Intel vs AMD: The Channel Game Is On!

Intel has continued to dominate the microprocessor market

with its excellent channel network throughout the country. Its revenues continue

to grow steadily and there are hardly any signs that growth would be affected by

any perceived slowdown, at least in the Indian market.

For Intel, everything has gone according to its plans. Even

when there was a serious processor shortage last year, Advanced Micro Devices

(AMD), its competitor, did not succeed in taking away its Indian market share

significantly. As supply eased, demand for Intel processors only seemed to

increase.

Currently, Intel dominates the Indian microprocessor market

with about 80 percent market share, compared to AMD's 18 to 20 per cent.

"We are targeting a market share of 30 percent during 2001 in India,"

said Yep Yin Wee, product-marketing manager, AMD Far East Ltd during his recent

visit. After that announcement, things in India are no longer the same.

Ambitious strategy

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To achieve the 30 percent market share target, AMD has

embarked on an ambitious strategy to establish a channel network throughout the

country. It has joined hands with transnational OEMs and is very much in the

process of talking to domestic ones as well. This is in addition to alliances

forged with transnational master distributors like BBS Electronics Pte Ltd,

Avnet Max Ltd and Intraco Technology Pte Ltd, which have a presence in India.

According to Ajay Kapure, Authorized Channel Representative

(Indian Sales Operations), AMD Far East Ltd, targets are fixed for these master

distributors based on market conditions, competitive scenario and other factors

at the Asia Pacific level. “AMD's office in India will be designated as branch

office in the very near future and the office premises will be upgraded to suit

the enhanced requirements of a bigger team. The appointment of a country manager

will also be announced shortly,” he informs.

AMD’s second tier consists of country-specific master

resellers or distributors like Great World, Supercom Memories, Aditya Promoters

and Compuage Infocom Ltd. Under these master resellers, there are resellers and

systems integrators. There are also specific initiatives to address each of the

above mentioned channel segments.

Intel’s channel

Intel still has the advantage of being the first entrant.

It has also successfully erected impressive entry barriers. With approximately

2000 channel partners throughout the length and breadth of the country, Intel

still has everything going for it in the Indian market. “Our Genuine Intel

Dealer (GID) program continues to be healthy and strong. We still get

applications and we put them through training programs. In fact, volumes through

channels have continued to increase,” according to R K Amar Babu,

GM—Channels, Intel Asia Electronics Ltd.

Intel is known to work very closely with its channels. When

the P4 was unveiled for the first time, there were a couple of channel partners

who actually demonstrated the product. “This is because we were working with

them all the while, even before the launch. This has always been our

approach,” he says.

A product like the P4 incorporates new technologies like

the RDRAM. It also requires the right chassis. “We are training our channel

partners how to integrate all these into machines that perform well. We are not

going to have a specific program as such devoted to the P4. Instead, all our

other programs will have a P4 tilt,” he informs regarding Intel’s latest

initiatives.

Intel’s channel initiatives continue to grow. Intel runs

a Secondary-Tertiary City Expansion Program and also participates in branding

exercises along with its distributors. In the next stage of this ongoing

program, Intel intends to take this program to more locations, even as the

number of its channel partners is increased. Says Amar, "We wish to improve

and grow our partners' business. We are looking for growth by offering more and

more solutions which will also help them earn better margins."

Resellers add value

Intel feels that the primary advantage of resellers in

India is that they add value by expanding reach. It finds this unique to the

Indian market. Intel helps its resellers to organize meets for its dealers. It

also helps in building white boxes. This program has been going on for a couple

of quarters now. This initiative was taken after it began getting feedback from

the field.

In AMD’s case, “Though the AMD Reseller Program was

officially launched just three months ago, it already has over 1,000 resellers

registered from across India. This number is all set to grow dramatically in the

near future, as AMD steps up its channel initiatives and brand building

programs,” says Ajay of AMD.

The key objective of the program is to enable resellers

sell AMD products more effectively. Another objective is to reward and

incentivize resellers for their performance and consequently build a strong and

loyal channel.

Widespread penetration

AMD has so far reached 75 cities where resellers have

adopted the channel program so far. The concentration in metros and A-class

cities is of course higher and the idea is to obtain widespread penetration in

up-country locations as well.



Once a reseller gets registered online for the AMD reseller program, he or she
is designated as ordinary member, and then moves on to either associate or

premier member levels based on a simple point grading system which is linked to

the number and mix of processors sold.

AMD will expand its reach to include tier-3 and tier-4

channels as a part of its latest channel initiative. The company will also

launch a program to unite these resellers under one umbrella and offer greater

support from the company. A strong team and infrastructure to be able to

effectively take of technical support issues with minimal turn around times, is

also being set up.

Under its reseller program, AMD has a very structured

technical certification program where registered resellers take two levels of

certification tests online viz. Bronze and silver levels after which they

qualify to attend the gold certification training as well as subsequent tests to

win the gold certification. In fact, AMD's recent gold certification training

program at New Delhi got overwhelming response from its channel.

AMD also holds product seminars called Power Forums to

impart information about its technology to various communities such as OEMs and

resellers.

Roping in SIs

AMD is in the process of roping in systems integrators (SIs).

In fact, many AMD resellers are also systems integrators, according to Manabesh

Hota, CPU specialist, BBS Electronics Pte Ltd.

“Systems integrators are actually given importance over

traders because they add more value. Though traders provide area coverage, it is

SIs who provide value to the customer. Secondary SIs are looked after by

national level distributors like Great World,” says Manabesh.

At present, there are no schemes specifically for SIs.

“But we are planning to have a separate scheme for SIs, probably by the end of

June,” he informs.

Focus on OEMs

AMD has specific plans to work together with MNC as well as

local OEMs.  The company wants to persuade them to introduce commercial AMD

SKUs. Through OEMs, AMD wants to reach enterprise and government customers as

well as opinion leaders in the market place. “OEMs, both MNC and local, are

critical to AMD's success. We are working with both to persuade them to

introduce AMD based SKUs,” says Ajay.

But this is an area, where Intel seems to be far ahead of

AMD. “We work with local OEMs like Wipro, HCL, Zenith as well as the MNCs. We

also have customized programs for all Indian OEMs as well as MNCs,” says Amar.

However, transnational OEMs like Compaq and HP have already

begun rolling out AMD-based machines. This trend is likely to be repeated in

India as well. “In fact, we are talking to all OEMs in India and it is only a

matter of time before all of them launch their AMD machines. At the national

level, players like Zenith are considered as potential OEMs. BBS would like to

go to directly to such national level players to give them more value,” says

Manabesh.

The retail scene

Retailing is one area that Intel does not seem to be

interested in. On the other hand, AMD has established its Athlon centers at

various locations. An Athlon center is meant to be a demonstration center as

well as one-stop shop from where the most updated AMD info and products are made

available to customers. Customers' feedback and sales leads are also being

directed through this channel.

Athlon centers will be the nodal points to implement AMD's

retail programs in future. By the end of the first quarter of 2001, AMD plans to

set up 18 more Athlon centers, which would be managed by its resellers. The

centers would be sponsored by AMD.

Motherboards and compatibility

Costly motherboards and compatibility issues have long

dogged AMD’s efforts to establish itself in India. For instance, Manoj Gupta,

Director, Fortune Marketing, who imports AMD compatible motherboards from Hong

Kong does not seem to be happy. “There are currently two to three models that

we import. The motherboards are definitely expensive as compared to the Intel

versions available. The other reason for this is that AMD boards do not come

with an onboard AGP card, while Intel boards are available with the option of

onboard AGP card,” he informs.

But these problems may soon be coming to an end. According

to Ajay Kapure, with AMD processors becoming a pervasive PC platform, more

manufacturers are getting into motherboards manufacturing for AMD chips. As of

today there are more than 200 motherboards supporting Duron as well as Athlon.

The end-result of all this is that, motherboard prices are

falling swiftly and hence, AMD motherboard prices will no longer be an issue.

Moreover, with the availability of UMA (unified memory architecture) chipsets,

graphics are getting integrated onto chipsets and hence the cost of an overall

AMD-based solution is supposed to be coming down.

Manabesh, corroborating this, says, “Motherboard prices

were higher earlier. Currently, almost all motherboard companies manufacture AMD

compatibles. So prices have already fallen, especially after the introduction of

two new chipsets called the SIS 730S, as well as the VIA KM 133.”

“In fact the Duron 600 with SIS 730S chipset which is all

integrated with sound, VGA, 200 FSB, 100 UMA costs Rs 7000 approximately.

Compared to this, a PIII 600 with any 100 FSB 810 E motherboard from Tomato or

HIS would cost Rs 9000,” Jayesh Sheth, Director, Great World points out.

BBS Electronics Pte Ltd seems to be playing a major role to

complement AMD’s efforts. It supplies ECS motherboards based on the SIS 730S

chipset to support AMD chips. This all-integrated chipset comes at a price point

that is almost equal to any motherboard that supports Intel processors. ECS

motherboards for AMD cost Rs 4,800, while Intel-based motherboards cost Rs

4,400. The difference is that Intel motherboards are 100/133 MHz FSB, while AMD

motherboards come at 200 MHz FSB. ECS motherboards also have a unique UMA

technology.

“We complement AMD by providing support and quality at a

good price point. For AMD CPU fans, we provide Coolermaster and Taisol brands.

Some of the major problems happen because of not using the right fans. So we

educate our channel about the need to use the right motherboards as well as CPU

fans. This is already being done through training programs and mailers,” says

Manabesh.

Upgradability is another USP that AMD hopes, will work in

its favor. Both, Duron and Athlon, are compatible with the same Socket A

motherboards. So upgrading would become very easy. If customers wish to upgrade

to a newer version of an AMD processor, they may use the same motherboard.

This is a value proposition for customers, as every time an

Intel processor is upgraded, the motherboard too has to be replaced. Customers

are very likely to notice this unique feature of AMD processors.

Another factor favorable to AMD is that its processors are

cheaper than Intel’s. “These are the facts that we are asking our channels

to popularize during training programs,” Manabesh reveals.

The server market

One of the key strategic objectives for AMD is to enter the

enterprise PC, server and workstation space. It is all set to popularize its

technology for chipsets among channels. The AMD 760 MP chipset that supports

more than one Duron or Athlon processor will be one of the highlights of 2001.

But it is the AMD two-way platform along with its DDR

(double data rate) memory, which will be the clincher for AMD, in the enterprise

server market. AMD will also leverage its X-86 64-bit technology in its

forthcoming Hammer family of processors to provide leadership performance on

32-bit applications, while also enabling seamless migration to 64-bit computing.

AMD will shortly launch ClawHammer and SledgeHammer processors for the low-end

server market.

Intel also has its ongoing ‘Build Your Own Server

Program’. But according to Amar, not all GIDs participate in this program.

“We supply them with our server motherboards. We also train them to build

their own servers,” he says. Intel is already a major player in the server

market. It also has a channel strategy to address the server market as well as

its proven technology.

Intel is also a force to reckon with in the laptop market.

Though AMD has an alliance with Transmeta to address the laptop market, specific

channel programs have yet to be worked out. 

What channels say

So how has AMD been successful in roping channel partners

in large numbers within a short span? “Margins on Intel products are going

down. AMD margins are definitely very healthy. Though volumes are lower, our

margins are higher, unlike what we earn on Intel sales," says Manoj.

Most of the margins come from the sale itself. The level of

back-end margins is very low. Resellers believe that globally AMD is picking up

and it is likely to follow a similar route here. Many have taken up AMD to get

the edge or the first-mover advantage, as there are not too many players today.

However, Manoj feels that AMD seems to be spending less

money for market development activities. He feels that AMD need to create a

presence by advertising heavily, as their media presence is low.

There are other misgivings too. “The one-year warranty

that we extend to the end-user comes from our own pocket. After accumulating a

certain number of processors, we export them back for replacement. We lose the

customs already paid during the imports," comments Manoj.

Problem of replacements

Since exporting back two or three odd units is not

economical, resellers wait for a certain number to accumulate. This means that

by the time replacement arrive, the prices are substantially lower. Money is

lost on cartage as well. “AMD has to move towards making its warranty support

more clear,” opines Manoj.

There are also potential channel partners who are skeptical

about AMD. Among them, is Vinod G, Managing Director, Arcamax Computers Systems

Pvt Ltd. Says he, “AMD does not have local branch office and it does not have

any technical expertise in positioning the product in different

industries."

When it comes to Intel-based machines, Vinod is of the

opinion that he does not face any problems in promoting it. So, he doesn't see

any competition arising from AMD against Intel. "Intel officials are

focused on nurturing the organization. AMD lacks that 100 percent,” Vinod

claims.

To sum up

AMD is indeed making inroads into the Indian processor

market. It may erode Intel’s market share to certain extent, just as it has

done worldwide. But for the foreseeable future, it does not appear as though

Intel will lose ground drastically. In fact, Intel can even be expected to

consolidate in terms of pricing and channel strategies, not to mention

technology.

At the same time, it should be borne in mind that

throughout the world, AMD has grown at Intel’s expense. Not only that, AMD

even made a profit globally despite a market that had begun slowing down.

If AMD is able to gain a 30 per cent market share worldwide

during 2001, there is no reason why it should not aim for a 40 per cent market

share in 2002. Since India is a critical, growing market, it might very well

decide whether AMD gains or loses worldwide. And it would be interesting to

watch what Intel would do, so as to not lose its market share.

Bobby Anthony in Mumbai, with inputs from Sunila Paul in

Bangalore and Mohit Chhabra in New Delhi.