On October 11, Lisa Su completed five years as the CEO of Advanced Micro Devices (AMD). In these five years, she’s brought AMD back from near bankruptcy and made it into a worthy competitor to rivals Intel (INTC) and NVIDIA (NVDA).
Su spent her first two years restructuring the organization, preparing a product road map, and devising a strategy to make AMD profitable again. Her efforts materialized, and AMD has returned to profits after multiple years of losses. The stock has risen from just $2.7 when Su took the helm to $28.38 at present.
Lisa Su’s last five years: October 2014–October 2019
AMD has been in the industry for 50 years, but it’s faced severe competition from Intel, the world’s largest chip company. Intel had over $70 billion in annual revenue in 2018. AMD is less than one-tenth of the size of Intel, and it reported just $6.5 billion in annual revenue in 2018.
AMD’s strength—as well as its weakness—is its broad portfolio of CPUs (central processing unit) and GPUs (graphics processing unit). Both technologies are capital-intensive. It takes a lot of time to design CPU and GPU architecture. The problem with AMD before Su took over was that there was no set technology road map that would set expectations and guide its future efforts.
Su created a new group called RTG (Radeon Technology Group), a part of AMD, to focus purely on GPUs. AMD’s main group continued to focus on CPUs and APUs (accelerated processing unit), which pack CPUs and GPUs on a single platform. This aligned AMD’s workflow. Next, Su developed a CPU and GPU road map. Over the last three years, she’s focused on implementing that road map and bringing competitive products to the market in a timely manner.
AMD adopted a strategy of offering better price to performance. It implemented this strategy by transitioning to Global Foundries’ 14 nm (nanometer) chip in 2016. In the case of CPUs, it added more cores to improve performance and a chiplet design to reduce the price.
Challenges and opportunities
AMD has faced many challenges over the last five years:
- At the end of 2017, AMD’s RTG head, Raja Koduri, left it to join Intel.
- The cryptocurrency boom ended in the second half of 2018, leaving the supply chain with excess GPU.
- The Vega GPU wasn’t as successful as its predecessor, Polaris, among gamers.
- At the end of 2018, AMD’s foundry partner Global Foundries backed out of the development of the next-generation 7 nm node.
- To add a cherry on top, the entire semiconductor industry has slowed as a result of the US-China trade war.
Amid these challenges, the odds have been in AMD’s favor. Intel delayed its 10 nm products by three years and faced a CPU supply shortage at the end of 2018. This helped AMD mitigate the impact of falling GPU sales in the wake of the crypto bubble burst. In 2019, Su took some big steps. She moved the manufacturing of AMD’s 7 nm products to TSMC (TSM). This move gave AMD a process node lead over Intel and NVIDIA. AMD launched its 7 nm CPUs and GPUs in the third quarter, and they either met or beat rival products in terms of performance.
In fact, AMD’s 7 nm products forced Intel and NVIDIA to lower the prices of select products to maintain their market shares. AMD also achieved some milestones in the server space with its EPYC Rome CPU. All these efforts have helped it gain share in the x86 CPU and discrete GPU markets in the last two to three years.
What will the next five years hold for AMD?
In the last five years, Lisa Su has focused on stabilizing AMD’s earnings and increasing its market share. AMD is currently offering competitive Ryzen and EPYC CPUs and Radeon GPUs for PCs, laptops, and servers. It’s done so while maintaining its lead in the game console market.
Next year should be exciting for AMD, as the game console market will move to its next generation of products after seven years. Today, AMD stock rose 3.9% after Sony (SNE) confirmed the launch of the PlayStation 5 in the 2020 holiday season. Game consoles have been AMD’s biggest revenue generators, and the PS5 should therefore provide the company with higher revenue.
Moreover, AMD is looking to enter higher-end CPU and GPU segments. With this move, it aims to target the flagship products of PC and server original equipment manufacturers, such as Microsoft’s Surface Laptop 3. But it will face tough competition from Intel and NVIDIA as the two prepare for a price war. From here on out, it won’t be an easy battle, as its rivals have ample resources and strong cash flows.
We could also see AMD make its entry into the future technologies of AI, ray tracing, and the Internet-of-Things. Su provided a glimpse of her AI intentions at Hot Chips 31 in August. Here again, AMD will see strong competition from NVIDIA and Intel, which are already leading in terms of technology and market share. This exemplifies Lisa Su’s strategy of entering a new technology once the ecosystem is in place and adoption is on the rise.
Lisa Su appears in a list of the world’s top CEOs
Lisa Su’s contribution to AMD’s turnaround over the past five years brought her into the limelight. For the first time, she appeared on the Harvard Business Review’s 2019 list of best-performing CEOs in the world. In her very first appearance, she secured 26th position. This news brings us to a question. What factors does Harvard base its CEO rankings on?
Harvard looks at objective performance measures like financial performance and ESG (environmental, social, and governance) ratings. It not only looks at how well a CEO serves its shareholders but also at how well a CEO serves employees, customers, suppliers, and communities. Harvard excludes CEOs with less than a two-year tenure.
Looking at AMD’s financial performance under Lisa Su’s leadership, you’ll see that the company’s revenue rose at a CAGR of ~12% from $4 billion in 2015 to an estimated $7 billion in 2019. She turned AMD’s non-GAAP EPS around from -$0.54 to an estimated $0.62. This revenue and EPS growth was driven by strong product execution and restructuring. She also reduced AMD’s debt through restructuring, which reduced its financial leverage from an alarming 20.14x to an estimated 2.4x. By increasing profit and reducing the cost of debt, Lisa Su improved AMD’s return on investment from -20.5% in 2016 to 19.3% in 2018.
Lisa Su also entered Fortune’s 50 Most Powerful Women of 2019 list for the first time.
To learn more about the top women CEOs and their accomplishments, check out Women CEOs: 5 Names You Should Know. Note: Originally published in October 2019, this post was updated substantively on November 12.