AMD CEO Hector Ruiz: Time for a New Business Model in the Semiconductor Industry
FEI FORUM ON FINANCE AND TECHNOLOGY, LAS VEGAS— --
In a keynote address to financial leaders at the FEI Forum on Finance and Technology Friday, Hector Ruiz, AMD president and Chief Executive Officer, asserted that, in order to succeed, semiconductor manufacturers must reinvent their business models to forge tight connections and collaborations with end-users, customers and partners.
“In traditional relationships between suppliers and customers, the lines that define where one company begins and the other ends are very clear – and can be very disruptive,” said Ruiz. “I believe this old model is broken. To be successful, we believe that semiconductor companies must build relationships with customers and partners that truly blur the lines, and create a ‘complementor’ relationship where the companies are connected and invested in each other’s success.”
Ruiz highlighted aspects of AMD’s “connected business model” which is focused on forging extremely connected relationships with partners, customers and end-users.
“Our industry is in the midst of a fundamental change that will redefine the classic definition of a semiconductor company and rewrite the metrics used to evaluate its success,” said Ruiz. “Changes in end-user expectations, increased dependence on silicon to define and differentiate products, the adoption of external value chain integration, and an increasing focus of intellectual property (IP) development based on customer needs rather than manufacturing efficiencies are changing the way AMD does business.”
Metcalfe’s Law, which says the overall value of a network increases exponentially as devices are added to it, is a guiding principle behind AMD’s business model. “Just as the value of a physical network like the Internet increases as more users have access, AMD’s value and strength will be enhanced by the number of relationships we forge with companies that we will work with to share in a common success.”
He cited AMD’s collaboration with UMC on cost-effective, high-volume manufacturing of leading-edge microprocessors as an example of a “complementor” relationship where the two companies are connected and invested in each other’s success. Ruiz also stressed that semiconductor manufacturers should not stop investing in improving manufacturing capabilities, but rather that companies need to focus on high-impact areas such as transistor development, advanced process control (APC), and silicon-on-insulator (SOI) technology where the IP investment can be directly linked to specific customer needs.
“The ability to lower the intensity of capital expenditures, share success with customers and partners, and continue to deliver innovative solutions will be the metrics by which we need to judge semiconductor companies in the coming years,” Ruiz continued.
Ruiz’s presentation is available in AMD’s virtual pressroom at www.amd.com/virtualpress/speeches
AMD is a global supplier of integrated circuits for the personal and networked computer and communications markets with manufacturing facilities in the United States, Europe, Japan, and Asia. AMD, a Fortune 500 and Standard & Poor’s 500 company, produces microprocessors, Flash memory devices, and support circuitry for communications and networking applications. Founded in 1969 and based in Sunnyvale, California, AMD had revenues of $3.9 billion in 2001. (NYSE: AMD).
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