Speculation: Ryzen 3000 series

[jpiniero]

I should add that it's not like AMD/Intel get 100% of the take from a retail sale. The distributor takes a cut, the retailer takes a cut, who knows who else takes a cut; you have to include the costs of the box and materials, and the cooler if included...

 

[Schmide]

I currently declare: We can talk about OEM, retail, server, etc

Economics works on all tiers.

 

[maddie]

Actually Intels 8 core parts probably will cost less to produce than dual chip 7nm/12nm hybrid.

I think this depends a lot on the accounting formulae used for determining the cost of a part. In the poll I started by assuming that 12C would be the maximum on AM4, but having to vote for 16C.

Are you sure internally, that a 6C chiplet would be valued at the same as an 8C? Two 6C chiplets might not be as costly as double an 8C chiplet. Implicit in your statement is that all chiplets are close in cost, whereas AMD might not so decide for their accounting. Even if it costs a bit more (questionable), it will also offer 50% more cores.

We keep forgetting how lean AMD (by necessity) has become, versus Intel which started all sorts of misadventures, all with associated costs. With a realignment of relative marketshares, this difference in operating expenses will only get more acute.

Cost of producing a chip is one of many. You must know this.

 

[maddie]

I can't believe people on this forum don't know this, SO I WILL SAY IT NOW:

Retail prices (of processors) are the prices you pay for the processors at the store.

OEM prices (of processors) are the prices original equipment manufactures (Lenovo, Dell, HP) pay for the processors.

Original equipment manufactures (OEMs) pay OEM prices not retail prices.

We are currently talking about retail prices, not OEM prices.

Do not conflate the two.

And here I was thinking "speculation Ryzen 3000 series" is the thread.

 

[Mockingbird]

[citation needed]
You keep pointing out that AMD has bills to pay, as a reason they can't go too low on pricing.
Well, so does Intel. Much higher bills, since they own foundries, shareholders to keep happy, and regulators to avoid.

IF that's true, it's exactly why AMD can't afford to fool around with "competitive" pricing.
They need to offer a LOT more, for a LOT less.

And they need to do it quickly, to get as many AM4 boards into new PCs as possible, before Intel can launch a truly competitive product.

Intel can stay afloat just using the money it already has alone.

AMD can't.

An all out price war would be disastrous, if not fatal, for AMD.

If AMD launches a price war, it would be suicide.

It's not a strawman. You are the one making assumptions about AMD's Box CPU marketshare based on a sole source. This is very misleading, unless you know the worldwide share of sales regarding Intel vs AMD. We do have worldwide competition between the two after all.

Even if we restrict this to Box CPU sales. Do you actually know this percentage worldwide or are you assuming parity with mindfactory.de?

I actually looked at two retailers, mindfactory and a nordic retailer (forgot the name).

Maybe that's a little misleading, but that's far less misleading that you conflating retail sales and OEM sales.

Who cares where they play hardball? If AMD has the means by design they should do whatever it takes to become a bigger player while they can.

Here's something to think about. If they, lets say artificially, set the value of a 6 core near $100, they change the perceived value of a processor.

Long ago an economist Thorstein Veblen coined a term conspicuous consumption. Which the long and short of it is, it's not the value of the product, it's the feeling of social status one receives from owning a product. This perceived value often dictates markets more than the actual value of a product. The Gigahertz race could be seen as such a situation. The core race could resemble it as well.

As I said before, you don't gain much market share by lowering the prices if you already dominate the market.

You gain market share by going after a different market where you don't dominate.

 

[Mockingbird]

I currently declare: We can talk about OEM, retail, server, etc

Economics works on all tiers.

And here I was thinking "speculation Ryzen 3000 series" is the thread.

Okay fine.

You want to talk about OEM prices?

Let's talk about OEM prices.

Tell me some of the prices AMD that has been charging Lenovo, HP, and Dell for its processors.

 

[maddie]

Intel can stay afloat just using the money it already has alone.

AMD can't.

An all out price war would be disastrous, if not fatal, for AMD.

If AMD launches a price war, it would be suicide.



I actually looked at two retailers, mindfactory and a nordic retailer (forgot the name).

Maybe that's a little misleading, but that's far less misleading that you conflating retail sales and OEM sales.



As I said before, you don't gain much market share by lowering the prices if you already dominate the market.

You gain market share by going after a different market where you don't dominate.

A simple response.

AMD has already started a price war. This is an indisputable fact, especially in servers, the most profitable by far, segment for Intel.

 

[maddie]

Okay fine.

You want to talk about OEM prices?

Let's talk about OEM prices.

Tell me some of the prices AMD that has been charging Lenovo, HP, and Dell for its processors.

Hold a bit while I call my contacts. 🙂

 

[Mockingbird]

A simple response.

AMD has already started a price war. This is an indisputable fact, especially in servers, the most profitable by far, segment for Intel.

That's not a price war.

In a price war, prices are set so low as to drive the competitor(s) out of the market.

 

[maddie]

That's not a price war.

In a price war, prices are set so low as to drive the competitor(s) out of the market.

Price wars evolve. What you're describing is one version of a price war. As all wars, do you think it's always the fiercest from the start.

I for one, am certain that some modelling would have taken place internally on the small chance Intel reacted this way from the start to crush the revitalized upstart AMD.

If Intel starts to dump, then that's a whole other matter, involving the law. They are already, as it were, a convicted felon in several jurisdictions.

 

[Schmide]

Intel can stay afloat just using the money it already has alone.

AMD can't.

An all out price war would be disastrous, if not fatal, for AMD.

If AMD launches a price war, it would be suicide.

I explained why they could in our fake capitalist market. The reverse is why Intel can't. Reality is you ignored it.

I actually looked at two retailers, mindfactory and a nordic retailer (forgot the name).

Maybe that's a little misleading, but that's far less misleading that you conflating retail sales and OEM sales.

Sales are sales. We've all ignored the console market. None of us know what variables will hold back AMD's economic future.

I can tell you one thing. It isn't just some profit margin in the sub $200 sales arena.

As I said before, you don't gain much market share by lowering the prices if you already dominate the market.

You gain market share by going after a different market where you don't dominate.

This is verbatim the arguments made during the Intel kickback era.

Hopefully we will actually see what an unfettered CPU market brings if Intel can keep its self in check.

 

[OTG]

That's not a price war.

In a price war, prices are set so low as to drive the competitor(s) out of the market.

https://www.merriam-webster.com/dictionary/price war
"commercial competition characterized by the repeated cutting of prices below those of competitors

It is a price war, just not a price war followed to its logical conclusion (yet).

Intel can stay afloat just using the money it already has alone.

AMD can't.

An all out price war would be disastrous, if not fatal, for AMD.

If AMD launches a price war, it would be suicide.

Why not just sell their chips for $1, wait until AMD goes broke, and resume business as usual?

I'll probably never have a ton of faith in government regulators, but this seems like a situation that may draw their attention.

 

[Mockingbird]

Price wars evolve. What you're describing is one version of a price war. As all wars, do you think it's always the fiercest from the start.

I for one, am certain that some modelling would have taken place internally on the small chance Intel reacted this way from the start to crush the revitalized upstart AMD.

If Intel starts to dump, then that's a whole other matter, involving the law. They are already, as it were, a convicted felon in several jurisdictions.

A price war would be AMD selling at little to no profit or even a loss to drive Intel out of the market.

Of cause, it wouldn't work and AMD would probably go bankrupt.

 

[Schmide]

A price war would be AMD selling at little to no profit or even a loss to drive Intel out of the market.

Of cause, it wouldn't work and AMD would probably go bankrupt.

I doubt anyone is saying AMD is going to drive Intel out of the market.

I highly doubt they could do much more than reach parity.

 

[maddie]

A price war would be AMD selling at little to no profit or even a loss to drive Intel out of the market.

Of cause, it wouldn't work and AMD would probably go bankrupt.

Good lord man, take a wider view of possibilities. Anyone selling at a loss with the intention of driving a competitor out of business is dumping, aka illegal.

This is a two producer industry and vital to the world at present.

 

[Mockingbird]

https://www.merriam-webster.com/dictionary/price war
"commercial competition characterized by the repeated cutting of prices below those of competitors

It is a price war, just not a price war followed to its logical conclusion (yet).




Why not just sell their chips for $1, wait until AMD goes broke, and resume business as usual?

I'll probably never have a ton of faith in government regulators, but this seems like a situation that may draw their attention.

Good lord man, take a wider view of possibilities. Anyone selling at a loss with the intention of driving a competitor out of business is dumping, aka illegal.

A giant selling a loss would probably get slap for predatory pricing.

Since Intel has much higher profit margin than AMD, Intel can just sell at cost (sell the product at the same price it takes to make), and that would be enough to drive AMD out of the business.

 

[OTG]

Since Intel has much higher profit margin than AMD, Intel can just sell at cost (sell the product at the same price it takes to make), and that would be enough to drive AMD out of the business.

You keep saying this, so would you mind sharing what it costs Intel to make (say) a 9900k, vs what it costs AMD to make a 2700x or 3000 series 8-core?

The same info for Xeon/Epyc would likewise be good to know, if it's not too much trouble.

 

[maddie]

A giant selling a loss would probably get slap for predatory pricing.

Since Intel has much higher profit margin than AMD, Intel can just sell at cost (sell the product at the same price it takes to make), and that would be enough to drive AMD out of the business.

This has me very confused.

What is the relationship between higher profit margin and the ability to sell at cost? I'm lost here.

 

[jpiniero]

I do wonder if AMD would be afraid to put a Vega 3 IGP on the IO die for fear of killing off APU sales. I do think it'd be worth it; since they won''t be getting much Corporate desktop OEM sales without it.

 

[Mockingbird]

This has me very confused.

What is the relationship between higher profit margin and the ability to sell at cost? I'm lost here.

Intel has the economy of scale that AMD doesn't.

That means that development cost can be spread over more units.

Furthermore, Intel has its own foundry, which means that, once the overhead cost is paid for, the cost of additional output is low.

In contrast, AMD has to pay TSMC a fixed amount for each output (wafer).

So, the cost for Intel to produce each unit is much lower than the cost for AMD to produce each unit.

As a result, if Intel is selling each unit at cost, AMD wouldn't be able to match the price unless AMD is selling each unit at a loss.

 

[OTG]

So, the cost for Intel to produce each unit is much lower than the cost for AMD to produce each unit.

As a result, if Intel is selling each unit at cost, AMD wouldn't be able to match the price unless AMD is selling each unit at a loss.

Ok, but how much is that? Cost to produce a chip, I mean.
For both companies.
You're making a very big claim (that Intel selling chips at cost, can drive AMD to bankruptcy), but unless you actually have some numbers, why should anybody believe you?

 

[Schmide]

Intel has the economy of scale that AMD doesn't.

That means that development cost can be spread over more units.

Furthermore, Intel has its own foundry, which means that, once the overhead cost is paid for, the cost of additional output is low.

In contrast, AMD has to pay TSMC a fixed amount for each output (wafer).

So, the cost for Intel to produce each unit is much lower than the cost for AMD to produce each unit.

As a result, if Intel is selling each unit at cost, AMD wouldn't be able to match the price unless AMD is selling each unit at a loss.

Again this is the same arguments that were made during the Intel Kickback era.

What you fail to realize is with large volumes and production comes great research and development costs.

Spot values over a period of time can hurt any player. Even worse ones board of directors can lose confidence.

Even more. Intel has judgements against them for previous non-competitive practices dating back 40 years.

You cannot make these arguments on a level playing field for they are different entities with different histories and market caps.

EDIT: If Intel didn't fear such situations they wouldn't have offered kickbacks in the past. The fact that they will in no way be able to do this again opens the door for AMD to aggressively compete with Intel.

 

[Mockingbird]

Ok, but how much is that? Cost to produce a chip, I mean.
For both companies.
You're making a very big claim (that Intel selling chips at cost, can drive AMD to bankruptcy), but unless you actually have some numbers, why should anybody believe you?

The numbers are obviously not publicly available, but you just need simple understanding of economics to understand that Intel has the economy of scale that AMD doesn't.

 

[OTG]

And AMD has economy of...not having >100,000 employees, multiple foundries, a huge range of product lines, AND also has a CPU architecture that should be MUCH cheaper to produce at scale.

Your simple understanding of economics runs into the fact that the details really do matter, and you don't know any of them.
For example: Can Intel produce their 2 x 28-core Xeon monstrosity for less than AMD makes a 64-core chiplet-based Epyc? And will anybody buy it, when the Epyc is so much more efficient?
Economies of scale or not, that's gonna be pretty tough, and it makes all the difference in the world to your "Intel can just sell at cost" claim.

Not to mention the legal issues!
Unless everybody at both AMD and every FTC-equivalent regulatory agency somehow forgets the last few decades of anti-competitive behavior, Intel can't just start selling their $10k server chips for peanuts.

 

[maddie]

Intel has the economy of scale that AMD doesn't.

That means that development cost can be spread over more units.

Furthermore, Intel has its own foundry, which means that, once the overhead cost is paid for, the cost of additional output is low.

In contrast, AMD has to pay TSMC a fixed amount for each output (wafer).

So, the cost for Intel to produce each unit is much lower than the cost for AMD to produce each unit.

As a result, if Intel is selling each unit at cost, AMD wouldn't be able to match the price unless AMD is selling each unit at a loss.

I'll address each point in turn.

With their 1 CPU design, Zen1 and now Zen2 for the most, by far expensive part, I tend to believe that AMD might have the advantage here in contrast to Intel with a host of separate designs. Inventory costs alone should be substantial. The ability to be extremely agile in filling orders is another. AMD can produce whichever CPU they want with much lower lead time than Intel. A big, often neglected cost saving. A design cost amortized over their entire pure CPU lineup (vs APU) is another big cost saving. I cannot accept your 1st statement as fact.

I hardly think that the operational cost of a Fab is low. I'm open to being corrected but any extreme hi-tech manufacturing operation is not trivial. I think you're underrating this cost.

The fact that Intel has been unable to get their production of 3rd party designs successful probably have many factors but one reason is they might not be that much of a lower cost than TSMC to justify the move. Just because you produce inhouse does not guarantee being cheaper. The outsourcing in many industries testify to this. TSMC is a specialized production powerhouse, arguably second to none at present.

All of this provides doubt to your claim of "So, the cost for Intel to produce each unit is much lower than the cost for AMD to produce each unit." Not a given.

And this "As a result, if Intel is selling each unit at cost, AMD wouldn't be able to match the price unless AMD is selling each unit at a loss". Not a given