Discussion AMD 2022-Q4 Financial Results

[Vattila]

After Intel released their dire earnings and forecast this week, AMD again passed Intel in market capitalisation (currently $122B vs $116B). It will be interesting to see if AMD can retain their higher valuation this time around, which very much depends on their own financial results in the current market turmoil. AMD will report quarterly earnings after market close on Tuesday 2023-01-31.

AMD has forcasted revenue to hit $5.50B ± 0.30B. Zacks Estimates on average expects $5.51B, with $0.66 EPS, with a revenue forecast for next quarter slightly up at $5.57B, presumably based on AMD's competitive position and strong growth in the data centre segment, in particular, outweighing the weakness in the client segments.

Do you think AMD will miss, hit or beat their revenue target? Will they forecast revenue up, flat or down for the current quarter?

PS. While we all wait for AMD's results, here is a nice video by CNBC on AMD's history and comeback:

 

[jpiniero]

Tons of copium over client, where entire channel is flooded with Alder and Raptor Lake. I was stunned AMD maintained client ASP annually.

They did cut prices, just to flat compared to previous year. In Q1 they were getting 42% increase (includes GPUs) and Q2 was 35%. In Q3 that fell to just 5%.

What I think happened is that they were forced to cut Rembrandt's prices down to were Cezanne (was?) to be able to move any of it, despite it being a bigger die and the TSMC price hikes.

 

[John Carmack]

What is this nonsense again!!! You mean that there are some warehouses stuffed to the brim with Intel CPUs, so that AMD simply cannot fit inside anymore? Or WHAT do you mean by this?!

Are you really this dense? Sometimes the result is deliberate and at other times it is beyond the company's control. Are the shelves full of unsold product like RTX 4080's not proof enough of the existence of this concept for you?

Despite your disbelief, companies literally do engage in practices where they flood distributors and retailers with more product than the market can absorb. There are even terms for some of those practices. An example is channel stuffing when they do it to pump numbers for the current quarter. Do a Google search for once in your life.

 

[DrMrLordX]

AMD already confirmed that they're cutting back on client shipments:

AMD is 'undershipping' chips to balance CPU, GPU supply

AMD joins Nvidia in "undershipping" chips to balance supply and keep prices higher.

www.pcworld.com

The article is a bit stupid since prices on AMD chips HAVE been falling, except for the now-much-scalped 7900XTX. Everything else - even relatively-new AM5 CPUs - are below MSRP.

 

[jpiniero]

FWIW Sony sold 7 million PS5's in the quarter. They had only been doing 2-3ish million a quarter until then. This quarter they are forecasting a little over 6 million.

 

[KompuKare]

FWIW Sony sold 7 million PS5's in the quarter. They had only been doing 2-3ish million a quarter until then. This quarter they are forecasting a little over 6 million.

Well, remember that AMD is no longer the value brand and is not interested in low-margin stuff, except...

... when it is consoles!

At least the consoles are not currently competing for scares 5nm wafers. Yet.

 

[Doug S]

AMD already confirmed that they're cutting back on client shipments:

AMD is 'undershipping' chips to balance CPU, GPU supply

AMD joins Nvidia in "undershipping" chips to balance supply and keep prices higher.

www.pcworld.com

The article is a bit stupid since prices on AMD chips HAVE been falling, except for the now-much-scalped 7900XTX. Everything else - even relatively-new AM5 CPUs - are below MSRP.

Both "undershipping" and falling prices can be true at the same time.

OPEC/OPEC+ plays this game all the time, they will curb production when oil prices are falling to keep them from falling further than they otherwise would.

 

[desrever]

Both "undershipping" and falling prices can be true at the same time.

OPEC/OPEC+ plays this game all the time, they will curb production when oil prices are falling to keep them from falling further than they otherwise would.

It just makes sense economically to do this if you have an finite amount of something to sell like Oil. If OPEC sell everything they can when price is low, they'd have less when prices are high, it doesn't even have to depend on them trying to control the price. At the scale of OPEC, they have some control over supply but even OPEC can't corner the whole market for oil because the US just ended up producing more and more shale like from 2015-2020. Now that theres not as much investment in oil production, oil prices are going back up and anyone who sold their oil for less would have just gotten paid less for what they had. Now some of the US well are running dry but OPEC still has tones of oil to sell so economically speaking OPEC did the logical thing.

This doesn't quite apply to chips most of the time cause production can generally ramp up above demand for new chips (the exception is during the chip shortage last year but before that there really wasn't any problem with ramping production up). AMD won't run out of chip to sell except for during a semiconductor shortage the past few years. If AMD isn't selling for lower prices, Intel is eating their market share, which is happening in client. Intel has like 90% of the client market now. What is happening however is AMD just not investing in getting chips in client because they are more focused on other markets that are more profitable in the current market. Competing with Intel in their strongest market is a hard fight that AMD is avoiding. Intel is already pumping large volume into client and continues to do so because they have competitive products in that space, even with the revenue intel's client segment is making, the profits is pretty small. AMD adding more volume will drive prices even lower but neither company would make any money. Unless both company want to be charities, why would either want to lower prices beyond their operating costs?

 

[Mopetar]

Well, remember that AMD is no longer the value brand and is not interested in low-margin stuff, except...

... when it is consoles!

At least the consoles are not currently competing for scares 5nm wafers. Yet.

Consoles are a way for AMD to split development cost with Microsoft and Sony. They'll take the lower margins their because their expenses are lowered. Having their technology inside also helps with branding to a degree.

Console SoCs will move to 6nm nodes, but not 5nm. TSMC has been offering deals to get production shifted off of 7nm and that's likely enough for the mid-cycle refreshes or the slim versions.

 

[moinmoin]

Well, remember that AMD is no longer the value brand and is not interested in low-margin stuff, except...

... when it is consoles!

At least the consoles are not currently competing for scares 5nm wafers. Yet.

As always: Big difference is that with semi custom chips AMD doesn't take the risk, the customer does. For stuff companies take a significant risk no one sane wants to end up being seen as a value brand (unless that's the only selling point left).

 

[jpiniero]

Console SoCs will move to 6nm nodes, but not 5nm.

PS5 has already been shipping on N6 for several months. 15% die size reduction.

PS5 Refresh: Oberon Plus

6nm EUV Shrink

www.angstronomics.com

 

[IEC]

I bought a PS5 in November. It's a refreshed Oberon Plus 6nm model. Uses less power, runs cooler, same performance.

 

[DrMrLordX]

Both "undershipping" and falling prices can be true at the same time.

Yes, which is important to remember. AMD doesn't want to oversaturate the channel during lax demand. But some people have read this article and said, "OMG MARKET MANIPULATION" when in reality they're just trying to keep prices from crashing too much. Which makes sense.

 

[Saylick]

Yes, which is important to remember. AMD doesn't want to oversaturate the channel during lax demand. But some people have read this article and said, "OMG MARKET MANIPULATION" when in reality they're just trying to keep prices from crashing too much. Which makes sense.

If I buy too many groceries the week before and my fridge is still stocked up, I'm not going to buy as many groceries this week. Where's the people complaining that in under-buying this week I'm maliciously trying to keep the food in my fridge from going bad and that I should instead let it get stale?!

 

[DrMrLordX]

If I buy too many groceries the week before and my fridge is still stocked up, I'm not going to buy as many groceries this week. Where's the people complaining that in under-buying this week I'm maliciously trying to keep the food in my fridge from going bad and that I should instead let it get stale?!

Yeah man gotta keep the landfill topped off.

While we're at it, let's make some more E.T. cartridges.

 

[Mopetar]

I bought a PS5 in November. It's a refreshed Oberon Plus 6nm model. Uses less power, runs cooler, same performance.

I was considering getting a new console, but they were impossible to find at launch and I wasn't going to pay a scalper for one.

Have they updated the look for this newer model or is it still the same as before? I was leaning PlayStation, but the design is kind of ugly in my eyes.

 

[lopri]

I would like to see AMD making deliberate attempt to grow market share, even at the cost of margin. Profit will follow naturally and more easily. They're doing it on server, they should do it on desktop, too.

 

[Doug S]

It just makes sense economically to do this if you have an finite amount of something to sell like Oil. If OPEC sell everything they can when price is low, they'd have less when prices are high, it doesn't even have to depend on them trying to control the price. At the scale of OPEC, they have some control over supply but even OPEC can't corner the whole market for oil because the US just ended up producing more and more shale like from 2015-2020. Now that theres not as much investment in oil production, oil prices are going back up and anyone who sold their oil for less would have just gotten paid less for what they had. Now some of the US well are running dry but OPEC still has tones of oil to sell so economically speaking OPEC did the logical thing.

This doesn't quite apply to chips most of the time cause production can generally ramp up above demand for new chips (the exception is during the chip shortage last year but before that there really wasn't any problem with ramping production up). AMD won't run out of chip to sell except for during a semiconductor shortage the past few years. If AMD isn't selling for lower prices, Intel is eating their market share, which is happening in client. Intel has like 90% of the client market now. What is happening however is AMD just not investing in getting chips in client because they are more focused on other markets that are more profitable in the current market. Competing with Intel in their strongest market is a hard fight that AMD is avoiding. Intel is already pumping large volume into client and continues to do so because they have competitive products in that space, even with the revenue intel's client segment is making, the profits is pretty small. AMD adding more volume will drive prices even lower but neither company would make any money. Unless both company want to be charities, why would either want to lower prices beyond their operating costs?

Everything has a finite amount to sell, the difference is in the ability to easily scale production up/down and the elasticity of demand. Sure the shale oil boom in the US took some of the control out of OPEC's hands, but rather than scaling back their own production to reach the price points they wanted they allowed the shale productions to lower the price. In hindsight that was very smart of them, they seem to have known what would happen back here in the US.

So what happened? The stockholders in those companies got pissed that all the profits kept being plowed back into exploration/production and threw down the gauntlet. So now those companies are sitting on a bunch of wells that were shut when the pandemic hit they haven't restarted, and a bunch of leases they haven't exploited. They could easily scale production to pump several million more barrels per day, but they choose not to because it would lower the price while increasing their costs and the shareholders don't want that. That's basically the exact same situation AMD is in - they could produce more chips but that would only lower the price leaving shareholders worse off.

 

[Markfw]

Everything has a finite amount to sell, the difference is in the ability to easily scale production up/down and the elasticity of demand. Sure the shale oil boom in the US took some of the control out of OPEC's hands, but rather than scaling back their own production to reach the price points they wanted they allowed the shale productions to lower the price. In hindsight that was very smart of them, they seem to have known what would happen back here in the US.

So what happened? The stockholders in those companies got pissed that all the profits kept being plowed back into exploration/production and threw down the gauntlet. So now those companies are sitting on a bunch of wells that were shut when the pandemic hit they haven't restarted, and a bunch of leases they haven't exploited. They could easily scale production to pump several million more barrels per day, but they choose not to because it would lower the price while increasing their costs and the shareholders don't want that. That's basically the exact same situation AMD is in - they could produce more chips but that would only lower the price leaving shareholders worse off.

I don't want this to go political, but when the new president took office, he basically shut all new oil production down, cancelled a pipeline product, and not sure , but he may have canceled those leases you talk about as well.

PLEASE DO NOT COMMENT ON THE POLITICS, I JUST WANTED TO MAKE A SMALL CORRECTION ON THE PROBLEM WITH OIL PRODUCTION.

 

[IEC]

I was considering getting a new console, but they were impossible to find at launch and I wasn't going to pay a scalper for one.

Have they updated the look for this newer model or is it still the same as before? I was leaning PlayStation, but the design is kind of ugly in my eyes.

No.

Rumors of a PS5 Slim model exist, but they are just that - rumors.

 

[eek2121]

Both "undershipping" and falling prices can be true at the same time.

OPEC/OPEC+ plays this game all the time, they will curb production when oil prices are falling to keep them from falling further than they otherwise would.

I want what you are smoking.

With oil, price is loosely controlled by OPEC. However, if I find oil in my backyard and can sell it for less (at scale, of course), I am free to do what I want. OPEC has no control over what I do. The only reason OPEC has any control at all is that they are a super-capitalistic alliance of oil producers.

AMD faces no constraints. Markets don't dictate the price of a 7950X. AMD does (AMD MAY choose to follow the market, but they most certainly don't have to). Newegg can sell a 7950X for $450 all it wants, but if the distributor (or AMD themselves depending on the setup) is charging more, Newegg is losing money.

AMD doesn't have to reduce prices at all. If they DO choose to reduce prices, it is because they knew they could make more money by doing so then by not.

You guys have a very odd take on capitalism.

If you desperately need a pen, and I am the only guy within 10 miles of you willing to sell you one, do you think I am going to give you a discount? Even if another dude is there, willing to sell you a pen, he knows that he and I have the pen market cornered. We can charge what we want. Ironically that describes OPEC in a way, except if your cousin shows up, he can't magically make a brand new pen to undercut us.

Intel/AMD control pricing. Retail does not. If Intel and AMD chose to double x86 prices overnight, they can.

Footnote: While x86 itself is not patented, most of the inner workings of a modern x86-64 processor are, to the point where Microsoft can't even effectively emulate the architecture on ARM.

 

[DrMrLordX]

I would like to see AMD making deliberate attempt to grow market share, even at the cost of margin. Profit will follow naturally and more easily. They're doing it on server, they should do it on desktop, too.

AMD's problem is that CPU prices aren't the only factor. One must consider total platform cost. OEMs aren't backing down on high motherboard prices, and AMD has no control over DDR5 prices either. Increasing adoption rates of both LGA1700 and AM5 only raises demand pressure on DDR5.

Under the present circumstances, I don't think AMD can safely increase market share just by channel stuffing.

 

[Doug S]

I don't want this to go political, but when the new president took office, he basically shut all new oil production down, cancelled a pipeline product, and not sure , but he may have canceled those leases you talk about as well.

PLEASE DO NOT COMMENT ON THE POLITICS, I JUST WANTED TO MAKE A SMALL CORRECTION ON THE PROBLEM WITH OIL PRODUCTION.

Your "correction" is incorrect. He didn't shut new oil production down, he put a moratorium on new leases. Since drillers aren't developing all the leases they already have, giving them more leases to sit on isn't going to increase production.

The Keystone XL pipeline being canceled has zero to do with US oil production. It was for getting oil from Alberta to the existing and operational Keystone pipeline so it can reach refineries in the Gulf states. Why? Because Canada doesn't want to build refineries that process dirty tar sands oil in their own country!

 

[Markfw]

Your "correction" is incorrect. He didn't shut new oil production down, he put a moratorium on new leases. Since drillers aren't developing all the leases they already have, giving them more leases to sit on isn't going to increase production.

The Keystone XL pipeline being canceled has zero to do with US oil production. It was for getting oil from Alberta to the existing and operational Keystone pipeline so it can reach refineries in the Gulf states. Why? Because Canada doesn't want to build refineries that process dirty tar sands oil in their own country!

Doesn't all "new production" require new leases ? And if you turn off a pipeline that would add new production of oil ? Both have the effect of shutting down all NEW production.

And my point was that oil production dropping had nothing to do with covid, but everything to do with what the new president did to production.

 

[mderbarimdiger]

AMD's problem is that CPU prices aren't the only factor. One must consider total platform cost. OEMs aren't backing down on high motherboard prices, and AMD has no control over DDR5 prices either. Increasing adoption rates of both LGA1700 and AM5 only raises demand pressure on DDR5.

Under the present circumstances, I don't think AMD can safely increase market share just by channel stuffing.

Yes, Lisa stated that they wait for AM5 prices to drop down and she expects better prices by the end of the year.

----

We should recognize that AMD is showing extraordinary financial strength against all other semi companies, Micron, Samsung, Intel, Lam research, and basically almost everyone who is in the semi market is in pain now, AMD is the rare exception!

Is it just a co incident or luck? obviously exceptional strengths is the results of an exceptional vision and keeping disciplined true to the vision.

Beating a competitor by pricing tactics is not a grand vision, and selling for cheaper just because we are now in a market downcycle is not what we would consider discipline, if you want to know wow AMD is succeeding please watch how they handle the current situation!

AMD is not giving up on the CPU client market, Lisa Su said during the last earnings call that AMD will differentiate with its CPU products without going in details, but we can assume that she meant the 3XD products, she specified that the second quarter will be slightly better and you can again assume that she was thinking about X3D products.

in addition she mentioned during the call that she expects AM5 / DDR5 to become more affordable in Q4 of this year.

so AMD is not giving up the desktop CPU business to intel, they are prepared to fought for its share, however the price tag is not going to be their weapon of choice, and its perhaps the best way for AMD to go.

 

[Doug S]

Doesn't all "new production" require new leases ? And if you turn off a pipeline that would add new production of oil ? Both have the effect of shutting down all NEW production.

And my point was that oil production dropping had nothing to do with covid, but everything to do with what the new president did to production.

No, there are plenty of existing leases that haven't been drilled yet - some may NEVER be drilled. Some because the owner of the lease can't afford to, some because the owner doesn't want to spend the money (i.e. the shareholders want returns, not re-investing every dollar they make) some because the location of the lease isn't so great (i.e. they would have to run too much pipe to get it to a main line to take it market or use tankers both of which increase the break-even price) or some wells may have more gas yield than they are allowed to flare.

Your "point" is wrong, oil production dropping had EVERYTHING to do with covid. Don't you remember when the spot price of oil reached negative 38 dollars at one point when everyone was staying home and not driving to work or school? If you have to pay $38 a barrel to bring oil to market, and don't have anywhere to store it, you have no choice but to shut your well. Check out the rig count below (from https://www.shaleexperts.com/rigcount) Do you notice that big dip in early 2020? You really trying to claim that has nothing to do with covid, or that a president who didn't take office until early 2021 caused it? It has almost recovered to where it was in Jan 2020, but not quite.