AMD: confident in our suppliers, ready to grow in 2022
AMD’s revenue has grown steadily in recent years. In 2020, the company posted its record revenue of $ 9.763 billion and, for that year, it recently guided a huge 60% increase to around $ 15.5 billion, a particularly elusive goal in a context of crisis in the supply of chips. Still, AMD is confident that it will meet its targets this year and in the years to come due to improved supply, growing demand for HPC-grade servers and hardware, and a focus on high-end models.
“We think we can continue [this revenue growth], both with customers on the demand side and also on the supply side [side] with our foundry partners, substrate suppliers and ATMP [assembly, testing, marking, and packaging] capacity and believes that we have significant room for improvement until 2022 and 2023, ”Devinder Kumar, AMD CFO, told Deutsche Bank Technology Conference 2021 (via SeekingAlpha).
AMD’s sales so far this year have been very strong. The company earned $ 7.295 billion in the first two quarters of the year and is on track to meet the goal of increasing revenue by 60% year-over-year.
To meet its financial goals this year, AMD had to prioritize manufacturing the products it had committed to supply as well as high-margin models, which sometimes meant giving up a unit share. In fact, AMD gained unit and revenue share in servers and mobile client PCs, but its unit share in desktops fell in Q2 2021 (even though it has some of the best processors nowadays) while the company has concentrated its production on a high-margin server. CPU as well as on mobile processors (which he had undertaken to provide to PC manufacturers beforehand). Meanwhile, the company’s unit share of the desktop and laptop discrete GPU market fell to a multi-year low in the second quarter of 2021.
Data centers & HPC
“The first priority is that if we have made a commitment to our customer, we want to make sure that we can deliver the parts to customers,” Kumar said. “The second thing you look at from a global demand versus supply perspective, […] the data center is a very high priority […]. Next, the PC business, especially with the high end, we want to make sure that we can maintain and continue to develop the business in this area. “
When it comes to data centers and servers, AMD is particularly competitive with its 2nd and 3rd generation EPYC processors named Rome and Milan that feature up to 64 cores, which Intel cannot offer. At this point, AMD’s EPYC processors have been particularly successful with OEMs supplying businesses. But as cloud data center operators accelerate adoption of EPYC chips, the business faces additional demand for its server processors.
Speaking of EPYC, it’s impossible to overlook another major market they are aimed at: supercomputers. AMD has won and executed several supercomputer contracts with its EPYC processors, but its main design wins for the Frontier 1.5 ExaFLOPS supercomputer from the Oak Ridge Leadership Computing Facility as well as the El Capitan 2+ ExaFLOPS supercomputer from the Lawrence Livermore National Laboratory failed. have not yet been delivered.
Frontier and El Capitan are both powered by AMD’s EPYC processors as well as the company’s Instinct compute GPUs based on the CDNA architecture developed specifically for the HPC space. Being exascale systems, they use a lot of high end components and make a lot of money for tech companies. The Frontier machine alone will net AMD, HPE and others around $ 600 million.
GPUs are for gamers, not minors
The demand for discrete GPUs for desktops and laptops has grown dramatically in recent quarters as people now spend more time at home, but AMD couldn’t really capitalize on this in terms of unit shipments.
Obviously, with demand being high, the company could increase the prices of its GPUs and sell more high-end models (like those on our best graphics card list) than usual. However, AMD has also been the subject of controversy.
A recent survey of Steam hardware found that there were 11 times more gamers using Nvidia’s GeForce RTX 30 graphics cards than gamers using AMD’s latest Radeon RX 6000 cards. Based on data from Jon Peddie Research, Nvidia topped AMD sales 9: 2 in Q2 2021, so after looking at data from both sources, some observers accused AMD of selling its Radeon GPUs to big farms. mining rather than sending them to the retail channel after seeing a video on Reddit.
AMD’s chief financial officer denied the charges and said the miners’ demand was negligible. He also indicated that while AMD does not prioritize its GPU clients (well, at least not unless it has committed to providing them to a client in advance), Radeon GPUs are for gamers, not to minors.
“First, crypto is negligible, it’s not a priority for us,” Kumar said. “We don’t prioritize our product or manufacture it for cryptos, it’s more for gamers and it’s our top priority from that point of view. [GPU revenue] growth, as you know we [have] Radeon RX 6000 high-end GPUs [they are] very competitive and driving growth in the GPU space. ”
The discrete GPU activity relies heavily on massive R&D spending, a halo effect produced by high-end graphics cards, a retail presence with a large family of offers and marketing investments. Several years ago, AMD couldn’t afford major investments in its graphics business and prioritized its CPU business because it had a clear track record with visible returns. This is the reason why Nvidia can drastically overtake AMD today.
What would be interesting to know is whether AMD is investing enough in its GPU business now and whether that will be enough to capture a significant market share from Nvidia several years from now.
Focus on revenue sharing
Being constrained by the levels of wafer processing capacity, substrate supply, and ATMP (assembly, testing, marking and packaging), AMD cannot actually significantly increase its unit shipments and gain market share. Intel unit, especially the customer side of the market. Therefore, AMD needs to focus on revenue share by selling server processors as well as high-end products instead of cheaper benchmarks.
“We are very focused on the revenue share to move forward and keep growing because we believe that even at the level where we are now, we have a considerably lower revenue share in terms of where we’re going. come up from a revenue share gain, especially with the high-end products and the comparative products that we introduce, ”Kumar said.
AMD is quite optimistic about its medium-term future, as demand for its products increases in all segments of the market, including client PCs, data centers and supercomputers. In fact, for the first time in its history, AMD has very competitive processors (if not the best processors) for virtually every major application. When combined with the generally high demand for computers, it’s no surprise that the business cannot meet 100% of the demand it faces.
With the growing demand for anything that calculates, AMD’s main challenge over the next few quarters and years will hardly be to land additional orders to sell as many parts as possible, but to produce enough chips to meet the demand. growing demand. In the meantime, AMD will focus on increasing its revenue share by selling more expensive components.