When Intel hit a rough patch a few years back and couldn’t supply enough CPUs to meet demand, the company chose to take a market share hit in the low end of the market to protect its data center business as much as possible. When AMD was capacity constrained earlier this year, the company announced it would do the same thing. It makes sense for both companies to prioritize the shipments of their highest-end, most valuable hardware.
Unfortunately, it seems such prioritization is no longer sufficient to meet demand. According to DigiTimes via THG, lead times are worsening and have risen from 52 to as high as 70 weeks. That’s very high, even given the long production cycles required to build chips. CPU supplies from AMD and Intel are also said to be quite tight, but it’s not clear if the bottleneck is in CPUs, low-level server ICs, or both. There are references to both issues, but the low-level server IC problem is getting most of the attention. Other companies such as Mitac are supposedly unable to fill 20-30 percent of orders due to a shortage in server ICs.
The semiconductor shortage continues to ricochet across the industry. Auto sales fell badly in June 2021 compared with June 2019, down 14.2 percent. None of this has prevented auto manufacturers from continuing to turn a profit — like AMD and Intel, auto companies are prioritizing the highest-end vehicles and components they have. Buyers who need a car (or a computer) are willing to pay top dollar.
One underreported facet of the semiconductor shortage is how much money all of the companies involved are making. Nvidia, AMD, Intel, and Apple have brought in a great deal of revenue through these shortages and will continue to do so. Nothing wrong with manufacturing an in-demand product, and the chip manufacturers aren’t the ones making money on GPU shortages, but all of the companies in question are doing very well. This applies to car manufacturers as well, at least to some extent.
Overall, the pandemic has been a brutal lesson in the perils of just-in-time manufacturing. Toyota’s sales have grown substantially in part because it requires suppliers to maintain chips and other components in reserve and pays them to do so. A recent Time story on the semiconductor shortage mostly retreads ground ET readers will find familiar, but it includes some interesting information on how GlobalFoundries has changed its own manufacturing plans to prioritize auto manufacturers during the shortage. There’s been a great deal of behind-the-scenes negotiating and order-shifting already as companies have tried to adjust to the unusual situation.
Tight server supplies for AMD could blunt the company’s progress in taking market share in that space. In Q1, AMD traded market share in desktop and laptops for servers and did quite well in that market. We won’t have Q2 data for a little while yet, but it’ll be interesting to see if the launch of Milan (AMD) and Ice Lake SP (Intel) shifted market share between the two companies.
Top image credit: TSMC
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