AMD’s Lisa Su Redoubles Intel Challenge With Record Xilinx Deal

(Bloomberg) -- Lisa Su spent her first six years at the helm of Advanced Micro Devices Inc. turning around the troubled chipmaker. She slashed debt and oversaw products that launched on time and performed as advertised.

Now she’s going beyond cleanup to challenge Intel Corp. for the lead in computer chips.

The 51-year-old engineer -- among the few female CEOs in technology -- unveiled a $35 billion all-stock acquisition of Xilinx Inc. on Tuesday, one of the largest chip deals ever. In interviews and conference calls, Su made it clear there are few limits to her ambition.

“We have an even bigger place in the industry over the next five years than we’ve had in the last five,” she said.

Since taking over in 2014, Su has erased AMD’s reputation as an accident-prone supplier of cheap processors struggling to survive in Intel’s shadow -- something her predecessors failed to do spectacularly.

Buying Xilinx, a maker of programmable silicon, will take AMD into new areas such as automotive and communications networking, while bolstering its offerings in the lucrative market for cloud data center components. If the transaction closes next year as planned, the company’s annual research-and-development budget will jump to more than $2.7 billion. That’s still small compared with Intel’s but it’s a crucial ingredient if AMD is going to seriously challenge the industry’s leaders.

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Born in Taiwan, Su graduated from the Bronx High School of Science in New York and got her Ph.D. from the Massachusetts Institute of Technology. She worked at companies including Texas Instruments Inc. and International Business Machines Corp., then arrived at AMD in 2012 as a senior vice president.

An early success was getting AMD chips in the dominant gaming consoles, Microsoft Corp.’s Xbox One and Sony Corp.’s PlayStation. But most of her progress has come from a methodical focus on meeting customer demands -- a stark contrast to former AMD CEOs who were known for splashy product launches that often didn’t deliver.

While she’s been involved in chip industry innovation, Su dislikes portrayals of her as a lab-bound technical genius, describing herself as an OK engineer. She says one of her main skills is the ability to understand engineers and help them make the best high-level decisions, not do the work for them.

In her usual practical fashion, she presented the Xilinx deal to investors as a transaction that will improve AMD’s finances first and then transition the combined company to future technical leadership.

“I haven’t talked a lot about M&A because I didn’t think there was a need to do M&A for M&A’s sake,” she said. “This is about what’s the next step for AMD and Xilinx is the best franchise in the industry.”

The structure of the Xilinx transaction also shows the power of Su’s transformation. AMD shares have soared under her watch and the company is using that currency to pay for the acquisition. That will help Su avoid the heavy debt load that crippled AMD a decade ago.

Read more: AMD Tries to Avoid Past Debt-Ridden Deal Mistakes

The chip industry’s first female chief executive now wants her company to be more than just another supplier of components. She sees Xilinx helping AMD set the industry’s agenda by defining new technology, something that’s mostly been the preserve of Intel in computing for half a century.

Getting to this position hasn’t been easy. When Su took the top job, she was AMD’s fourth CEO in a decade. The company had lost money in six of those 10 years as products either launched late, performed below expectations or had to be fixed later. That left AMD with less than 1% of the lucrative server chip market, down from a peak of 26%.

Prior to the Xilinx deal, Su’s most public expression of ambition was to regain that 26% market share. When discussing AMD’s future, she would fall back on her standard refrain of “consistent execution” -- creating a company that delivers what it promises.

One of her biggest decisions in 2018 has helped Su keep her promises and set the stage for AMD’s next chapter. The company outsourced production of its best chips to Taiwan Semiconductor Manufacturing Co. Soon after, TSMC overtook Intel in production technology. Now AMD’s processors are often as capable as Intel’s -- sometimes better. When she announced the Xilinx agreement, Su was careful to point out that her acquisition target also relies on TSMC’s production prowess.

Read the Bloomberg 50 profile: Lisa Su, AMD’s David to Intel’s Goliath

Intel still dwarfs AMD. The world’s largest chipmaker has an annual R&D budget of more than $10 billion and is expected to make a profit of $21 billion this year -- more than double AMD’s revenue.

But Intel is making Su’s job easier. The company is going through an unprecedented series of stumbles with its once peerless manufacturing. It’s only just started shipping large numbers of chips made with a production technique called 10 nanometer, more than three years late. AMD and its customers are already enjoying the benefits -- price, performance and power efficiency -- of a more advanced type of manufacturing known as 7 nanometer.

That type of technical leadership helped persuade Xilinx Chief Executive Officer Victor Peng to join Su.

“We had a great path as a standalone company,” said Peng, who will become AMD president and continue to run the Xilinx business. “We looked at the landscape and we thought about this carefully. This is about choosing to be part of an even greater company -- which is AMD.”

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