let’s sell off something to raise capital.” I view that as becoming a more focused company. In that sense, being able to use a number of different manufacturers that are expert in the area is better than trying to do everything yourself. That’s what we’ve done a bit more as AMD over the past few years. We’re identifying what makes us special and where we should leverage other external sources.
The overall expectation is that 2016 will be a better year from a financial standpoint than 2015. We have chosen to bet on technology. As those products come out, the expectation is that the market share, the revenue, the overall operating profits will follow. But that’s yet to be proven. That’s our job, over the next 18 months, to do that.
Question: If that scenario doesn’t come to fruition, what’s the fallback strategy?
Su: Well, I intend to make that scenario come to fruition. But I think you should also think about AMD much more broadly. The technology assets we have are unique in the industry. One thing we’ve also started talking about is our ability to monetize IP outside of traditional product sales. I believe we should do that in any case, because there’s value to it.
My philosophy is, I can’t make every product that can possibly use a high-performance CPU and graphics. Why shouldn’t I enable others, in a positive fashion, to leverage AMD IP in more places?
Question: It seems like Nvidia is trying to do the same thing.
Su: The approach of direct patent licensing or patent enforcement is one avenue. I think we have a much more partnership approach in terms of how we deal with things. It’s around technology enabling and co-development. Almost an extension of our custom model into more of an IP-enabling model.
Question: What does that mean in the real world? By talking about co-development, do you mean partnering, or just taking another chip company and licensing them your graphics technology to do what they will?
Su: That could be one scenario. It could be licensing graphics IP. It could be joint development on CPUs. It could be any of those avenues.
Question: What do you think of Intel’s push into diversity? They made a bigger deal about that at the last two keynotes.
Su: It’s an admirable effort. They’ve done a good job with it, putting the focus on it. Everyone in the semiconductor industry, everyone in the technology industry, would benefit from more diversity in the business.
Question: When you go into OEMs or other potential customers and talk to them, what are they looking for? What do they ask for?
Su: We have jointly picked the design point on Zen with our top customers being very involved. From a design standpoint, I think they’re very pleased with it. Our customers want Zen to be in the market. The focus is very much on co-development. We’re doing the chip development as they do the platform development so we can enhance time to market. There’s a huge desire to see Zen in the marketplace. That’s true particularly on servers, but also on the PC side as far as high-performance desktops. We’re very committed to doing that. We’re enabling them with strong samples, platforms, and software availability.
The channel ecosystem, as you guys can imagine, is very fired up about the platform. I get a lot of notes from enthusiasts saying that they’d like to see Zen sooner. It’s cute.
Question: The server market has changed in the last few years. It’s fragmented into very different kinds of servers. Are there particular segments where you think Zen is going to be targeted within that broader market?
Su: We’ll do very well in multithreaded workloads and workloads that benefit from a lot of parallelism. When you think about some of the cloud workloads that do that, we’ll target those segments. We also believe there are opportunities to grow the one-processor server base as well. We do have a good sub-segmentation of where things go. Our overall focus is trying to get those highly multithreaded workloads an advantage.
Question: Given the strength of your partnerships — you look across the chip industry at the likes of ARM, who don’t make a big push at putting their brand on everything. Are we seeing a decline of the need to be seen as being in something? Or does that still have value? Do people want to know that there’s an AMD chip in something? Or is that less important now?
Su: It’s important to be there, for sure. It’s important to be viewed as a technology leader. That doesn’t necessarily mean AMD branding on the box. But that means, if we’re in five of the top six applications, that’s a pretty good view. That’s really our focus. How do we get into the top brands? For instance, being Apple’s discrete graphics partner across the Mac line, that’s something we’re very proud of. We’re never going to be on the front of the box, but that’s a marquee application. That’s the way we think about it.
Question: Why do you think we saw so many big deals in chips this past year? Everything was in a steady state for the longest time, and now we’re seeing $37 billion takeovers.
Su: I do think that says a bit about the maturity of the semiconductor industry. When you look at the industry and how you can extract profitability growth, you either do it through innovation or you do it through efficiency. The M&As help on that efficiency aspect. There’s a lot to do on the innovation aspect as well.
Question: If you look back over the last few years, clearly the pace of change in terms of semiconductor process technology has slowed down. As a customer of all these guys, does the increasing time between nodes, the increasing cost of each of those nodes, does this bother you? How do you think of this as a customer of the big chipmakers?
Su: In some sense it’s an equalizing force. If you look at it, back five or seven or eight years ago, you’d see that process technology, are you first into a process technology? That ended up being one of the bigger differentiators of companies. As we go forward, 28nm was a really long node. That made architectural improvements and design improvements much more important. The FinFET 16nm or 14nm will be a very long node with a lot of products. That affords much more architectural optimization.
I also look at the gap between us and our competitors. The idea of the process technology lead being the sole and determining factor of who wins really does change the game. It will be much more about architecture and design. It’s a great equalizer from that standpoint going forward.
Question: The only counterexample off the bat is just the power aspect of at all. Architecture and design is one thing. That’s something AMD has had a leadership role in dating back to the K6. But over time, because of power becoming more of an issue, process technology is the easy way to go. If you have a more advanced process generation than your competitor, you’re going to be lower power as well.
Su: There’s no question that process technology is a big knob to turn in the performance and power spectrum. That’s why we’re going FinFET relatively early. We saw the power benefit. My comment is relative to where we see it going long term. We’ll always be in advanced technology. My view is that 16nm and 14nm are very important. We’re transitioning a number of products there in 2016. But it’ll be a long node. It’ll last for the next three, four, five years.
Within that node we can do a lot of optimization. Even on power there’s a lot we can do in the architecture as far as power management, power tuning, the power optimization between hardware and software. Once you’re in the node it becomes all about architecture. Every three, four, five years you make one big jump with process technology and then the rest is on architecture.
Question: I have a Microsoft Surface Book with an Intel chip inside here. As we go to more of a two-in-one environment, how does AMD play into that? Can you keep up with Intel in that space?
Su: Absolutely. Particularly with this node, as we go into FinFET. The power efficiency of the node is very significant. We’ll see a significant improvement. We’ve made improvements in our APU power efficiency already through design and some of the things we’ll announce later this year. As we go to the seventh-generation APU you’ll see big improvements. But certainly the process technology will help in that range.
Question: In the end, in the market, out of 5,000 notebooks in the European market, there are only 25 with Carrizo, and only three of them have an SSD.
Su: The Carrizo APU, from a technology standpoint, is outstanding. If you look at the performance and performance per watt improvements, outstanding. When you look at the OEM systems in the marketplace, we’ve made good progress. You look at HP’s EliteBooks, those are nice machines.
I think people need to see existence proof. The idea of AMD being the cheap solution has to be replaced by AMD as a very competitive solution. The HP notebooks out there are one example. The Lenovo gaming system is another very nice set of machines. Dell has a number of machines out that are strong. You’ll continue to see that portfolio increase. Each generation will get better.
If you looked at a year ago, you probably saw nothing at the $1,000 price point. Now you see three. The next generation, hopefully it’ll go up a little faster.
Question: You used the phrase “existence proof.” Are you talking about proof of viability, of longevity?
Su: Everybody wants to see, in that price point, does the product sell? The PC market segmentation is always good, better, best. What sells at that price point? You’ll see that the OEMs are moving AMD up the stack. Where AMD used to only be in the very low price point machines, we are moving up the stack. We’ve proven, with our A8s and our A10s, that we can compete. Certainly with our commercial business, we can compete.
HP is willing to launch its new Windows 10 commercial system exclusive with AMD. We’ve also been, not just on the consumer aspect of being able to get an SSD type system that you guys would want to use, but also the enterprise accounts that we’re winning are significant. We’re talking about accounts like Brinks, like Dr. Pepper Snapple Group, all these Fortune 500 and Fortune 1000 companies. Never before, in all the years you’ve been covering AMD, were they rolling out thousands of AMD-based notebooks. That’s where we are today.
We have a nice position the team’s achieved where we’re number one in thin client. Now we’ve got real momentum in enterprise-class notebook designs. That’s a big one for us to build on going into seventh-generation APUs and Zen-based APUs after that. Success there allows us to build that into the consumer side as well — SSDs, beautiful displays, and all the rest.
Question: In terms of form factors, we’re seeing a resurgence in desktops as people move forward. There was a push away from desktops and into laptops. Have you seen that as well, that desktops are having a bit of a resurgence?
Su: I do think so. There’s an attraction to interesting desktop form factors. They’re not all big towers. Some of them are now much smaller, sleeker boxes. The all-in-one category as well, as far as what can be offered there.
Question: Can you comment at all on what you’ve seen as far as Windows 10’s effect on the PC market?
Su: More generally, we’d all say that Windows 10 is a great product. Microsoft did a good job with it. As far as a transformational thing in the PC market, I don’t think we’ve seen that. We believe it’s a steady refresh cycle that will come with Windows 10.
VB: So it’s not necessarily affecting hardware sales at this point?
Su: It’s not inflecting hardware sales up, if that’s what you’re asking.
Question: Is there anything else you think is affecting PC market demand right now?
Su: We have some macro effects in the PC market. China is weaker, obviously. The markets have been pretty rough. With Europe there’s still some instability with the exchange rates. Those things do affect the PC market overall.
There’s a general view that there are a lot of older PCs that do need to be replaced. It’s about finding the new and interesting machines that will unlock that. I am a believer that the PC market has a lot of room for innovation, still. As the top guys — HP, Lenovo, Dell — look at innovation within their systems, and certainly Microsoft with Surface and Surface Pro, that’s what brings customers to the PC market.
Question: Is there some delay in that refresh because people are spending money on other new things — wearables, drones, robots?
Su: I don’t necessarily get that. I don’t know what other people say. You saw some cannibalization by tablets and smartphones at a point. That’s leveled off. Now it’s about, OK, good cycle, you have Windows 10 out there. You have a potential commercial refresh coming up with Windows 10. You have new two-in-ones. You have much sleeker form factors coming out. That stabilizes the market a bit.
Question: There’s so little that’s genuinely blow-your-mind exciting in the tech market right now. We had a period of lots of major shifts that were really exciting, but everything’s steadying down now. We’ve gotten so used to these big “wow” moments. Another one of those would be great. We saw that briefly with the Nano and some of the PC designs around it.
Su: I think what you’re saying, if I can rephrase it to how I would think about it, is bringing the technology to life. The fact is, the technology is phenomenal. Really. I sit around and look at this stuff and it’s unbelievable what we can do. Now how do you translate that into something you can take a picture of, or have a soundbite that ends up becoming —
Question: I feel like it’s less your job to blow us away than your customers, though. I’d like to see AMD maybe fully exploit how it’s different with semi-custom.
Su: I do believe that the customer innovation we can enable, or that we do enable, is underappreciated. There’s something to be said there.
Question: Semi-custom right now is enabling game consoles. It’s not enabling some new kind of thing. Here in the middle of Vegas, aren’t you trying to get into the slot machine business?
Su: Yeah, actually. We have a number of them. As I was walking through some of the casinos, I thought, “I wonder if that has our chips in it?” It did cross my mind. Maybe we’ll put an AMD banner on those machines.
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