AMD reported its Q4 2020 earnings earlier this week, as well as full-year revenue results. One of the topics the company covered during the call was the ongoing hardware shortage in CPUs, GPUs, and gaming consoles.
We want to say upfront that AMD had an excellent 2020, with full-year sales of $9.76B, up 45 percent from $6.73B the year before. AMD delivered record earnings in both client and server, with data center now comprising a “high teens percentage” of AMD’s total revenue. Assume 18 percent, and that’s $1.76B in data center revenue for the year. We’re going to talk about the shortage issue in this story, but it’s in the context of a very strong year for AMD.
AMD’s Lisa Su made it clear on the call that AMD sold a lot of processors over the past three months. Ryzen 5000 more than doubled the launch quarter volume of any previous Ryzen CPU. AMD’s mobile shipments broke both quarterly and yearly records, thanks to the strength of Ryzen 4000. AMD claimed launch shipments “3x larger than any AMD GPU priced above $549.” As comparisons go, that’s a weak one, but it’s really the only weak link in AMD’s otherwise impressive chain of records and wins.
A Long-Tailed Shortage
AMD expects demand to be greater than seasonal through the first half of the year. Typically, in computing, Q1 is the weakest quarter while Q3 and Q4 are the strongest. When asked about the ongoing shortages, Su said: “The industry does need to increase the overall capacity levels. And so we do see some tightness through the first half of the year, but there’s added capacity in the second half.”
Additional conversations we’ve had with AMD added a little color to this point. AMD expects the ongoing CPU and GPU shortage to persist through March, but it doesn’t expect the problem to persist at the same intensity.
There are a number of reasons to believe this is true. TSMC continues to add 7nm capacity and yields on recently launched hardware tend to improve over time. By early summer, countries around the world may be relaxing their coronavirus restrictions. Demand for PCs could dip if people pivot more towards in-person social activities and head back to school/work.
In the short term, component prices are likely to remain high and supply scarce. AMD has pledged to continue selling its own graphics cards, but there’s a limited amount that any single company can do to resolve systemic stress on an entire supply chain. And AMD doesn’t manufacture any of its own hardware directly.
We’re not going to claim that end-users should just give up on snagging new hardware, but it probably isn’t a good idea to bet on doing so. Hopefully, the situation will begin to ease by April or May, even if it takes a few more months to sort itself out completely.
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