During the Consumer Electronics Show in Las Vegas last week, we picked up an intriguing rumor circulating among a few C-Level executives that Intel Corp. is pondering the acquisition of AMD.

Given Intel’s acrimonious history vs. AMD in the CPU market, common sense says this is an unlikely marriage. Most analysts we reached dismissed it outright.

But seen from the perspective of CES — a colossal tech extravaganza that attracts an audience that embraces technologists, investors, management consultants and speculators — Intel-AMD merger speculation had a certain ring of truth. At the very least, it was a great topic for idle conversation.

CES this year exposed a stark contrast between the two old rivals.

This year, Intel, which hasn’t yet named a new CEO, surrendered the most coveted keynote speech, on Monday night, to LG. (Clearly, the company didn’t want to pay for it). AMD’s CEO Lisa Su delivered a knock-out keynote on Wednesday morning at CES. Su discussed AMD processors for three different markets — notebook, desktop and data centers — all designed and manufactured at the 7-nm process node. The first 7-nm chip will become available next month. In contrast, Intel unveiled a 10-nm PC processor at its CES press conference.

Differences between a headless Intel and an AMD under Su’s strong leadership were obvious. Technology analysts, used to seeing AMD as perennial underdog to Intel, were impressed by AMD’s alpha-dog performance. “I think this was a landmark event,” Kevin Krewell, a principal analyst at Tirias Research, told EE Times. “It was quite dramatic for AMD to usurp the leadership role from Intel.”

Lisa Su on stage at CES 2019 (Source: CTA)

Changing semiconductor landscape

Asked about the potential of an Intel-AMD merger, Krewell told us to “file it under fiction.” He noted, “It would give Intel complete dominance of PCs and servers and be considered anticompetitive.” Jon Peddie, President of Jon Peddie Research, also told us, “Not in a million trillion light years.”

Both noted that the U.S. Federal Trade Commission (FTC) would never allow it.

However, one CEO who teased the Intel-AMD deal begged to differ. “The semiconductor market today is no longer limited to CPUs for PCs,” he said. With Nvidia’s strength in GPUs for AIs and data centers, the Intel vs. AMD duo play is no longer monopolizing the market.

More importantly, given the rise of system vendors like Apple, which now designs its own chips, the semiconductor landscape is becoming increasingly diverse and fragmented. Google, Facebook and Amazon, who also design their own chips, are part of the trend.

Intel wants Lisa Su

One thing we must understand, though, is that people in the industry love to speculate on potential mergers and acquisitions.

Kathleen Maher, vice president at Jon Peddie Research and the editor-in-chief of JPR's TechWatch Report, told us, “Obviously, the idea of Intel acquiring AMD is something that bubbles up from time to time, as does the idea of Nvidia acquiring AMD. But in that [latter] case, forget the FTC, Europe would have a cow (or whatever).”

However, even those who don’t buy the Intel-AMD rumor are open to the suggestion that Intel wants Lisa Su more than it wants AMD.

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In her Wednesday keynote, Su dazzled her audience. Maher, who agreed with Su’s rave reviews, said, “She is always very good. More important, I think, is that the wider tech world got a look at her and sat up and took notice.”

Su’s CES keynote had the feel of a tipping point. A star was born. She even impressed people who have known her for many years.

Peddie told us, “Love her. I’ve known her for 20 years from when she was at the IBM workstation group in Austin. She’s smart as hell and has turned AMD around (look at the share price) and has all the troops motivated.”

Krewell said, Intel “could try to hire Lisa Su, but that would be hard as well.”

Many industry observers think Intel is too hard a company to manage for anyone who hasn’t grown up in its culture. Peddie said, “It’s a damn tough job. Almost no one qualified inside wants it.” He added, “Finding someone from outside (highly unlikely) is tough — would you take someone from GE or IBM? Look at how that almost ruined AMD ten years ago, and Apple before that.”

He added the gender equality factor. Peddie doesn’t believe Intel has done enough to elevate women. The result is too-small a pool of female executives to choose from.

Maher is one analyst who believes Su could run Intel. Referring to Su, she said, “She's got a hot hand. The AMD troops like her quite a bit, but I also think she's ruthless enough to run Intel.”

Cost of having no CEO

The industry wonders why Intel is taking so long to name a new CEO, after Brian Krzanich’s abrupt resignation last June.

The cost of such a leadership void is high for any company. It’s even more critical at a $62.8 billion company.

Last month, Northland Capital Markets’ analyst Gus Richard lowered his rating for Intel stock to “Underperform” from “Market Perform.” He predicts Intel’s 2019 sales will be negatively affected by lower demand from data centers and market-share losses to AMD.

Barron’s quoted Richard’s research memo:

Intel has lost the leadership in process technology, its key differentiation, and it is losing momentum…We continue to be more pessimistic about Intel gross margins as its competitive position is eroding and yields for 10nm are likely to depress gross margin in 2H:19.

Of course, for anyone following the semiconductor industry, Intel’s lag in chip-manufacturing technology isn’t news.

Maher noted, “Intel's slip and AMD's advance resulted from calculated risks taken by both companies.” She added, “The laws of physics are pretty tough and both companies are aware that the fight just gets tougher… this is why both companies are adopting the chiplet approach.”

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