Question Zen2 CPU prices Increasing; Not a good sign for Zen3?

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VirtualLarry

No Lifer
Aug 25, 2001
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Before Zen+ came out, we had good discounts on Zen CPUs. Likewise on Zen+ CPUs when Zen2 was coming out.

Zen3 is supposed to come out before the end of the year, and:
1) we have no leaks, and
2) Zen2 CPU prices (3600) have risen from $154.99 to MSRP ($199.99) in a matter of weeks.

What this tells me, is that Zen3 sucks, and that retails know it.

Edit: Let me explain. If Zen3 were better than sliced bread, then Zen2 would be (relatively) unsellable, at least at the same price-points, and thus, Zen2 CPUs should be discounted commensurate with the disadvantage relative to zen3 CPUs, before release, to clear stock.

The fact that Zen3 is getting ever-closer to release, and Zen2 prices are going UP, points me to a VERY disasppointing Zen3 release.
 
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prtskg

Senior member
Oct 26, 2015
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Without looking into it since I'm not invested in Intel at all I'm gonna guess it is the new tax law allowing them to repatriate overseas cash at a lower rate. The rules allow companies to do it over time (up to 8 years) so it may impact multiple years. There's also the impact of lower tax rates for profits made in the US.

A company will have previously declared that income, but they may or may not have reserved money for future taxes owed when the money was brought back to the US. If Intel was reserving money at a higher rate than they actually ended up having to pay, the freed up money becomes profit at repatriation time. Some companies were reserving little or nothing against future taxes to juice their income numbers, but Intel was profitable enough they wouldn't have needed to play those games.
You were right. After some searching I too came to the same conclusion of decreased tax. After all, other factors contributed simple changes only.
 

Markfw

Moderator Emeritus, Elite Member
May 16, 2002
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Could you frame this response in the context of AMD's rising market share and its relationship to their net income?
A lot of things are affected my net income, so you can't compare it to market share. At the moment I believe AMD is busy doing 2 things (as mentioned by someone else here, but I agree), paying off their huge debt from years of loosing money, and putting it into R&D. So their net income is much lower (% wise) than Intel. Intel has no past debt, and their R&D is pretty stagnant.
 
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rainy

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Jul 17, 2013
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Markfw

Moderator Emeritus, Elite Member
May 16, 2002
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Well, I will admit I was wrong... I was looking at their past, and from what I had read, were cash rich. Odd that is true, and 36b in debt. AMD spending more on R&D than Intel could certainly explain why they are the current technology leader in CPU's (ignoring fab)
 
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Doug S

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Feb 8, 2020
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I very much doubt that's "real" debt. Intel was likely playing the same financial engineering games that Apple and other highly profitable tech companies played.

All these companies that made a lot of money overseas did everything they could to avoid bringing it back to the US after Bush's offshore tax holiday, because why pay taxes at up to 35% to bring it into the US when you can afford to wait years or even decades for another administration to come along and offer you a lower rate?

Those overseas cash piles became truly huge, but without bringing them into the US and paying taxes on them the only way to use that money in the US (whether for buybacks/dividends, or for actual investment in the US) was to issue debt in the US. The long term rates were very low, so it was almost free money.

Apple has over $100B of long term debt, but they have nearly double that held as 'cash', so it isn't real debt. Again without looking into it since I'm not invested in Intel so I simply don't care, I'll bet they have well over $36B held as 'cash' so like Apple it isn't real debt.

Even after they bring all that money home they will still pay those bonds over time. Recall that Apple talked about getting to a "net zero" cash position long term. i.e. they want to equalize the amount of debt and cash they hold. Not a "debt zero" cash position, which is where individuals would prefer to be (unless you are invested in real estate, it is pretty hard to be debt free if you invest there)
 

moinmoin

Diamond Member
Jun 1, 2017
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Yeah, long term debts have to be calculated against cash on hand (safe liquidity) and assets (not so safe since that can be overvalued).

Intel is in no troubles since while it has, as of last quarter, long term debts of $36.093B, it also has $25.815B in cash on hand and $152.539B in assets.
AMD has, as of last quarter, long term debts of $0.490B, it also has $1.775B in cash on hand and $6.583B in assets. (All numbers from above macrotrends.net links.)
 

Markfw

Moderator Emeritus, Elite Member
May 16, 2002
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Yeah, long term debts have to be calculated against cash on hand (safe liquidity) and assets (not so safe since that can be overvalued).

Intel is in no troubles since while it has, as of last quarter, long term debts of $36.093B, it also has $25.815B in cash on hand and $152.539B in assets.
AMD has, as of last quarter, long term debts of $0.490B, it also has $1.775B in cash on hand and $6.583B in assets. (All numbers from above macrotrends.net links.)
So, Intel has a negative cash situation (owe more than cash on hand) while AMD is the opposite. However, Intel does have much larger assets.
 
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Doug S

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Feb 8, 2020
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So, Intel has a negative cash situation (owe more than cash on hand) while AMD is the opposite. However, Intel does have much larger assets.

They don't have to pay that debt immediately, so they have more than enough so long as they keep generating oodles of cash each year that they're mostly using for stock buybacks. They will likely have to trim those buybacks if AMD starts taking a bigger share of the x86 profit pie.
 

Vattila

Senior member
Oct 22, 2004
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So, Intel has a negative cash situation

The accounting term and metric usually used is net debt, which is "short-term debt + long-term debt – cash and equivalents". For Intel, as of the 2020-Q2 report, net debt was $25 billion. A company with high net debt is considered "highly leveraged".

"High Debt Remains a Concern: [...] Intel has a highly leveraged balance sheet. As of Jun 27, 2020, the company’s net debt was $24.82 billion compared with $19.12 billion as of Mar 28, 2020. A highly leveraged balance sheet is a concern owing to the high cost of servicing the debt through cash flows. This in turn might impact a company’s shareholder return plans."

 
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TheELF

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Dec 22, 2012
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Now it is "net income"? We were talking about AMD gaining market share?
Yes and how can AMD possibly gain market share?Think about it.
AMD has to make more money to make more product to make even more money,wash, rinse, repeat.
If they can't increase their net income they can't increase their market share.
Current market share of AMD doesn't have the slightest influence on intel as you can see from the money the two companies make.
You should already know the console release date for the next Xbox (November). Why even make patently false statements like that?

Yes, which is why AMD will not have a better quarter because the console APUs have already been sold months ago,this is what I was answering to.
jpiniero said:
It hasn't really led to big profits... yet anyway. This quarter will be good for AMD because of the consoles.
Why even make patently false statements like that?
Why not even read what I was answering to?!
 

Hitman928

Diamond Member
Apr 15, 2012
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Yes and how can AMD possibly gain market share?Think about it.
AMD has to make more money to make more product to make even more money,wash, rinse, repeat.
If they can't increase their net income they can't increase their market share.
Current market share of AMD doesn't have the slightest influence on intel as you can see from the money the two companies make.

Yes, which is why AMD will not have a better quarter because the console APUs have already been sold months ago,this is what I was answering to.


Why not even read what I was answering to?!

AMD said that console revenue peaks in the third quarter (July - Sep) so no, all the console APUs weren't sold months ago.

Also, as others have pointed out, the reason AMD's net profits haven't reflected their recent success is because they've reduced their long term debt by ~75% and increased their R&D budget by over 60% over the last few years. So the exact opposite of what you are saying, they are spending their earnings by reinvesting into themselves to produce more and better products which will lead to even more market share unless Intel can right its own chip and return to dominance which is not likely, at least not within the next couple of years.
 

teejee

Senior member
Jul 4, 2013
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Yes and how can AMD possibly gain market share?Think about it.
AMD has to make more money to make more product to make even more money,wash, rinse, repeat.
If they can't increase their net income they can't increase their market share.
Current market share of AMD doesn't have the slightest influence on intel as you can see from the money the two companies make.

Yes, which is why AMD will not have a better quarter because the console APUs have already been sold months ago,this is what I was answering to.


Why not even read what I was answering to?!

At least in automotive (where I work) typical payment agreement is to pay for components 30-90 days after delivery. I'd assume similar for the consoles. I guess deliveries started earliest a few months ago, so probably not much (if any) money for console soc's in Q2.
 

Hitman928

Diamond Member
Apr 15, 2012
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At least in automotive (where I work) typical payment agreement is to pay for components 30-90 days after delivery. I'd assume similar for the consoles. I guess deliveries started earliest a few months ago, so probably not much (if any) money for console soc's in Q2.

For AMD's accounting, console revenue ramps up in Q2, peaks in Q3, and ramps down in Q4.
 

Doug S

Platinum Member
Feb 8, 2020
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Yes and how can AMD possibly gain market share?Think about it.
AMD has to make more money to make more product to make even more money,wash, rinse, repeat.
If they can't increase their net income they can't increase their market share.
Current market share of AMD doesn't have the slightest influence on intel as you can see from the money the two companies make.

Yeah too bad there aren't places where you can borrow money if you don't have enough at the moment, and pay it back over time plus a little extra, if you can convince the place you borrow it from that borrowing the money will help you make more money.

It was really a struggle to save up enough money to buy my house for cash. If only something like this existed I could have paid perhaps 10% of it and borrowed money to cover the rest.

Someone ought to invent it, we could call I don't know a "bank" maybe, how does that sound?
 

Hitman928

Diamond Member
Apr 15, 2012
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Yes it seems you got the real financial info. And then the revenue will continue many years ahead of course.

Yes, revenue will continue and will also continue to have the same ramping cycle each year for many years thought first year or two is almost always the most dramatic in terms of ramp up and down.
 

TheELF

Diamond Member
Dec 22, 2012
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AMD said that console revenue peaks in the third quarter (July - Sep) so no, all the console APUs weren't sold months ago.
So AMD is selling the console CPUs over time, x amount per quarter?
Which again would mean that they won't make a huge amount of money all at once.
So the exact opposite of what you are saying, they are spending their earnings by reinvesting into themselves to produce more and better products which will lead to even more market share unless Intel can right its own chip and return to dominance which is not likely, at least not within the next couple of years.
Yeah they are working towards that goal,paying off debt and paying for R&D but they still haven't reached the point yet were they can increase their production.
They would have to go back to increasing their debt if they wanted to do it now.
That is if they can get more capacity than what they get now.
 

Hitman928

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Apr 15, 2012
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So AMD is selling the console CPUs over time, x amount per quarter?
Which again would mean that they won't make a huge amount of money all at once.

AMD isn't stockpiling tens of millions of console chips to have multiple years of supply. That would silly, no one does this. AMD works with Sony and MS to know how many chips are needed and when and then they plan accordingly. AMD doesn't want to sit on billions of dollars worth of inventory just waiting for Sony and MS to request more chips. What you see is a cycle of production and sales as outlined previously. Heck, AMD was still selling chips to MS and Sony as recently as the end of 2019 for the last gen consoles. Not a huge amount, but they didn't really stop making/selling last gen console chips until this year.

Yeah they are working towards that goal,paying off debt and paying for R&D but they still haven't reached the point yet were they can increase their production.
They would have to go back to increasing their debt if they wanted to do it now.
That is if they can get more capacity than what they get now.

AMD wouldn't have to go into debt unless they tried to jump to like 10X their production which they couldn't get enough wafers for yet anyway. AMD is making significant increases in their production of Zen based CPUs every year and I expect they will start to expand in GPU production next year as well. When you can sell every last chip you make at decent margins, it's not financially difficult to ramp up production to increase market share which is what they've done in CPUs every year since Zen1 was released. AMD has doubled their x86 market share since Zen1 and it continues to increase every quarter. Now they are trying to really focus on increasing their market share in the more lucrative markets (server and higher end laptops) to not only grow in market share but to grow margins as well.

 

Hitman928

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Apr 15, 2012
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@Hitman928

Interesting, I would have thought reporting for console revenue would have peaked in Q4. Guess they got paid a bit earlier than I expected.

AMD has to have the chips to MS/Sony a few months in advance in order for the consoles to be ready on time for public sale. Since the launch is in November, MS/Sony already have the vast majority of chips they need from AMD for the console launch through the end of the year which means the bulk of console sales will be counted in AMD's Q3. This is what Lisa Su explained in the last earnings call.
 

DrMrLordX

Lifer
Apr 27, 2000
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AMD has to have the chips to MS/Sony a few months in advance in order for the consoles to be ready on time for public sale. Since the launch is in November, MS/Sony already have the vast majority of chips they need from AMD for the console launch through the end of the year which means the bulk of console sales will be counted in AMD's Q3. This is what Lisa Su explained in the last earnings call.

I figured MS/Sony were going to be cheap and try to delay payment until after console launch, but if not, good for AMD then.
 

gorobei

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Jan 7, 2007
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MS spec'd the apu for their servers(streaming games) as well as the consoles. so they will probably be ordering them on a consistent basis over the coming years in addition to the bulk console orders.
 

Hitman928

Diamond Member
Apr 15, 2012
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I figured MS/Sony were going to be cheap and try to delay payment until after console launch, but if not, good for AMD then.

I don't know when AMD will actually receive the payment for the console chips but the revenue will be counted in Q3. There are multiple ways of doing corporate accounting for stuff like this. I believe AMD generally counts revenue when the products have been delivered even though payment may not be received until later.
 

itsmydamnation

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Feb 6, 2011
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I figured MS/Sony were going to be cheap and try to delay payment until after console launch, but if not, good for AMD then.
with accounting , having the numbers recorded in the books ( recognising the revenue) and actually receiving the money are two very different things and can be out by many months.