The CPU Shortage Has Ended, Benefiting Advanced Micro Devices

2021.10.13

AMD Stock Benefits As CPU Shortage Ends (NASDAQ:AMD) | Seeking Alpha

Summary

• Server unit shipments and market share are performance-sensitive and independent of ASPs.
• 서버 출하량과 시장점유율은 판매 가격에 민감하다.

In the server CPU sector, AMD and Intel seem to be leapfrogging each other by introducing a “superior chip” on almost a quarterly basis.

서버 CPU 시장에서 인텔과 암드는 분기별로 슈퍼칩을 소개하면서 앞서거니 뒷서거니하고 있다.

 

The battleground in the server sector is no longer with the chip designers, but whether Intel can make its own CPUs at <7nm nodes.

 

This idea was discussed in more depth with members of my private investing community, Semiconductor Deep Dive. Learn More »

 

The PC market exhibited strong growth in the past year. Thanks to hundreds of millions of people working, teaching, or studying from home in the midst of the Covid-19 pandemic. Worldwide PC shipments totaled 300 million units in 2020, a 12.9% increase from 2019. This was the highest annual growth for the worldwide PC market since 2010.

작년에 PC시장은 원격 근무와 교육등으로 강한 성장을 하였다.

작년 글로벌 PC출하량은 2019년대비 12.9% 증가하 ㄴ 3억대에 달했다.

이는 2010년이래 최대 PC 출하 증가율이었다.

 

The PC market will still see significant growth in 2021 as growth will reach 14.2% YoY.

올해 PC 출하량은 2020년대비 14.2% 증가할 것으로 예상된다.

 

This forecast runs counter to Micron’s (NASDAQ:MU) guidance in its earnings call when its CEO Mehrotra reported that Micron's PC customers are encountering their own inventory challenges as they face shortages of non-memory components, slowing near-term demand the COVID-19 pandemic had accelerated. PC makers have cut back on memory and storage purchases to wait on semiconductors to complete their computer builds.

Micron’s less than stellar guidance caused the company’s stock to drop 2% amid a rash of downgrades. I discussed this topic in an October 2, 2021 Seeking Alpha article entitled "Micron Technology: Look Past Guidance to a Strong 2021-2022".

In this article, I present an analysis of the CPU or microprocessor (central processing unit, the “brains of a computer”) market, which is used as the brains of PCs and primarily manufactured by Advanced Micro Devices (AMD) and Intel (INTC). It also presents an analysis of market shares for both companies in the server CPU market, primarily in light of changes in Intel’s resurgence of CPU manufacturing and its forthcoming products.

End of CPU shortage

Chart 1 shows microprocessor unit shipments on a three-month moving average (3mma) basis between July 2019 and August 2021. It also shows MoM changes (orange line) in unit shipments that dropped during the first wave of Covid and another drop with the second wave in late 2020.

Importantly, we see a third drop as the covid delta variance in 2021 resulted in further a CPU shortage followed by a one-month recovery so far in August 2021.

Chart 1

Chart 2 illustrates shipments between 2008 and 2022. A consistent drop in desktop CPU shipments is obvious, as units decreased from 160 million in 2008 to 75 million in 2022, representing a compound annual growth rate (“CAGR”) of -5.5%.

Unit shipments of notebook CPUs increased from 130 million units in 2008 to 180 million in 2019, but then increased 35% to 245 million in 2020. The increase in shipments due to the work/study/stay at home protocols will subside slightly in 2022, primarily due to an expected decline in pandemic-driven notebook demand for remote work and learning applications. The CAGR between 2008 and 2022 is +5.5%.

Server CPU shipments increased 11% YoY in 2020 compared to 28% for notebooks. While covid did not substantially increase unit shipments (Chart 1) as it did for notebooks, server growth illustrated in Chart 2 shows a steady growth, increasing 10% in 2022. This sector exhibited a CAGR of +6.3%.

Chart 2

Market Shares

In Chart 3, I present Intel's ASP (average selling price) (green bars) and server CPU share. Server ASPs were flat between 1Q2018 and 2Q2021, yet Intel continued to lose market share against AMD.

This observation is very different in a similar comparison between ASP and Notebook PC CPU shares, which I analyze and present in my Semiconductor Deep Dive Marketplace newsletter of which this article is an abridged version.

Thus, as opposed to notebooks, where pricing is a factor, performance is the overriding issue in choice of Servers CPUs. This is important because there have been rumors, which Intel has denied, that it was dropping prices to compete with AMD in the server space.

Chart 3

AMD’s share of the server market is shown in Chart 4. AMD continues to increase its revenue as it shifts its production to higher-margin chips and capitalizes on its performance leadership with higher prices for its chips than we've seen in the past. For example, even though AMD’s ASPs increased 42% between 1Q2018 and 2Q2021 (versus just 2% for Intel), AMD continues to gain market share over Intel, as can be seen in Chart 4.

Chart 4

AMD had arguably not been competitive with Intel Xeons since 2009, when the four-core “Nehalem” Xeon 5500s debuted. In 2017, AMD attempted to regain lost share with its Epyc processors.

First launched on March 2, 2017, AMD’s Epyc processors are built on the Zen microarchitecture. It’s used not only in server solutions, but desktop solutions as well (AMD Ryzen processors). Like the Ryzen processors, the Epyc uses 8-core silicon dies that are made up of 2 CCX (Core Complex) modules. For AMD, these modules are made up of four processor cores and an L3 cache. AMD Epyc processors have 16 cores. This is technically implemented with two 8-core silicon dies, which are connected by an Infinity Fabric bus. They share a memory controller and PCI Express hub.

On July 12, 2017, Intel introduced its latest generation of Xeon processors, based on the "Skylake-SP" architecture.

Previous lines of Xeon processors were given names with the format Exvx: E3v3, E3v5, etc. The SP family uses a different naming scheme: all of the processors are divided into four series, each named after a precious metal: Bronze, Silver, Gold, and Platinum.