AMD Reports Record Sales as Demand Soars for Server Chips
AMD continued its ascent into the upper echelons of the semiconductor market, posting record sales in the fourth quarter, driven by strong sales of its chips targeting PCs, game consoles and data centers.
The company said revenue for the three months to Dec. 25 was $4.83 billion, up 49% from a year earlier, a record high. Executives at AMD, which has cemented its status as one of America’s most valuable chip companies worth more than $145 billion, also forecast strong sales and earnings for the first quarter of 2022.
Under CEO Lisa Su, AMD rolled out chips with major performance gains, opening the door for it to take on Intel. While Intel’s struggles to upgrade to more advanced tech nodes have hampered its ability to compete with TSMC and other foundry rivals in recent years, Su has also convinced customers to start ditching Intel in favor of chips. from AMD. As a result, AMD quickly amassed market share in laptops, desktops, and data centers.
PC market reinvigorated
AMD is surfing on the recovery of the PC market following the epidemic of COVID-19. The pandemic has pushed employers and students to buy desktops, laptops and other devices to work remotely and play games. It is the second largest supplier of graphics processors used in PCs for high-end gaming, behind NVIDIA. AMD is also facing increased competition from Intel, which has started selling PC GPUs for the first time in years.
The semiconductor company reported sales of $2.6 billion in its computer and graphics segment, up 32% from a year ago, boosted by the explosion in demand for PCs based on its flagship lines of Ryzen processors and Radeon GPUs.
AMD said the average selling price of both product lines has risen as customers prefer its high-end laptop chips, a market Intel is trying to retaliate in with chips based on its Alder Lake CPU architecture.
Cloud giants drive data center chip sales
It’s also gaining traction in data centers, where Intel has long dominated with its Xeon server chips. AMD said sales of its server chips to cloud computing giants such as AWS, Google and Microsoft soared last quarter. They use its EPYC processors in data centers that they rent to others. The cloud industry is booming, driven by strong demand for software and services related to a widespread shift to remote working.
“On the cloud side, we’re in 10 of the biggest hyperscalers in the world,” Su remarked on a conference call with analysts. It said it more than doubled sales in its data center business last year due to strong demand for its EPYC server processors and Instinct server GPUs, which together accounted for about 25% of its revenue.
It is also persuading other tech giants, including Meta, to use its server processors in massive new data centers. AMD said it worked with Meta (formerly Facebook) to build a single-socket server based on its EPYC processors for Meta’s new “North Dome” systems, improving performance per watt across a wide range of major workloads. Meta would manage the fourth largest data center operation in the United States
The new relationships boosted sales of its data centers and semi-custom segment by 75% to $2.2 billion.
Peak demand for gaming graphics chips
Business was also boosted by sales of Sony’s PlayStation 5 and Microsoft’s Xbox Series X consoles, which use AMD-designed graphics chips. Ongoing chip shortages stalled production of high-end game consoles for a year and a half, turning them into two of the most coveted consumer products to hit the market last year.
Su said her outlook predicts continued strong demand for the new PlayStation 5 and Xbox Series X in 2022. She said despite supply chain uncertainty, the console’s upgrade cycle exceeds “all previous generations”.
The strong streak of growth and profit gains also boosted its gross margins – or the percentage of sales remaining after deducting production costs – to 50% in the prior quarter for the first time in a decade.
Net income for the last quarter of 2021 was about $975 million, or 80 cents per share, according to AMD. The company said its gross margins will rise to 51% in the coming year, challenging those of Intel.
The findings come amid a global chip shortage that has gripped a wide range of industries, including cars and consumer products, for more than a year now. Inventory levels have been depleted as demand for electronics continues to rise, leading to record delays for many types of components. Global supply chain issues lead to shipping delays as well as higher costs of moving goods.
AMD uses the same fabless model as most of the US semiconductor industry, meaning it outsources production of its chips to TSMC and other foundries that are overwhelmed with orders they have to hard to fill.
AMD said it has taken additional steps to secure long-term supply agreements and, as part of its strategy, has made advance payments of $1 billion in 2021 to lock in long-term production capacity. TSMC and other partners. Su said supply issues have also prompted AMD to work more closely with customers, which means having a “several quarters and, in some cases, years” view of their forecasts to plan ahead.
The company said it has the production capacity it needs to continue growing. AMD forecasts sales in the range of $4.9 billion to $5.1 billion for the first quarter, driven by increased demand for its high-end processors.
AMD said it expects $21.5 billion in sales for 2022, which would represent 31% growth over the previous year. AMD plans to roll out a new generation of its EPYC server processors, codenamed Genoa, based on its “Zen 4” microarchitecture later in 2022. The chips will be manufactured by TSMC using its 5nm process.
“We expect another year of significant growth in 2022 as we expand our current portfolio and launch our next generation of PC, gaming and data center products,” said Su, who has served as the company’s CEO since 2015.
AMD announced plans to complete its $35 billion deal with programmable chip giant Xilinx in the first quarter. The deal would give AMD more strength to compete with Intel in the server and network chip market. AMD said China had conditionally approved the deal, removing the last major regulatory hurdle to the takeover.