AMD Announces Proposed Plan to Sell Singapore Facility

[ShintaiDK]

More important than a number is what countries got put on the chopping block.

Belgium, Denmark, Finland, Netherlands, Norway, Russia, Sweden and Switzerland.

 

[Genx87]

Seriously, if I were the Intel CEO at this point, I'd be attempting to devise a way to make a not-too-small loan to AMD. I believe that Intel is in a much better position with AMD not so cash-strapped, that they are selling off their assets. I'm thinking a $1B loan to keep their rival afloat would be a much better way to give away $1B, than spending it on lawyer's fees, in an attempt to keep the government from forcing your company into multiple companies, should Intel become a monopoly.

Intel can easily argue the semi-conductor market has greatly changed in the last 4 years to the point if AMD goes away, intel is not a monopoly. PC\Laptops powered by Windows will represent about 40% of OS shipments this year.

 

[Lonyo]

So high volume MS now scaled back the Xbox One from 21 to 13 countries. :awe:

Whereas Sony's production is so high volume they have stopped pre-orders at retailers in the countries they are going to launch in, because they want to have some systems on store shelves.

So maybe MS cut the number of launch countries because there isn't enough product, and same with Sony. No more pre-orders because there isn't enough product.
Which means there's actually another problem, not enough supply, rather than a demand issue.

 

[mrmt]

Can you explain to me how Q3 margins are only impacted by 2-3% with such high volume, low margin sales?

Because volume is not that high, we are talking about 12% of AMD quarterly revenues.

Here's the math, and every number here is netted from the 11 million of written off inventory sales.

AMD is forecasting a 22% increase in sales for Q3, so 1.4 billion, with a gross margin of 36% that gives us 504 million in gross profits. But once we read the transcript we can see that AMD expecting to grow some 6% in the legacy business, which would put its revenues around 1.23 billion dollars. AMD isn't guiding margin on specific segments but they are not implying changes here, so let's assume the same 39% gross margin, that gives us a gross profit of 479MM dollars for the two legacy business.

That leaves a 170MM gap in revenues and 25MM in gross profits, which is the console share of the business, hence the 15% gross margin.

 

[Tsavo]

Belgium, Denmark, Finland, Netherlands, Norway, Russia, Sweden and Switzerland.

Lack of demand, or lack of units to sell?

 

[seitur]

Whereas Sony's production is so high volume they have stopped pre-orders at retailers in the countries they are going to launch in, because they want to have some systems on store shelves.

So maybe MS cut the number of launch countries because there isn't enough product, and same with Sony. No more pre-orders because there isn't enough product.
Which means there's actually another problem, not enough supply, rather than a demand issue.

Diffrence is Sony is able to deliver to 31 countries while all signs tell that in most countries Sony is leading pre-order charts.

Xbox1 APU because of eSRAM is big chip and yields are rumored preety bad, while PS4 APU while more powerful is also simplier and it's yields are much better.

There is also question what foundries are doing which chip, but I haven't heard verified info about that.

 

[ShintaiDK]

Lack of demand, or lack of units to sell?

Supply. Why else would you risk all those people that already preordered. And add a free game with the delayed launch.

 

[Tsavo]

Supply. Why else would you risk all those people that already preordered. And add a free game with the delayed launch.

Eh, it being MS is the only reason why I asked. MS would cut their feet off so they wouldn't have to brush their teeth.

 

[guskline]

Exactly. This isn't a business decision made from strength, this is a business decision of last resort.

In theory they could always buy the assets back once they stage their comeback and are rolling in the dough. But history shows this basically never happens (the comeback)...unless you are lucky enough to have good lobbyists and can convince the US government that you are critical to the future of some senator remaining a senator, then you are too big too fail and a bailout is coming your way.

AMD is not too big to fail, and at this rate they are only getting smaller.

I agree with you IDC. The real question is what AMD is doing with the savings (if any) from this sale. Is any portion of the proceeds being put to R&D or is it all being used to pay down debt?

 

[cytg111]

Erh, stupid question, but is AMD not too big to fail? If AMD fails, you have Intel left as a monopoly.. Wouldnt that be a worse situation for all of us(thinking FTC aka mr scissorhands)?

 

[ShintaiDK]

Erh, stupid question, but is AMD not too big to fail? If AMD fails, you have Intel left as a monopoly.. Wouldnt that be a worse situation for all of us(thinking FTC aka mr scissorhands)?

Why would they be too big to fail? It benefits nobody to keep something alive that cant substain itself. And actually hurting the overall segment. Just for some illusional idea of "competition" that doesnt exist anyway.

If Intel doesnt innovate or raises prices. What happens again? Thats right, Intel goes belly up on its own.

 

[Tuna-Fish]

Xbox1 APU because of eSRAM is big chip and yields are rumored preety bad, while PS4 APU while more powerful is also simplier and it's yields are much better.

Honestly, SRAM should *not* be reducing yields. SRAM is the ideal case for using redundancy to improve yields.

It does make the chip pretty huge, though...

 

[ShintaiDK]

Yep, it cant really be the eSRAM since you simply add extra blocks. Just like in regular memory fabrication or cache for that matter.

 

[PPB]

And actually hurting the overall segment. Just for some illusional idea of "competition" that doesnt exist anyway.

Explain how a monopoly is better.


This will be fun :awe:

 

[SiliconWars]

Because volume is not that high, we are talking about 12% of AMD quarterly revenues.

Here's the math, and every number here is netted from the 11 million of written off inventory sales.

AMD is forecasting a 22% increase in sales for Q3, so 1.4 billion, with a gross margin of 36% that gives us 504 million in gross profits. But once we read the transcript we can see that AMD expecting to grow some 6% in the legacy business, which would put its revenues around 1.23 billion dollars. AMD isn't guiding margin on specific segments but they are not implying changes here, so let's assume the same 39% gross margin, that gives us a gross profit of 479MM dollars for the two legacy business.

That leaves a 170MM gap in revenues and 25MM in gross profits, which is the console share of the business, hence the 15% gross margin.

What about when you factor in the loss of old console revenue and ~doubled Kabini sales which have already been seen to negatively impact margins in Q2?

 

[ShintaiDK]

Explain how a monopoly is better.


This will be fun :awe:

I feel you are anything but serious.

You can try explain how "competition is better" and I can gun it down completely with little effort.

Start by considering why there aint any more x86 manufactors than there is now. Its not because they cant enter the business or reapear. In the history we had over 20 x86 manufactors. The reason is purely economic. Its simply too expensive to compete.

Why dont you think AMD uses 8B$ on R&D plus building leading edge fabs? Is it because the segment can substain it? or is it because the segment cant substain it? Do you think we would be better of with 5 AMDs or 1 Intel?

AMD have offered zero competition since 2006. Yet more money on R&D and factories havent been used before.

The segment is also with a dynamic demand and a high revenue requirement to substain the production and development. And the cost keeps increasing.

So unless you are willing to spend 5-10B$ of your tax money every year on AMD. And increasing every year in amount as well. Then you have to figure out what you want.

Do you want the illusion of competition, only to sit back with inferiour products on an inferiour process nodes. Or do you want a monopoly with the best product on the most advanced node that the planet is capable of funding in a free market? Remember, the average price wont change on the product, nomatter if you got 5 companies or 1.

I think you confuse it with a static demand segment with low entering cost. But even then, competition is far from always the best. Just look at the private US heathcare business. Multiple times more expensive and worse than state monopoly heathcare systems.

 

[mrmt]

What about when you factor in the loss of old console revenue and ~doubled Kabini sales which have already been seen to negatively impact margins in Q2?

Margins weren't negatively impacted by Kabini. In Q1 and Q2 gross margin was 39% once you purge the sales of written off inventory.

AMD isn't mentioning the old consoles revenues as something relevant, probably because it is already too old and very low volume by now.

 

[mrmt]

I agree with you IDC. The real question is what AMD is doing with the savings (if any) from this sale. Is any portion of the proceeds being put to R&D or is it all being used to pay down debt?

They aren't paying down any debt, just coupons from the bonds they issued.

 

[middlehead]

I wonder if Sony and MS have made plans for their consoles, if AMD can no longer produce them?

Firstly, you're a giant schmuck for typing "M$." Stop that.

Secondly, being as AMD hasn't actually produced chips for years now, I'm sure they'd be fine if AMD died tomorrow. They're probably still paying AMD to coordinate production, but they'll have the rights to the chip and the authority to take it somewhere else for manufacturing if they need to. And if they somehow don't have those rights, which would be stupid because it's the same deal they've had before, then both Sony and MS deserve all the pain they'd receive.

 

[SiliconWars]

AMD isn't mentioning the old consoles revenues as something relevant, probably because it is already too old and very low volume by now.

They did mention the old console revenue, and even with a large discrete graphics market share increase, revenue went down.

The problem with your 15% is that it could very easily be 30% based on small movements in different segments, and how much you underestimated the loss of current gen console revenue.

http://seekingalpha.com/article/155...-2013-results-earnings-call-transcript?page=3

Graphics and visual solution segment revenue was $320 million, down 5% compared to the prior quarter, primarily due to lower game console royalties.

That was last quarter so you can imagine what it'll be like in the current one.

 

[rainy]

Why I'm not surprised to see the same two nicknames breaking out like a rash in any topic AMD related.

Those guys are saying how unimportant/irrelevant is AMD nowadays but their activity shows something quite different and looks like a sad obsession to me.

 

[IlllI]

sometimes i wonder if filing for bankruptcy would help them in the long run. would it allow them to get out of that terrible contract they signed with globalfoundries?

 

[Homeles]

In case anyone was wondering like I was, AMD's Singapore facility is for testing and final packaging of processors. Sounds pretty similar to Intel's Costa Rica and Malaysia assembly plants.

 

[mrmt]

The problem with your 15% is that it could very easily be 30% based on small movements in different segments, and how much you underestimated the loss of current gen console revenue.

It could be, but then why would an AMD executive say that the console margins are in the "low double digit" levels and imply constant margins on everything else in the Q&A? I can't fathom why would the executive have that choice of words or imply the constant margins if the console chips were at 30% or even above 25%.

Just FYI there was a post where I wrote that I expected some 20% when I commented prior to read the transcript because I expected the other business to stay flat or even fall a little. Only after seeing the 6% increase is that the number makes sense, and that's why the analysts pressed AMD executives about the "mid-teens" number. Numbers around this threeshold is what I'm seeing floating around in reports.

But I'm really interested in seeing your numbers. Could you share them? What's your estimate for the console margins and where do you think the margins are falling?

 

[ShintaiDK]

sometimes i wonder if filing for bankruptcy would help them in the long run. would it allow them to get out of that terrible contract they signed with globalfoundries?

It should. The current WSA until 2024 is simply a death sentence.