AMD, like Intel back in 2018-2019, is having trouble meeting demand for its CPUs. The reasons for this are complex. Back in 2018-2019, Intel was dealing with the impact of process node delays and a lack of spare manufacturing capacity. Today, the entire semiconductor industry is dealing with shortages caused by the COVID-19 pandemic and its impact on both demand and supply.
While the cause of their respective shortages is different, the strategy AMD is deploying appears much the same: strategically focus product shipments in order to maximize revenue. That’s the word from AMD CEO Lisa Su, who recently spoke at an investor invent held by JP Morgan:
“There is some compute that we’re leaving underserviced…So I would say particularly, if you look at some of the segments in the PC market, sort of the lower end of the PC market. We have prioritized some of the higher-end commercial SKUs [Stock Keeping Units] and gaming SKUs and those kinds of things.”
This much has been evident in AMD’s product launches. When AMD launched Zen 2 and the Ryzen 5000 series, it launched chips as cheap as $199, right out of the gate. With Zen 3, the cheapest CPU is the Ryzen 5600X, at $299. Higher than expected prices, due to ongoing shortages, have kept pricing poor. Right now, Intel’s 14nm desktop CPUs are often better deals than AMD CPUs, unless you prioritize low power consumption over performance per watt. The only reason this isn’t getting more attention at the moment is that GPU prices are so bad, very few people are building their own gaming PCs right now.
According to PCMag, Su tied the shortages directly to AMD’s decision not to expand its product lines. Right now, Ryzen 3000 CPUs are still anchoring a lot of AMD SKUs in the $150 to $300 range. Both Ryzen 3000 and Ryzen 5000 are built on 7nm, and while both have been in short supply during the pandemic, the existing Ryzen 3000 CPUs aren’t carrying as much of a price premium as the higher-end parts.
During her remarks at the JP Morgan event, Su added that AMD hopes to add more manufacturing capacity in the next few months. This could reflect additional capacity now coming online at TSMC, or it could mean that more manufacturers are shifting to 5nm, opening space in the 7nm fab lines.
TSMC approved capital expansion plans to build out additional 7nm and 5nm capacity in 2019 and 2020, but reports from November 2020 claim that the company’s 7nm production lines were already fully loaded until the back half of 2021. The chip shortage has worsened since then, but there’s also been time enough for TSMC to make plans to adjust production further. It’s also not clear how consumer demand will continue to evolve as the pandemic weakens. TSMC has invested a great deal of money in ramping 5nm production in the past year, so it’s not unreasonable to think that customer shifts might create a little more room on 7nm.
We’ve heard on multiple occasions that lithography is not necessarily the bottleneck for chip production, however. AMD and Intel have both invested in building out additional Ajinomoto build-up film (ABF) substrate production capacity and it’s possible they expect bottlenecks to ease in the coming months.
This prioritization also suggests an explanation for why AMD’s server market share shot up last quarter while its desktop and mobile shares both slipped. Ever since the launch of Ryzen in 2017, AMD has competed best with Intel at the top of the product stack. The farther up the product stack you go, the tougher the competitive standing for Intel. Intel’s older 14nm Xeons, which topped out at 28 cores, were soundly beaten by AMD’s 64-core Threadrippers. Ice Lake-SP, which launched earlier this spring with up to 40 cores, reduces Intel’s competitive gap against AMD significantly, but a 24-core advantage in a single-socket can be tough to beat. Sapphire Rapids, which should start ramping late in 2021 or early 2022, is said to offer more significant performance improvements — and Milan-X, which just tipped up, may be part of AMD’s answer to that HBM-equipped part.
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