BY AARON PRESSMAN

June 1, 2021 11:00 AM GMT+8

Advanced Micro Devices has gained major momentum in recent years with new big-selling chips for PCs, laptops, and servers. Now CEO Lisa Su has won over a high-profile customer outside of the computer industry: Tesla.

AMD processors and graphics chips will be used in the infotainment systems of newly updated Tesla Model S and Model X electric cars, which are expected to go on sale in a few weeks. With AMD’s more powerful chips, Tesla owners will be able to play cutting-edge video games in their cars—when they’re not driving, of course–and see maps and other items in more detail.

“The work (Tesla) is doing is truly pushing the leading edge of what you can put into a car,” Su told Fortune in an exclusive interview before announcing the Tesla deal on Monday at the Computex computer show in Taiwan. She described the effort to make in-car dash systems as powerful as high-end PCs “part of the broader trend that computing is everywhere.”

“The fact is that the technology we developed for PCs is now coming over into the automotive world,” Su said.

The Tesla contract adds to AMD’s momentum following three years of gains in the computing market. As a supplier to one of the buzziest U.S. companies, AMD can claim significant bragging rights and yet another victory over its rivals.

The win displaces Intel, which had supplied chips for the infotainment system in prior versions of the Model S and X. The other Tesla vehicles—Model 3 and Y—will continue to be equipped by Intel.

AMD didn’t disclose any financial details about its Tesla deal. But to give a sense of its size, Tesla produced nearly 60,000 Model S and X cars last year, or 11% of its 2020 total production.

The deal doesn’t include chips in Tesla’s self-driving car system, which are designed by Tesla in-house. Tesla didn’t respond to an email seeking comment.

Even with the Tesla deal, AMD remains a minor player in the automotive industry, which is part of the reason why it plans to buy chip maker Xilinx for $35 billion. That deal, announced in October, is expected to close by year-end.

Since Su took over at AMD in 2014, she has overseen a renaissance at what is the second-biggest chipmaker for personal computers and servers behind Intel. In the first quarter, AMD’s sales jumped 93% to $3.4 billion, almost more than AMD’s entire annual revenue in 2015.

And while Intel has stumbled in making new chips, AMD has had little trouble in working with its manufacturing partner, Taiwan Semiconductor. AMD’s stock has gained 52% over the past 12 months while Intel’s lost 10%.

On Monday at Computex, AMD also announced a host of other customer wins and new chips, including a deal to supply graphics technology for Samsung mobile phones and new processing chips for laptops and PCs that include the latest graphics technology built in. Integrating its newest and best-performing graphics technology with the processor chips should improve laptop performance without hogging as much battery power as separate graphics chips require.

In another demonstration, Su showed AMD’s latest Epyc processor for servers outperforming Intel’s latest server chip by 50% on an e-commerce application.

But the most important reveal may have been Su’s demonstration of a new technique AMD developed in concert with Taiwan Semiconductor to improve chip performance in the future.

For years, chip makers have jammed more transistors onto the same-sized piece of silicon to cut costs and boost performance. That progress has slowed, so the industry is looking to the third dimension to improve performance.https://a25dec8758fe862b1e1db8d93c87f70d.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

At Computex, Su showed off an existing AMD desktop processor chip that had added memory stacked on top of it using the new technique. By putting the processor and the memory in closer contact, the performance of the most-demanding video games improved 15%.

“The next frontier is really to go into the third dimension, the idea of stacking chips on top of each other,” Su said. The stacked chips must be carefully designed so that they don’t overheat or use too much power. Comparing the process to snapping Lego bricks together but on a microscopic scale, she added: “It looks nice, but it’s actually very hard to do.”

AMD will only be using the stacking technique on high-end chips, aimed at video gamers and businesses that are willing to pay extra. “This is not something that will show up for the mainstream consumer products,” Su said. “It will be the top-end performance that you can get from some of our processors.”

Intel has said that its own version of 3-D stacking technology, which will premiere on its Ponte Vecchio chip for graphics and A.I. processing, is expected to debut in the Argonne National Laboratory’s Aurora supercomputer next year. Next, Intel will use the technology in its Meteor Lake line of desktop processors due in 2023.

The semiconductor industry is still struggling to meet the increasing global demand for chips, which has caused shortages that have slowed production of everything from cars to phones and video game consoles. Su said AMD and other chipmakers are still working to increase production to fix the problem.

“The overwhelming thing to remind people of is the origin of this particular shortage is just incredible demand—no one could have predicted this type of demand,” she said. “There’s an overwhelming desire to satisfy the demand, and every part of the semiconductor ecosystem is working on ramping that demand as fast as possible.”