AMD admits undersupply to keep prices high

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BFG10K

Lifer
Aug 14, 2000
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While not technically price fixing, it's still a collusion cartel operating at its finest. If you keep buying at these prices, none of your complaining is valid.

STOP BUYING GRAPHICS CARDS AT THESE PRICES!

That'll force them to drop pricing, or otherwise their consumer GPU division will fold.
 

Stuka87

Diamond Member
Dec 10, 2010
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Its worth noting that nVidia already said they were doing this last quarter. So its not like its a surprise that AMD is doing it, or any other tech provider. And its 100% normal with an economy dips down. Any company would be dumb to continue to ship huge quantities into a dropping market.

Demand has dropped significantly. However, while limiting supply to a brand new generation of GPUs and CPUs will work up front, as early adopters will pay whatever. It won't work long term unless demand climbs back up, which is not looking likely for much of this upcoming year.
 

maddie

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Jul 18, 2010
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Its worth noting that nVidia already said they were doing this last quarter. So its not like its a surprise that AMD is doing it, or any other tech provider. And its 100% normal with an economy dips down. Any company would be dumb to continue to ship huge quantities into a dropping market.

Demand has dropped significantly. However, while limiting supply to a brand new generation of GPUs and CPUs will work up front, as early adopters will pay whatever. It won't work long term unless demand climbs back up, which is not looking likely for much of this upcoming year.
Exactly. If everything returns to normal soon, which I 100% doubt, then good. If this downturn continues they will have lost a lot of consumer goodwill for chasing a fantasy.

I suppose we can create a humorous line here. Higher margins forever, increased sales never.
 
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GodisanAtheist

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Nov 16, 2006
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While not technically price fixing, it's still a collusion cartel operating at its finest. If you keep buying at these prices, none of your complaining is valid.

STOP BUYING GRAPHICS CARDS AT THESE PRICES!

That'll force them to drop pricing, or otherwise their consumer GPU division will fold.

- Virtually my entire computer in my sig was built with either used or carry-forward parts. The case and AIO are new, the CPU was new but a tray part for $300.

Basically double dipping on parts for 40-50% off new prices, and none of that money went straight to AMD or Intel or NV after the rapacious profits they pulled in over the last year or two.
 
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amenx

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Dec 17, 2004
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"AMD admits undersupply to keep prices high..."
The whole tech industry is scaling back chip orders, product supplies because there is a recession. This has been the way things work for all products, even beyond the tech industry, ie, cars, phones, travel, tourism, etc, virtually all sectors (outside of food, medical care) are seeing a slowdown in business. Of course we can put a spin on that and say "its to keep their prices high".

AMD has only about 10-15% of the discrete GPU market. I doubt they are trying to maintain high margins by deliberately shipping less. Perhaps they are shipping less because they may feel that even with price reductions, they may still not make up for it in volume sales during hard times?
 

KompuKare

Golden Member
Jul 28, 2009
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Not to mention, how much of the "R&D costs are going up" and "foundries have no more capacity" claims were lies?

Obviously they're both contributors, but there's absolutely no doubt another reason is maintaining fat margins miners gave them.
Well, if you deliberately decrease your volume (because margins, margins, margins!), then your R&D costs per unit do actually and factually go up!

This is the logic for madness though.
 
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AtenRa

Lifer
Feb 2, 2009
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While not technically price fixing, it's still a collusion cartel operating at its finest. If you keep buying at these prices, none of your complaining is valid.

STOP BUYING GRAPHICS CARDS AT THESE PRICES!

That'll force them to drop pricing, or otherwise their consumer GPU division will fold.

Su was talking about under shipping in order for the channel to reduce inventory not to increase prices.

AMD sold less GPUs but the Channel sales were up Q to Q.


From the event

Turning to our Client segment. Revenue declined 51% year-over-year to $903 million. We continue to ship below PC consumption in the fourth quarter as we focused on further reducing downstream inventory. While overall PC demand remains soft, desktop channel sell-through increased sequentially during the holiday season.

Now turning to our Gaming segment. Revenue declined 7% year-over-year to $1.6 billion as lower gaming graphics sales more than offset higher semi-custom revenue. Semi-Custom SoC revenue grew year-over-year as demand for game consoles remained strong during the holidays. Gaming graphics revenue declined year-over-year as we further reduced desktop GPU downstream channel inventory.

Channel sell-through of our Radeon RX GPUs increased sequentially
, and we launched our high-end Radeon 7900 series GPUs to strong demand based on the performance of our new RDNA 3 architecture and 5-nanometer chiplet design. In January, we announced our first RDNA 3 mobile GPUs that have been selected to power new gaming notebooks from Dell Alienware, ASUS and others that are on track to begin shipping in the first half of 2023.

As we enter 2023, we expect the overall demand environment to remain mixed with the second half stronger than the first half. In the PC market, we are planning for the PC TAM to be down approximately 10% for 2023. We expect to continue to ship below consumption in the first quarter to reduce downstream inventory, which is reflected in our guidance.

Also to put some light in to the Q and A and what was said.

Vivek Arya
Got it. And then on the PC side and also kind of as it relates to the pricing environment, you mentioned the PC TAM is - could be down about 10%. But when we look at the shipments, right, from you and your competitor, they could be down as much as 40% or 50%, right, year-on-year in Q1. So do you think there's a possibility that the TAM assumption of just down 10% could be an optimistic one?

Because I would imagine that would suggest the inventory clears out soon, but you're suggesting that it may not clear out until Q2. So I was just hoping you could give us some better sense for when the PC market starts recovering? And do you think it could become more price competitive before it recovers?

Lisa Su

Yes. So maybe just to make sure that we're just correlating the numbers. So my comment about PC TAM being down 10% was assuming, if you take a look at sort of what IDC just published for - in 2022 at about 290 million units, and that's more of a sell-through TAM versus a sell-in TAM. So we have been under shipping sort of the sell-through or consumption for the last two quarters in an attempt to renormalize that as soon as possible.

In terms of do I think its conserve - I think it's in the ZIP code. I think it's in the ZIP code. So if you imagine 2023 sell-through TAM of about 260 million units, plus or minus, seems to be about the right number. We have made good progress in inventory normalization. We want to be cautious, obviously, heading into the year just given the macro environment. First quarter, we said would be roughly seasonal for PCs.

I think second quarter - first quarter should be the bottom for us in PCs. We - and then grow from there into the second quarter and then into the second half. And I should note also, Vivek, I mean, we just launched our Ryzen 7000 Series with sort of our AI capabilities, both from a notebook and desktop standpoint.

So, we feel good about the product road map in PCs. Obviously, we have to get through this normalization. Most of the focus is on continuing to differentiate our products and working with our customers to offer sort of very strong platforms.



Mark Lipacis

Hi, thanks for taking my question and congrats to Jean on the new seat. Two questions, if I may. First, on the PC side, can you give us a sense about roughly how far under consumption, you believe, you're shipping on the PC side, either in Q4 and Q1?

And Lisa, correct me if I am wrong, I thought I heard you say in an answer to an earlier question that you expect the PC client, but just to grow into second quarter. So is that suggest that 1Q, you think is the bottom on the PC? And then I had a follow-up? Thank you.

Lisa Su

Sure, Mark. So we - so the first - the second question, yes. We do believe the first quarter is the bottom for our PC market - for our PC business, and we'll see some growth in the second quarter and then a seasonally higher second half. In terms of the under shipment, I mean, I think we're - we undershipped in Q3, we undershipped in Q4. We will undership, to a lesser extent, in Q1. So I think you can infer that from our guidance single-digit down.

And then we'll be back to a more normal environment. Now just as a reminder though, the first half is not usually a - the first half is usually a seasonally weak client time anyways. So, we would expect more lift in the second half, not so much in the second quarter.

Mark Lipacis

Got you, okay. That's very helpful, thank you. And then a follow-up, if I may, on the - China is lifting, as they're lifting the COVID restrictions, I guess I would imagine that you would expect that ultimately, at some point, to translate into higher demand. And I'm wondering if you could just kind of share with us your thoughts about how that might play out?

And could you remind us is, to the extent that you can help us understand of the risk to the supply side for you in the event that the COVID spreads rapidly as they lift the restrictions and impacts what you have on the supply side there? Thank you.

Lisa Su

Sure, Mark. So we've done a very good job in our supply chain in terms of risk mitigation. So we have - we don't believe that we have a significant risk as it relates to COVID future outbreaks, if there are any. As it relates to China recovery, I think we would benefit from a China recovery. It's very difficult to call. I mean we've seen, certainly in our Data Center business, we saw in the second half of the year and last year in the first half of this year that the China Data Center business has been weak for us.

If there was a recovery, I think we would benefit from that. Similarly, some of the other consumer patterns as well. But it's very difficult to call. So we put that in the bucket of macro uncertainty, and we'll see how it plays out.
 

Saylick

Diamond Member
Sep 10, 2012
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As an AMD investor, I have to admit it's hard not to get annoyed by clickbaity, borderline hit pieces like this article. You see, the average Joe doesn't listen into the earnings call or read the earnings transcripts. They just read articles from hardware websites and take them at face value.

As many rational people have pointed out, the deliberate undersupply in Q3, Q4, and to a lesser extent 2023 Q1 is to manage inventory levels, not to artificially keep prices high. In no sentence during the earnings call does Lisa or her team say that they are holding off supply to keep prices high, yet somehow the words "artificially raise prices" makes its way into an article.

Heres a direct quote from the Techspot article:
In a Tuesday evening investors call, AMD CEO Lisa Su tried to calm investor anxiety by pointing out that the company has been, and will continue to, undership GPUs to "balance supply and demand." Of course, that's just another way of saying, "we're going to keep prices inflated by lowering our output."

You can immediately see the point at which we go from "here's what was said" to "this is what I think she really meant". Once you make that jump, it's no longer reporting just the facts and it becomes sensationalism.

The worst part is that once one website runs with crap like that, everyone else does too. Whatyaknow. Our favorite clickbaity trash site WCCFTech ran with it too...

Again, you can CTRL+F the transcript for the words "overprice" or "inflate" and you will NOT find that language in AMD's remarks whatsoever.
 

Mopetar

Diamond Member
Jan 31, 2011
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I don't really think there's a distinction to be made between the two as they're just different ways of saying the same thing. Any business will scale back production when facing lower demand. Pumping the channel with even more inventory means that the only way to move it is to lower prices.

AMD had a lot of flexibility with the wafers it buys since they can be used for either CPUs, GPUs, or other products given their acquisition of Xilinx. Even within those areas their chiplet based approach makes it possible for them to shift production between market areas. Any company is going to try to find the point on the supply/demand curve where they can maximize their profitability.

And for anyone who's shocked at this, I suggest looking at the articles of incorporation where AMD lays out that they're a business and not a charity.
 
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Saylick

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I don't really think there's a distinction to be made between the two as they're just different ways of saying the same thing. Any business will scale back production when facing lower demand. Pumping the channel with even more inventory means that the only way to move it is to lower prices.

AMD had a lot of flexibility with the wafers it buys since they can be used for either CPUs, GPUs, or other products given their acquisition of Xilinx. Even within those areas their chiplet based approach makes it possible for them to shift production between market areas. Any company is going to try to find the point on the supply/demand curve where they can maximize their profitability.

And for anyone who's shocked at this, I suggest looking at the articles of incorporation where AMD lays out that they're a business and not a charity.
Heh, this. I've been reading people's comments on the various articles and it's honestly amusing to see people do mental gymnastics.

They acknowledge that Nvidia is scummy, but at least they are known for being scummy. Meanwhile, they now believe that AMD is joining Nvidia in being scummy as a result of their undersupply actions to manage inventory levels. In their mind, AMD was previously pro-consumer and they are no longer that. In the end, they announce that they will avoid AMD moving forward and only buy Nvidia and Intel, even though they already mentioned that they know Nvidia is scummy.

I guess it's just a case of choosing the devil you know over the one that you don't. Also, funny that people put AMD on a pedestal only to punish AMD when AMD no longer lived up to a standard that AMD didn't even have a say in. It's literally a silent contract.
 
Jul 27, 2020
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Unfortunately, when a company starts seeing great success and plenty of money, the leeches working in other dying companies are attracted to it. I'm pretty sure that AMD has been infiltrated by quite a few.
 

IEC

Elite Member
Super Moderator
Jun 10, 2004
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PCWorld posted an update to their article:

Update: Drew Prairie, AMD’s VP of communications, reached out with the following clarification: “We are shipping below consumption because there is too much inventory in the channel and that partners want to carry lower levels of inventory based on the demand they are seeing and their expectations for their business…the idea we are doing this to keep prices “elevated” isn’t accurate. Our client ASP was flat year over year, and that is due to mix of CPUs shipped.”
This article originally published with the headline “AMD is ‘undershipping’ chips to keep CPU, GPU prices elevated” but it has been updated to reflect AMD’s clarification.

If they have any integrity, the tech press will have to post mea culpas and retractions en masse. But they'll probably take the coward's way out. Videocardz already appears to have 404'd their article.

 

Saylick

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Sep 10, 2012
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PCWorld posted an update to their article:



If they have any integrity, the tech press will have to post mea culpas and retractions en masse. But they'll probably take the coward's way out. Videocardz already appears to have 404'd their article.

The tagline is unchanged... Good job PCWorld, you only had one job!

Screenshot_2023-02-02-20-19-42-55_40deb401b9ffe8e1df2f1cc5ba480b12~3.jpg
 
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maddie

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Jul 18, 2010
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PCWorld posted an update to their article:



If they have any integrity, the tech press will have to post mea culpas and retractions en masse. But they'll probably take the coward's way out. Videocardz already appears to have 404'd their article.

the idea we are doing this to keep prices “elevated” isn’t accurate. Our client ASP was flat year over year

What a funny statement. Let's analyse it a bit. If ASP has been flat and they are undershipping, then obviously, it's to keep prices constant. Do they have to state it explicitly for it to be true? Nobody said it is to continuously increase prices, he did, and what does "elevated" prices mean. Very subjective, as my high can be your low. This is typical modern corporate speech, pretending to say one thing but really saying something else.
 

Saylick

Diamond Member
Sep 10, 2012
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Riddle me this...

Let's say I am a wizard at forecasting demand and my Magic 8 ball tells me there will be a guaranteed 100 people who will buy my item per month for the entirety of 2023. 100 buyers per month. No more, no less. That's the demand. However, I accidentally fat finger the purchase order to my manufacturer of said item and they make 800 in the first 6 months instead of 600, so now there's 200 of them excess in inventory. Demand for my item remains constant throughout the year, so I remain confident I can sell all of the overproduced items at the same, original MSRP if I simply let the items sit on shelves. "If someone won't buy it today at MSRP, someone will buy it for that price tomorrow or the following month", I tell myself since I know that demand is relatively constant throughout the year. Then, at the start of the second half of the year, I tell my manufacturer to make the remaining 400 so that I can fulfill all of the predicted demand for the year.

I've accidentally oversupplied the market in the first half, and deliberately undersupplied in the second half. The whole time I knew that all items will sell at MSRP so long as I make enough to satisfy demand (i.e. 1200 items for the entire year). Does this count as me trying to "keep prices elevated" or it just an inventory correction? If I had decided to lower prices mid-year to clear the temporary excess inventory, I would have made less money than I originally planned, and all because of a mistake in the production order? But then I would have a temporary shortage in the back half of the year if I sold the last 400 items at MSRP because I'd be short 200 units.

What's your (to everyone in this thread) interpretation?
 
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Joe NYC

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While not technically price fixing, it's still a collusion cartel operating at its finest. If you keep buying at these prices, none of your complaining is valid.

STOP BUYING GRAPHICS CARDS AT THESE PRICES!

That'll force them to drop pricing, or otherwise their consumer GPU division will fold.

This thread is going to be too dumb to even start reading...
 
Jul 27, 2020
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Can't really say much unless I know the production cost of 7900 XT/XTX. AMD's problem in reducing the price is that they know for sure that Nvidia won't budge so they will be the sucker trying to do the right thing and still not making much money coz apparently, rabid young gamers prefer buying a 3060 12GB over a 6700 XT.

1675403979227.png
1675404059765.png

Imagine that. Similar prices yet Geforces are #1 and #3 while Radeon has to be humiliated with the #28 spot.

This is despite 6700 XT offering an extra 19 fps average performance at 4K.

1675404306859.png

There is no reason to blame AMD. Blame the Nvidiots.
 

Saylick

Diamond Member
Sep 10, 2012
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Can't really say much unless I know the production cost of 7900 XT/XTX. AMD's problem in reducing the price is that they know for sure that Nvidia won't budge so they will be the sucker trying to do the right thing and still not making much money coz apparently, rabid young gamers prefer buying a 3060 12GB over a 6700 XT.

View attachment 75863
View attachment 75864
Would you look at that... The #2 spot. Nvidia single-handedly propping up the GPU prop market given how heavy and brick-like Nvidia graphics cards are these days...
 

beginner99

Diamond Member
Jun 2, 2009
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IMO, this is a nothing burger. Just sensible business trying to match supply to demand. When the channel is overstuffed, you back off on supply.

Except I fail to see the oversupply here since months.Only 6700 XT / 6750 XT was somehwat in stock but at $550 (this is final price with all taxes). 6800 xt / 6950 xt? forget it. few that are available are at prices that makes a 7900 XT or 4070 Ti a no brainer.

The only high-end car soemhwat in stock from AMD is the 7900 XT. I do see much more 4070 Ti however as well. So the over shipping must have been in CPUs but not GPUs to Europe.
 

coercitiv

Diamond Member
Jan 24, 2014
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Riddle me this...

I've accidentally oversupplied the market in the first half, and deliberately undersupplied in the second half. The whole time I knew that all items will sell at MSRP so long as I make enough to satisfy demand (i.e. 1200 items for the entire year). Does this count as me trying to "keep prices elevated" or it just an inventory correction? If I had decided to lower prices mid-year to clear the temporary excess inventory, I would have made less money than I originally planned, and all because of a mistake in the production order?

What's your (to everyone in this thread) interpretation?
I think we should mention something important here, because without this important contextual information the behavior of AMD seems perfectly fine. Like I said before, I'm still on the fence, but I'm sharing my thought process... for science I guess :)

One interesting thing that happened on this forum in the recent past was abundant sharing of information. People shared availability and stock info from around the world on all kinds of GPUs. It started as frustration for some, soon became a sport for many, and we managed to realize AMD GPU availability was surprisingly low after Black Friday and until today. AMD has a major gap in the $450-750 price range, basically everything built on N21, and now even 6600(XT) stocks seem to be dwindling. The only cards with healthy supply are the 6700/6750XT.

This is the reason many of us are tempted to overreact at their decision to undership. People want to buy their cards and all they see are ridiculous prices. How can we reconcile what AMD says regarding historically low demand with the fact that the RX 6800XT cannot stay on the shelves once it gets anywhere close to $550?

IMHO this leaves us with 2 probable scenarios:
  • AMD panicked after the crypto crash and did not produce enough N21 and maybe even N23 chips to meet demand.
  • AMD willingly allowed N21 stock to dwindle as they hoped to replace these sales with N31 instead.
Starting to see why people might be angry even as AMD thinks their behavior is normal? The N31 is being sold in $850-1000 cards, yet it probably prevents production of N21 which serves all AMD price points above $450. Last month it got so bad in some countries that a decision to buy AMD was split between going 6700XT/6750XT bellow $450 or getting the 7900XT for $850+. This made no sense in a market with low demand and "high" inventories.

IMHO AMD definitely screwed up something, yet I cannot say for sure whether it was fully intended. One thing is certain, had they launched N32 products by now, the situation would have been much easier to handle.
 

AtenRa

Lifer
Feb 2, 2009
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I think we should mention something important here, because without this important contextual information the behavior of AMD seems perfectly fine. Like I said before, I'm still on the fence, but I'm sharing my thought process... for science I guess :)

One interesting thing that happened on this forum in the recent past was abundant sharing of information. People shared availability and stock info from around the world on all kinds of GPUs. It started as frustration for some, soon became a sport for many, and we managed to realize AMD GPU availability was surprisingly low after Black Friday and until today. AMD has a major gap in the $450-750 price range, basically everything built on N21, and now even 6600(XT) stocks seem to be dwindling. The only cards with healthy supply are the 6700/6750XT.

This is the reason many of us are tempted to overreact at their decision to undership. People want to buy their cards and all they see are ridiculous prices. How can we reconcile what AMD says regarding historically low demand with the fact that the RX 6800XT cannot stay on the shelves once it gets anywhere close to $550?

IMHO this leaves us with 2 probable scenarios:
  • AMD panicked after the crypto crash and did not produce enough N21 and maybe even N23 chips to meet demand.
  • AMD willingly allowed N21 stock to dwindle as they hoped to replace these sales with N31 instead.
Starting to see why people might be angry even as AMD thinks their behavior is normal? The N31 is being sold in $850-1000 cards, yet it probably prevents production of N21 which serves all AMD price points above $450. Last month it got so bad in some countries that a decision to buy AMD was split between going 6700XT/6750XT bellow $450 or getting the 7900XT for $850+. This made no sense in a market with low demand and "high" inventories.

IMHO AMD definitely screwed up something, yet I cannot say for sure whether it was fully intended. One thing is certain, had they launched N32 products by now, the situation would have been much easier to handle.

You dont expect AMD to still make orders in TSMC for N21 when they have already launched the successor N31 ??
N21 cards like the 6800/6800XT were very popular after the price cuts and they simple dont have lots of N21 inventory left to make all three 6800/6800xt/6950XT, they simple preferer to give the last inventory of N21 to create RX6950XTs not 6800/6800XTs.
That said they probable will launch N32 soon within Q1 23 to cover the luck of products from $600 to $800 segment.
 
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leoneazzurro

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Are there details of what AMD is undershipping and who they are undershippng to? Because my impression is that all these statements are referred to the CPU client side (where there has been low demand for Zen4) instead of the GPU side. There could be other reasons for the RX6800/6900 low supply (i.e. clearing inventory for making space for RX7000 series). Without these details I'd say it's difficult to make considerations about AMD's behaviour.
 
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