AMD to prioritise flagship CPUs over lower end offerings

[CAT-THE-FIFTH]

CPUs are apparently not a low margin businesses - Intel who makes ridiculous amounts of money despite spend billions of USD on their fabs,and various billions on weird purchases,etc. Intel still has higher margins than AMD despite having to sell their 14NM+++++++++++++++++++++++ CPUs for less and less money.

Its most likely even a £250 CPU is higher margin than people think. For one thing its only 70MM2 of 7NM silicon with very high yields. They are also salvaged parts,ie,lower clocking chiplets with defective cores. Then consider that the same chiplets will be found in Epyc/Threadripper so the parts which filter down to that level are really "poor quality" in comparison. The 7NM APUs are 150MM2~180MM2 and are found in £350~£400 desktops and £400~£500 laptops. The consoles are somewhat different - the parts have some redundancy built in,but anything with sufficient defects is unusuable. With GPUs,there is loads of salvage SKUs to take up faulty parts. With consoles that doesn't really exist.To put it in context,the console APUs are around 300MM2~360MM2 in size. These are around the same size as a GPU in the RX6700XT or RTX3070TI. AMD due to shortages has lost dGPU sales relative to Nvidia!

Spoiler

Now look at their last financials. AMD made $485M on $2100M of computing and graphics sales(23%). They made $277M on $1345M(20%) of semi-custom and enterprise sales. Yet AMD in 9 months has almost doubled its enterprise sales. So if you take enterprise sales out of it,which are very high margins,its quite clear even with a huge increase in semi-custom consoles sales/licensing its lower margin than their client side of the business.

Spoiler

Plus Intel makes a ton of money from OEM sales. Nvidia made around $5 billion. Half of that was from "gaming" GPUs,and they still ship significant volumes of older 12NM/14NM parts. At least 14 million consoles have sold over two quarters(in Q4 2019 they sold only 2 million GPUs). Yet despite this computing and graphics has made $4 billion in revenue with $1.05 billion in income,yet semi-custom and enterprise made $2.6 billion and $520 million in income. There is a reason why AMD lumped in enterprise and semi-custom into one segment,because it hides the relatively low margins console contracts make relative to enterprise,and client CPU/GPU sales.Its why Nvidia and MS fell out,as MS pushed hard on Nvidia WRT to costs.

AMD needs to balance the different parts of the business,,they have potentially left a ton of revenue on the side,if now they have to leave whole profitable market segments,especially during a pandemic which drove forward a lot of PC purchases. If they didn't need to abandon parts of their business,then it wouldn't be an issue. I really hope AMD finds a way to get more supply to its PC business. Sadly its giving Intel and Nvidia more of respite than they deserve,to come back later when they are stronger.

 

[0h_no_not_again]

I really cannot see how AMD can have a high Margin on Console chips given the pricing of them. I'd be surprised if margin per console is in double digit $ or if it is, it's single digit margin per CPU and the same for GPU. Either that or Sony and MS are losing hundreds of dollars per console for every one sold which I would be very surprised to hear. That's a lot of games to sell even if each game has a $10 licence fee. Are gamers going to pick up 10 games or more in the first year to 18 months? Possibly, but if they're £60+ then it's highly unlikely.

The unit margins are not high, but you generally get paid to develop the designs and IP within - and there is an astonishing value in the design and IP of consoles. It means that any margin made on the sale of the device, less spares and failures, goes straight to profit.

You've also got the fact you don't need ton's of cash up front to fund your own development, and finally think about the power AMD gains partnering with Sony and Microsoft.

Consoles == long term strategy.

 

[SKILL]

CPUs are apparently not a low margin businesses - Intel who makes ridiculous amounts of money despite spend billions of USD on their fabs,and various billions on weird purchases,etc. Intel still has higher margins than AMD despite having to sell their 14NM+++++++++++++++++++++++ CPUs for less and less money.

Its most likely even a £250 CPU is higher margin than people think.

<snip>

AMD needs to balance the different parts of the business,,they have potentially left a ton of revenue on the side,if now they have to leave whole profitable market segments,especially during a pandemic which drove forward a lot of PC purchases. If they didn't need to abandon parts of their business,then it wouldn't be an issue. I really hope AMD finds a way to get more supply to its PC business. Sadly its giving Intel and Nvidia more of respite than they deserve,to come back later when they are stronger.

The point isn't that a <£250 CPU is 'low margin', but that's it's 'lower margin' than a more expensive processor...

If AMD were to compete with the 11400 for example they'd need to sell a 6-core chip for ~£150, and not like they could use some crummy 'bad' core that barely manages 4GHz as it wouldn't compete. So you're basically saying they should sell a 5600X capable die for £100 less...

They haven't even released Threadripper '5000' yet, again that same 6-core die (or several of them) could be put into an even higher margin product.

Yes they need to balance the different parts of the business, and in an ideal world they'll have plenty of RDNA2 GPUs, lower SKUs for Zen3, Threadripper 5000 out there, massively increased CPU volume to target OEMs and service the console market. But there is very limited supply and very high demand so where to focus. Consoles may be low margin but they're good solid revenue in a long term market that helps fund R&D, it's really not the terrible option you seem to think it is.

 

[CAT-THE-FIFTH]

The point isn't that a <£250 CPU is 'low margin', but that's it's 'lower margin' than a more expensive processor...

If AMD were to compete with the 11400 for example they'd need to sell a 6-core chip for ~£150, and not like they could use some crummy 'bad' core that barely manages 4GHz as it wouldn't compete. So you're basically saying they should sell a 5600X capable die for £100 less...

They haven't even released Threadripper '5000' yet, again that same 6-core die (or several of them) could be put into an even higher margin product.

Yes they need to balance the different parts of the business, and in an ideal world they'll have plenty of RDNA2 GPUs, lower SKUs for Zen3, Threadripper 5000 out there, massively increased CPU volume to target OEMs and service the console market. But there is very limited supply and very high demand so where to focus. Consoles may be low margin but they're good solid revenue in a long term market that helps fund R&D, it's really not the terrible option you seem to think it is.

AMD can easily sell a cache disabled lower clocked part for closer to £200,which is still £50 more than a Ryzen 5 3600. A Ryzen 5 5600G for example still easily beats a Ryzen 5 3600 despite half the L3 cache. The Ryzen 5 5600X is still a decent amount faster overall than a Core i5 11400,and all AMD needs to do is get something which is faster than a Ryzen 5 3600.To put it in context,the size difference between a Zen3 and Zen2 CPU is only 10MM2. Yet AMD has to sell a far better quality Zen2 chiplet in a Ryzen 5 3600 for less money. The reason they can't do that is because they have no supply to be able to transition over. The Zen2 parts are going to be lower margin.

You mention no Zen3 Threadripper - again that means they have not enough supply for Epyc too,because they use the same chiplets. So its affecting all ends of the market now.

However,AMD already sell 150MM2~180MM2 7NM APUs in £350~£450 systems.I seriously doubt an OEM is paying £250 for a CPU. OEMs sell whole Ryzen 7 laptops for around £500 with a perfect 150MM2 7NM SOC,and Ryzen 5 based laptops for less.

OEM sales make up the bulk of their client side.Yet despite apparent "lower margin" OEM sales,AMD is making more revenue,and a higher rate of return on this than semi-custom and enterprise bundled together.

Longterm this is going to be a big problem. AMD can attempt to transition more parts to higher margin SKUs,but again they are limited in what they can do.

OEMs are going to buy the parts for far less than a retailer can sell them for,so AMD/Intel/Nvidia already are making decent margins on all their parts before sales to OEMs,let alone end consumer sales which are much higher margin.

If mainstream/entry level sales were relatively low margins,Intel and Nvidia would be having worse margins than AMD. In terms of pure revenue,they not only sell far more CPUs and GPUs,they also are exposed far more to the entry level and mainstream markets. Look on Steam for example - some of the top GPUs are entry level/mainstream models. Yet Nvidia has some of the best margins selling these kinds of GPUs. The same goes with Intel.

The bigger issue is MS/Sony have a history of pushing down costs,so they can price the consoles cheaper. So what happens if demand is lower and they want to push AMD down on the costs,to enable cheaper models to maintain sales. This is why Nvidia and MS fell out! It was great when AMD was barely surviving and had crap products,but its now becoming an issue when they have decent products. How is this going to work out for 5NM/6NM??

Both Intel and Nvidia have decided to also move on 5NM/6NM. So if Sony/MS also push their consoles,how it is going to impact the rest of AMD's business?? I am concerned where this is going to lead! Its no point having the best products,if most retailers then end up selling Intel/Nvidia instead because supply is easier to find.

 

[SKILL]

So you're arguing that mainstream/entry level sales aren't rubbish margins? Which isn't what my post was saying at all?

If you have one die, and you can sell that either for £100 or £200 profit/margin which makes more sense?

Now sure, if you have a gazillion of those dies then selling some, or even lots, at £100 margin and still having plenty for the markets willing to pay £200 then great, but that's not the situation they're in.

It's only in the last ~2 months that 5600X's have been readily available all over the world, so now maybe they've got some 'spare' dies, or wafer space, to expand on what market they target, but again, do you go low margin or high margin if both are viable targets? Surely high margin is a no-brainer for as long as you don't end up with stock sitting unsold.

 

[CAT-THE-FIFTH]

So you're arguing that mainstream/entry level sales aren't rubbish margins? Which isn't what my post was saying at all?

If you have one die, and you can sell that either for £100 or £200 profit/margin which makes more sense?

Now sure, if you have a gazillion of those dies then selling some, or even lots, at £100 margin and still having plenty for the markets willing to pay £200 then great, but that's not the situation they're in.

It's only in the last ~2 months that 5600X's have been readily available all over the world, so now maybe they've got some 'spare' dies, or wafer space, to expand on what market they target, but again, do you go low margin or high margin if both are viable targets? Surely high margin is a no-brainer for as long as you don't end up with stock sitting unsold.

Are all those parts are going to be decent enough quality to sell as "better parts". Are the dies in a Ryzen 5 5600X good enough to be binned for a Ryzen 9?? Look at the TDP rating and power consumption of the Ryzen 9 5900X?? The six core chiplets in the Ryzen 9 5900X are a better quality bin. Look at the quality of the 8 core chiplets in the Ryzen 9 5950X against the Ryzen 7 5800X?? Again the same issue.

The reason AMD had so many more Ryzen 5 5600X/Ryzen 7 5800X CPUs than any of the Ryzen 9 CPUs,was because they didn't have enough volume to bin for the better products.This is the problem with giving so much volume to consoles. It not only affects the bottom end of the market,it realistically affects the top end too. More volume means more chance for crapper bins for cheaper parts,and better bins for higher end parts. AFAIK both Epyc and Threadripper use the same quality CPU bins - why its nowhere to be seen is because the higher quality chiplets are being used for Epyc.

Another issue is also the size of the market - the top end consumer market is going to be much smaller than a high end market. Its a market much easier to saturate overtime. Sure many here will buy new toys every year,but I suspect its every few years for most companies/businesses.

But the bigger issue is next year,and the year after when we get to 5NM/6NM. AMD got a bit lucky with Huawei being booted off TSMC,and I am concerned they will get less 5NM/6NM volume. So if you have MS/Sony wanting to push a die shrink to reduce costs,is the rest of the AMD stack going to be stuck on 7NM for a few years?? I really hope AMD hasn't backed themselves into a corner here.

 

[Journey]

It's all just made up though, none of this is fact, it is just literal speculation, can you prove that "The reason AMD had so many more Ryzen 5 5600X/Ryzen 7 5800X CPUs than any of the Ryzen 9 CPUs,was because they didn't have enough volume to bin for the better products." I am all eyes.

So if you have MS/Sony wanting to push a die shrink to reduce costs,is the rest of the AMD stack going to be stuck on 7NM for a few years?? I really hope AMD hasn't backed themselves into a corner here.

If they want a die shrink they'll have to pay for the wafers, and they need to plan for the allocation just like they have had to for the 7nm parts.
Do you seriously think that AMD would have so many wafers available if they weren't producing console chips?

 

[CAT-THE-FIFTH]

It's all just made up though, none of this is fact, it is just literal speculation, can you prove that "The reason AMD had so many more Ryzen 5 5600X/Ryzen 7 5800X CPUs than any of the Ryzen 9 CPUs,was because they didn't have enough volume to bin for the better products." I am all eyes.

So you mean literally every retailer saying they were out of stock of Ryzen 9 CPUs was some grand conspiracy. Or have you missed all the stock alert places,which constantly showed Ryzen 5 and Ryzen 7 CPUs coming into stock,but not Ryzen 9 CPUs. So all the big deals sites showing multiple Ryzen 5/7 deals(but not Ryzen 9 deals) were all conspiring in some big coverup.

The Ryzen 7 5800X had so much stock it dropped in price to as low as £330. It was even easier to get than a Ryzen 5.

Instead you are speculating that all the people waiting months in the UK and US for Ryzen 9 parts was made up. They obviously don't have the detective skills you have.

So all the people I knew who got fedup of waiting for their Ryzen 9 pre-orders not to be delivered,didn't at all downgrade the CPU. Yes,they imagined the months of waiting. They imagined the other CPUs into stock!

You are just a contrarian. Tell others they make things up,but show zero evidence to prove it.Goodness grief I think I have found AMD Dave!

Obviously you are all eyes,because you shut them and fell asleep. Now you woke up,just at the time when stock is fine. Funny how you didn't comment when it was not so fine. Oh well,good timing and all that when you woke from your nap.

 

[Journey]

The reason AMD had so many more Ryzen 5 5600X/Ryzen 7 5800X CPUs than any of the Ryzen 9 CPUs,was because they didn't have enough volume to bin for the better products.This is the problem with giving so much volume to consoles

I'll quote you and you can try again.

Tell me how you know that is fact? How do you know they didn't just chose to produce more Ryzen 5600X and 5800X CPU's? For every 5900X made they can make and sell two 5600X's and save the better binned chiplets for EPYC parts.

You have no evidence to support any of your theories, or speculation.

As for your AMD Dave comment, sure... someone disagrees with your speculation ad you resort to name calling, grow up.

 

[Troezar]

I'm getting the feeling someone is miffed that AMD CPUs are more expensive these days... I'm sure it will calm down as availability increases. I also think that CPUs are getting ahead of what users need and upgrade cycles may get longer. Any decrease in demand would also lower prices. Hopefully AMD have a fat war chest built up, I can't see Intel staying where they are for too much longer.

 

[Journey]

So you mean literally every retailer saying they were out of stock of Ryzen 9 CPUs was some grand conspiracy.

Also where did I say this, or did you not bother to read my post properly and just speculate what is said.

 

[CAT-THE-FIFTH]

I'm getting the feeling someone is miffed that AMD CPUs are more expensive these days... I'm sure it will calm down as availability increases. I also think that CPUs are getting ahead of what users need and upgrade cycles may get longer. Any decrease in demand would also lower prices. Hopefully AMD have a fat war chest built up, I can't see Intel staying where they are for too much longer.

I did my upgrade a few months ago so I am good to go until AM5. My concern is what is going to happen another year or so down the line.The issue is AMD has pretty much admitted future availability is the problem here,and yet they have pushed a huge amount of volume towards consoles at the same time. Now its rumoured the £400 Steampal console uses a custom AMD APU,so that is more capacity going that way,and less towards other products.

For example I know many who want to get an AMD GPU over an Nvidia one,but ended up getting Nvidia cards because it was easier to get in retail,or in a prebuilt system. They won't be buying another GPU for 3~4 years after that.

What happens if AMD starts having issues supplying retail CPUs?? Because of what is happening now,lots of new system sales are being pushed forward everywhere. Even university computing clusters,and council computing infrastructure being pushed forward due to work at home,etc. The problem a fair amount of these systems are still Intel from talking to mates,since apparently its hard to get sufficient AMD volume even in that market. But if AMD waits too long to make sure there is enough volume,I can see the market contracting back down again. It just seems really bad timing to push consoles,push new CPUs,push new GPUs,etc all on the same capacity limited node,within a few months of each other.

The volume AMD can't provide is going to Intel/Nvidia.

 

[Hotwired]

I still think it's very odd to talk about wafers which are Sony and Microsoft private orders placed a long time ago as if AMD has any right to tell TSMC to confiscate capacity booked in for consoles and print AMD products.

If the guesstimated numbers reflect reality then it means Sony and Microsoft had vastly larger plans and confidence to book capacity in advance than AMD with their own products who need to fight everyone else for shorter notice and currently overpriced TSMC capacity. Which is how you get AMDs CEO saying they're prioritising highest profit products because what's the point in getting overcharged and then making budget parts.

AMD can't take advantage because they don't own the factory and they didn't have the brass or crystal balls to pre-book massive capacity at TSMC before the mad rush. Sony and Microsoft planned to sell boatloads of consoles anyway so their orders were booked in advance.

 

[CAT-THE-FIFTH]

MS/Sony don't book the capacity,AMD does. Unlike Apple,Sony and MS subcontract their custom chips to companies like AMD. AMD actually jumped onto TSMC 7NM relatively early:
https://www.anandtech.com/show/13279/amd-to-fab-7nm-cpus-gpus-at-tsmc

They managed to use the failure of GF 7NM to rewrite their WSA so they could go and use another fab. They certainly beat Nvidia to getting TSMC 7NM allocations.

AMD after taking up Huawei's allocations became of the largest TSMC 7NM customer. The way it worked with the previous console contracts,is AMD had to deliver X number of completed console chips at the agreed price. So unless AMD has moved to a licensing model per chip,I suspect its the same type of contract.

So its AMD which takes the risk - if yields go south its upto AMD to push more of its wafer allocations towards it. That is why they are having to rationalise the rest of their products. In the end AMD agreed the quantities to be delivered - it is entirely on them. If you go back to the original XBox MS and Nvidia had a spat over that(Nvidia had to supply a certain amount of chips at a certain price,but Nvidia accused MS of giving them a lower price).

 

[Journey]

For anyone that is interested in listening to the actual conference where the opening post quote came form, (no speculation required) you can find it on JP Morgan - HERE

It's about 36 minutes long but it is very interesting, and illustrates the direction AMD are going across the entire business, not just the tiny market that is retail boxed CPU's that people on here buy. It's also good to hear the full thing in context.

 

[gpuerrilla]

AMD cant churn out the numbers its that simple. Not enough consoles to go round, not enough GPU's (until the past month where retailers are trying it on - yeah whatever £750+ for a 6700 dream on), I mean they had to chance to take a chunk out of nvidia and scored an own goal there. The CPUs seem to be trickling through so they are better regarding availability except they are intel-esque with a 20% markup from where they need to be. So there's another department @CAT-THE-FIFTH that can safely concede what would have been a crushing blow to intel, instead due to lack of numbers and unusually high price have meant they didnt knock em out in the fight and it ended up being a tie (setting up a rematch).

 

[Troezar]

AMD cant churn out the numbers its that simple. Not enough consoles to go round, not enough GPU's (until the past month where retailers are trying it on - yeah whatever £750+ for a 6700 dream on), I mean they had to chance to take a chunk out of nvidia and scored an own goal there. The CPUs seem to be trickling through so they are better regarding availability except they are intel-esque with a 20% markup from where they need to be. So there's another department @CAT-THE-FIFTH that can safely concede what would have been a crushing blow to intel, instead due to lack of numbers and unusually high price have meant they didnt knock em out in the fight and it ended up being a tie (setting up a rematch).

In that situation the best you can do is sell everything you have at an inflated price.

 

[pastymuncher]

I guess this means no 5000 series APU's anytime soon then? My wife wants a upgrade from her Haswell system using onboard graphics and I was hoping to go down the AMD APU route but as I can't buy one anywhere I am going to have no choice but to go with Intel again. Sad times indeed.

 

[Journey]

I guess this means no 5000 series APU's anytime soon then? My wife wants a upgrade from her Haswell system using onboard graphics and I was hoping to go down the AMD APU route but as I can't buy one anywhere I am going to have no choice but to go with Intel again. Sad times indeed.

Don't be surprised if you see them at Computex, as AMD have already committed to pushing this generation (5xxx) parts into the standard retail space, not that buying an OEM one should put you off at all, I've built so many 4350G, 4650G, and 4750G systems I've lost count, and I've been running a 4650G for ages as one of my daily machines.

 

[pastymuncher]

@Journey Aren't those the Pro series that you have that are supposed to be for the likes of Dell? If so could you tell me what motherboards are you using and have you had any problems with bios support please?