The fact that there is a crying shortage of circuits has not escaped the computer enthusiasts, but in recent times it has seriously started to spill over into everything that has to do with electronics. This threatens the growth of many otherwise prosperous companies. Those with the best conditions to continue to grow are the already large dragons who can place large orders over a long period of time.
When Nvidia presented its interim report for the second quarter, CEO Jen-Hsun Huang said that he sees that the shortage continues, but that by securing long-term contracts, the company can ride out the storm. Another company that seems to take the circuit shortage calmly is AMD, which is growing so fast and completely sonic, increasing the need for production capacity at TSMC thereafter.
We believe that we can continue [this revenue growth], both with the customers on the demand side and also supply [side] with our foundry partners, substrate suppliers, and ATMP [assembly, testing, marking, and packaging] capacity and feel that there is significant room for us to grow out to 2022 and 2023. – AMD:s ekonomichef, Devinder Kumar
During the Deutsche Bank Technology Conference 2021, AMD’s CFO Devinder Kumar says that the company sees good opportunities for them to have the capacity required to continue to grow. To make this possible, three main components are required. The first is that AMD’s main contract manufacturers can supply circuits, the second that there are substrates and the third that there is sufficient capacity for assembly, testing, marking and packaging (ATMP).
Well, there are two things, right. The first priority is if we’ve made a commitment to our customer, we want to make sure that we can supply the parts to the customers. […] Then the second thing you look at it from an overall standpoint, demand versus supply, the way obviously we can prioritize the data center is a very high priority from that standpoint. And then the PC business, in particular with the higher end of the stack, we want to make sure that we can maintain and continue to grow the business in that area. That’s a very high priority and then you take it from there. It is not as simple as that make it to be.
To meet its financial goals, AMD has two priorities, says Kumar. The first is that they live up to existing client agreements. Second, it is obvious to analyze supply and demand, but now more than usual. It is already known that AMD prioritizes the manufacture of processors for data centers and high performance for consumers, while products with lower margins such as processors in lower price ranges may lag behind.
The fact that AMD prioritises high margins over volumes and thereby growing in the market has made its clear mark. In x86 processors, AMD had a market share of 22.5 percent during the second quarter compared to Intel’s 77.5 percent, which according to Mercury Research was AMD’s highest in 14 years. When it was broken down into different categories, the situation looked different.
In terms of processors for desktops, AMD lost 2.1 percentage points on an annual basis and had a share of 17.1 percent during the second quarter of the year. A direct consequence of products in the higher segment being prioritized before having as large a market share as possible. On the portable side, this was a negligible growth of 0.1 percentage points up to 20 percent. The largest increase was noticed on the lucrative server side, where the company rose from 5.8 to 9.5 percent – an increase of almost 64 percent in one year.
While AMD believes in continued growth despite the shortage, analysts agree that there is an upper limit even in a normal situation. Unlike Intel, AMD relies entirely on third-party manufacturing, today almost exclusively TSMC, and is therefore completely in control of what capital investments it is prepared to make. Intel, on the other hand, has its own factories.
In 2020, AMD had sales of $ 9.76 billion, and in 2021, AMD hopes to grow by 60 percent to approximately $ 15.6 billion. During the first two quarters of the year, AMD withdrew 7.3 billion.
Source: Seeking Alpha (transcription)