AMD admits to restraining chip supply to keep higher CPU and GPU prices

[Cal Jeffrey]

In context: Gamers have been lamenting about the high prices of graphics cards for what seems like forever. We all got excited when crypto mining became obsolete, just knowing that we were finally going to see prices come down, but for the most part, they haven't. The latest GPUs are still out of reach for the average consumer, and even older cards are holding their value.

If you haven't noticed, the tech industry is suffering a significant contraction. Executives are panicking as they try to pinch pennies with layoffs and other measures to keep investors happy. One of those "other measures" is restraining product supply.

In a Tuesday evening investors call, AMD CEO Lisa Su tried to calm investor anxiety by pointing out that the company has been, and will continue to, undership GPUs to "balance supply and demand." Of course, that's just another way of saying, "we're going to keep prices inflated by lowering our output."

"We undershipped in Q3, we undershipped in Q4," Su told investors. "We will undership, to a lesser extent, in Q1 [sic]."

Many hardware companies got used to the high demand caused by the pandemic and the crypto boom. Now that both driving factors are ebbing, companies are finding themselves with a surplus of inventory and are trying to tip the scale to keep their numbers up for investors.

The natural laws of economics dictate they lower prices to move those products. However, that means ruining the huge margins they have enjoyed. PC World notes that AMD saw its non-GAAP gross margin balloon to 51 percent last quarter. If that were to shrink, investors would call it a loss.

Charging normal prices for products is not taking a loss. It only matters in the short-term — in quarter-over-quarter numbers. However, it does matter in investors' portfolios, which is why companies are constantly under pressure to ensure positive growth.

But AMD is not the only culprit trying to stave off a few bad quarters. We saw a similar move this week with Sony.

On Tuesday, leakers said Sony was cutting shipments of its new PS VR2 by 50 percent. Last year, the company told investors it expected to ship two million PS VR2s in Q1 2023. Now, it doesn't think it can break the two million unit barrier until late 2023 or early 2024.

However, Nvidia beat both of them to the punch. In November, CFO Colette Kress told investors that the company was combating declining demand by lowering shipments.

"We still see gaming is solid, and we're continuing to watch each and every day in terms of the sell-through that we're seeing," Kress said. "So we have been undershipping. We have been undershipping gaming at this time so that we can correct that inventory that is out in the channel [sic]."

This is why we still see cards retailing for $800 - $1,200 — the price miners were willing to pay. These companies need to get hit in the NASDAQ to get them to realize normal people don't pay that kind of money for one computer component.

The solution is relatively simple. Just hold on to your money for now. It's a rough economy. Perhaps gamers just saying "no" for a few quarters will show OEMs that their fake undersupply will not fly anymore. Of course, you'll have to forgive me for being an idealist.

Permalink to story.

https://www.techspot.com/news/97462-amd-admits-restraining-chip-supply-keep-higher-cpu.html

 

[Theinsanegamer]

Hey, you know how AMD only has 8% market share, and how people were going on about how it's nvidia mind share and AMD was being treated unfairly?

Yeah no, they did this to themselves.

 

[Mr Majestyk]

Well screw you too Su. I though Huang was "the" douchebag, but he's taught you a lot I see. Your strategy has backfired spectacularly. RDNA3 sales are abysmal, Zen 4 sales are terrible, you have already slashed prices barely a few months after release, and we now know v-cache models will be priced at $449, $599 and $699.

 

[n3o127]

Unwilling to price or MSRP their products (as what, they know public not pay that much ???) -- So, make up a problem and make it so to drive the prices up to that price. Dum question, does this fall in any way into some sort of price fixing (laws) or such ?

 

[Thanthan]

Unwilling to price or MSRP their products (as what, they know public not pay that much ???) -- So, make up a problem and make it so to drive the prices up to that price. Dum question, does this fall in any way into some sort of price fixing (laws) or such ?

No, it most likely doesn’t. Price fixing would entail that they agree with nvidia and intel beforehand to pricing, but simply pricing their wares according to their competitors or according to other interests is not price fixing per se. Typically price fixing isn’t really a thing for goods that reach consumers, it’s more common in business to business (artificially inflating say steel or DRAM) and the construction industry and similar. In consumer facing industries it’s more of a ‘getting away with scumbaggy bad pricing’ than technical price fixing. The former not being illegal to my knowledge.

 

[Julnor]

Hey, you know how AMD only has 8% market share, and how people were going on about how it's nvidia mind share and AMD was being treated unfairly?

Yeah no, they did this to themselves.

AMD fanboys are complete morons. And there are way more of them than people that actually buy AMD GPUs so it's a curious situation. They also kept insisting AMD are the good guys and anyone buying a non-AMD product is "stupid".

AMD might only exist because both Intel and Nvidia are afraid of monopoly (anti-trust) regulations hitting them. That would explain why AMD seemingly refuses to actually compete for market share.

 

[nnguy2]

Or they didn't want to flood the market with gpus and have to eat the cost from oversupply from retailers.

Oversupply of used RTX 30 Series GPUs could delay GeForce RTX 40 Series launch

It remains to be pure speculation, but when you think about it, it does make sense. NVIDIA's next generation of graphics cards, known as the Ada Lovelace or RTX 40 series, was set to be released i...

www.guru3d.com

 

[Endymio]

Well screw you too Su. I though Huang was "the" douchebag, but he's taught you a lot I see.

Whining isn't helpful, but an understanding of basic economics is. Every company in the world is continually adjusting its production up or down to increase profitability. Given that demand has fallen off a cliff, if AMD doesn't reduce supply, they'll be forced to sell chips at a loss. Companies exist to make a profit, not to gratify your own personal desires.

 

[WhoCaresAnymore]

Yeah, I'm just as ticked with AMD as I am with nVidia. They would have made things more affordable, but they didn't. Gamers are getting hosed. I'm not upgrading anything this year.

 

[ShadowDeath]

Hey, you know how AMD only has 8% market share, and how people were going on about how it's nvidia mind share and AMD was being treated unfairly?

Yeah no, they did this to themselves.

It's like they didn't learn from that time those Hard Drive manufacturers deliberately slowed production to make more money and got fined. Then it happened again to chip manufacturers.

 

[Charles Olson]

Did most of the commenters only read the title then hit the comment section ?
" However, Nvidia beat both of them to the punch. In November, CFO Colette Kress told investors that the company was combating declining demand by lowering shipments.

"We still see gaming is solid, and we're continuing to watch each and every day in terms of the sell-through that we're seeing," Kress said. "So we have been undershipping. We have been undershipping gaming at this time so that we can correct that inventory that is out in the channel [sic]." " And Nvidia has 88 percent of the market!

 

[Theinsanegamer]

Did most of the commenters only read the title then hit the comment section ?
" However, Nvidia beat both of them to the punch. In November, CFO Colette Kress told investors that the company was combating declining demand by lowering shipments.

"We still see gaming is solid, and we're continuing to watch each and every day in terms of the sell-through that we're seeing," Kress said. "So we have been undershipping. We have been undershipping gaming at this time so that we can correct that inventory that is out in the channel [sic]." " And Nvidia has 88 percent of the market!

Nobody claimed nvidia wasnt doing it, furthermore Nvidia is already regarded as scummy. AMD is torpedoing their goodwill by resorting to such tactics.

 

[Neatfeatguy]

Well screw you too Su. I though Huang was "the" douchebag, but he's taught you a lot I see. Your strategy has backfired spectacularly. RDNA3 sales are abysmal, Zen 4 sales are terrible, you have already slashed prices barely a few months after release, and we now know v-cache models will be priced at $449, $599 and $699.

Zen 4 is widely available. There was never a sold out model at Micro Center since the release of it. One of the biggest issues with Zen 4 was the high MB pricing when compared to what you could pay for on the previous generation. You were looking to spend about the same on a CPU (as compared to Zen 3), but motherboard pricing was so much higher. You could save money going with Intel instead of AMD's new Zen 4 and you'd see similar performance. Also, Zen 4 requires DDR5 - you can squeak by with DDR4 with Raptor Lake if you already have some and not have to buy the more expensive DDR5. Sure, you'd lose a little performance, but not so much that you'd notice without running benchmarks as a comparison.

Also, rumor was (and has been confirmed a little while ago) that AMD had their 3D cache versions of the 7x00 series CPUs coming out. Folks saw what the 5800X3D did for gaming in Zen 3, why buy a $500 Zen 4 when you can wait a little while and pick up a nearly identical priced 3D version that'll (should) give a significant boost to gaming performance.

AMD kind of kicked its own a$s for having low Zen 4 sales. Coupled with the downward trend of folks not flocking to upgrade since a lot of people already did so in the past 1-2 years, the performance gains just aren't there for a lot to move from Zen 3 to Zen 4.

AMD had no lack of inventory for Zen 4.

As for GPUs, even Jensen spoke about how they were holding back Ampere stock back during the winding down of the crypto boom. He wanted to continue to keep prices artificially inflated as much as possible for as long as possible. Folks were mad about it, but cards continued to sell.

AMD is no different here. Held back inventory to keep prices high....it's all about the mighty dollar here. They do what they can to keep as much money flowing into the company as possible for their investors, no one else matters. They don't care what you think and they know you'll eventually have to give them your money if you want to continue to use these kind of products.

Did most of the commenters only read the title then hit the comment section ?
" However, Nvidia beat both of them to the punch. In November, CFO Colette Kress told investors that the company was combating declining demand by lowering shipments.

"We still see gaming is solid, and we're continuing to watch each and every day in terms of the sell-through that we're seeing," Kress said. "So we have been undershipping. We have been undershipping gaming at this time so that we can correct that inventory that is out in the channel [sic]." " And Nvidia has 88 percent of the market!

It's cute that you guys seem to think AMD missed out greatly improving their market share. Even if AMD saturated the shelves with GPUs, it wouldn't have made much of a difference. Maybe a couple of percentage points.

AMD would really have to come out on top for a few generations and have ample availability of their product, while keeping the pricing at an adequate level for most people. They'd also have to have a strong showing to break the mental conditioning of people that their drivers suck compared to Nvidia.

 

[scavengerspc]

I hope everyone can adjust to this revelation. I mean, we have never seen this kind of action before, have we?

So, If anyone wants to punish a company for tactics like this by never buying their products again, be prepared for your shiny new computer to use a key tap and Morse code. Your next cell\smartphone will have 2 paper cups and some string. Your next favorite TV show will be on a 19th century stage.

Real life has always been a bit of a b***h.

 

[SRB]

Here's the part I don't get about jumping on AMD. Ok, they constrained supply to try to keep prices up, but this wasn't done in a vacuum. Nvidia has been massively jacking the prices every release for quite a few years. All AMD has done it to price theirs lower than Nvidia, but higher than previous generation to not leave any money on the table. Because of the brand loyalty, all that would happen to AMD, if they undercut Nvidia by a large margin, is make less money on exactly the same number of cards sold. Judging from all of the vitriol on here, I doubt the majority of Nvida buyers on here still wouldn't have touched and AMD card if it were half the price.

 

[Neatfeatguy]

Here's the part I don't get about jumping on AMD. Ok, they constrained supply to try to keep prices up, but this wasn't done in a vacuum. Nvidia has been massively jacking the prices every release for quite a few years. All AMD has done it to price theirs lower than Nvidia, but higher than previous generation to not leave any money on the table. Because of the brand loyalty, all that would happen to AMD, if they undercut Nvidia by a large margin, is make less money on exactly the same number of cards sold. Judging from all of the vitriol on here, I doubt the majority of Nvida buyers on here still wouldn't have touched and AMD card if it were half the price.

I wish AMD cards were priced lower when I was in need of a replacement GPU. I needed one during the middle of the crypto boom. AMD cards around me were easily $200-300 higher than the equivalent cards from Nvidia at my local Micro Center store.

The 6800 was $1200+ whereas the 3070 was around $900.
The 6800XT was nearing the $1500 mark whereas the 3080 was around $1200.
Even the 6700XT was $1000 whereas the 3060Ti was $700.
(granted AMD cards were available on the shelves due to their extreme prices and you'd only get a chance to buy a lower priced Nvidia equivalent if you camped out the delivery day mornings at Micro Center)

I so would have picked up an AMD card had the prices not been effing stupider compared to the already effing stupid prices of Nvidia cards. I even tried getting a 6800 on launch day, but I lost out to the bots/scalpers/miners.

Thankfully I was able to get a card off newegg's shuffle. Just a GPU, no other piece of crap hardware tied to it like the the abysmal Gigabyte PSU they pushed off on people. Just lucky to get a 3080 for a somewhat reasonable price at the time of around $850.

 

[Rq3EWAq]

"The solution is relatively simple. Just hold on to your money for now. It's a rough economy. Perhaps gamers just saying "no" for a few quarters will show OEMs that their fake undersupply will not fly anymore. Of course, you'll have to forgive me for being an idealist."

Not an idealist, just a guy who say what its true. Well done, I liked this article! I will not buy a GPU at these prices either.
I have years of performance ahead of me with 6800XT + 5800X + 64GB ECC DDR4 RAM I own, and well, prices and performance of current offering just does not make sense to upgrade, I will stay with what I have.

 

[Julnor]

Gamers and tech industry encompass more than just PC Gaming. For gaming, consoles are clearly the better value and product, and Sony is increasing production of PS5s, while all the console manufacturers are able to keep costs the same or even lower them. So it's not just a choice between overpriced PC hardware or no games, it's literally the choice between the overpriced and now inferior PC hardware and software library, versus a much cheaper and superior console choice. PC gaming became a bubble, it's probably not even the prices so much as the inferiority of the experience. In the 10s it was the opposite, PC gaming was better value for better performance and a better library. The market reacted rationally, it moved into PC gaming, and now it's flipped. It will flip again, check back in 5 years and the consoles will completely dominate PC in terms of gaming numbers. Which I'm not sure they still don't have a lead anyway.

 

[Neatfeatguy]

Gamers and tech industry encompass more than just PC Gaming. For gaming, consoles are clearly the better value and product, and Sony is increasing production of PS5s, while all the console manufacturers are able to keep costs the same or even lower them. So it's not just a choice between overpriced PC hardware or no games, it's literally the choice between the overpriced and now inferior PC hardware and software library, versus a much cheaper and superior console choice. PC gaming became a bubble, it's probably not even the prices so much as the inferiority of the experience. In the 10s it was the opposite, PC gaming was better value for better performance and a better library. The market reacted rationally, it moved into PC gaming, and now it's flipped. It will flip again, check back in 5 years and the consoles will completely dominate PC in terms of gaming numbers. Which I'm not sure they still don't have a lead anyway.

What is your definition of "inferior PC hardware and software library"?

 

[yRaz]

Zen 4 is widely available. There was never a sold out model at Micro Center since the release of it. One of the biggest issues with Zen 4 was the high MB pricing when compared to what you could pay for on the previous generation. You were looking to spend about the same on a CPU (as compared to Zen 3), but motherboard pricing was so much higher. You could save money going with Intel instead of AMD's new Zen 4 and you'd see similar performance. Also, Zen 4 requires DDR5 - you can squeak by with DDR4 with Raptor Lake if you already have some and not have to buy the more expensive DDR5. Sure, you'd lose a little performance, but not so much that you'd notice without running benchmarks as a comparison.

Also, rumor was (and has been confirmed a little while ago) that AMD had their 3D cache versions of the 7x00 series CPUs coming out. Folks saw what the 5800X3D did for gaming in Zen 3, why buy a $500 Zen 4 when you can wait a little while and pick up a nearly identical priced 3D version that'll (should) give a significant boost to gaming performance.

AMD kind of kicked its own a$s for having low Zen 4 sales. Coupled with the downward trend of folks not flocking to upgrade since a lot of people already did so in the past 1-2 years, the performance gains just aren't there for a lot to move from Zen 3 to Zen 4.

AMD had no lack of inventory for Zen 4.

As for GPUs, even Jensen spoke about how they were holding back Ampere stock back during the winding down of the crypto boom. He wanted to continue to keep prices artificially inflated as much as possible for as long as possible. Folks were mad about it, but cards continued to sell.

AMD is no different here. Held back inventory to keep prices high....it's all about the mighty dollar here. They do what they can to keep as much money flowing into the company as possible for their investors, no one else matters. They don't care what you think and they know you'll eventually have to give them your money if you want to continue to use these kind of products.


It's cute that you guys seem to think AMD missed out greatly improving their market share. Even if AMD saturated the shelves with GPUs, it wouldn't have made much of a difference. Maybe a couple of percentage points.

AMD would really have to come out on top for a few generations and have ample availability of their product, while keeping the pricing at an adequate level for most people. They'd also have to have a strong showing to break the mental conditioning of people that their drivers suck compared to Nvidia.

Finally a reasonable post in this non-sense. AMD is not a person, it's a publicly traded company and has a legal obligation to it's share holders to do what it is profitable. We can argue about the ethicacy of that all day long, but I'm not here to talk about that. The thing is there was never a shortage of AMD products and over producing them would artificially lower the price.

First off, the title of this article is misleading so thanks for the click bait. However, I am going to ask a question and I want someone to give me a reasonable answer. As a business looking to make money, why would you make MORE of a product that isn't selling instead of less? People are still thrilled with the 5000 series and AMD has said it will continue to make zen 3 parts along side zen4 parts. They are still making PLENTY of sales.

Going from CPU to GPU, you can still find 7900xtx and 7900xt parts at MSRP, even below in some cases I've seen with the 7900xt. I'm seen 7900XT's in the 860-870 range.

AMD has been dropping the prices of the 5000 series and 6000 series of graphics cards nearly monthly since the release of the 7000 series of CPUs and GPUs. They have stock of parts at every price point for every performance level. It does not make sense to increase supply to devalue their own product when they already have unsold products they've been dropping the price on sitting on shelves. You can buy a 6950XT for less than a 7900XT and it's FASTER so long as you don't care about power consumption.

And it's not like AMD or nVidia are the only ones doing this. Intel is doing this with their CPU's, too. the 13 series is selling very poorly compared to the 12 series and the 12 series, at it's current pricing, overs similar price to performance.

There are no good guys here, lets not forget that. These companies are not our friends, they are businesses with a sole purpose and legal obligation to MAKE MONEY. AMD, nVidia, Intel, or anyone else you can name isn't going to drop their prices to make you feel good. As much as we all hate their new offerings it has never been a secret that they have been planning to price their new products to move old stock. Don't like the 4070? go buy a 3080. Don't like the 7700x? go buy a 5800X3D. Don't like the 13700k? the 12700K is still a fantastic chip. Heck, get a 13600k, it's arguably the best price performance CPU on the market right now especially if you don't want to go DDR5

 

[mrtraver]

Just in case anyone did not realize yet that they view investors as the real customers, not the people who purchase the products.

 

[brucek]

Does "under-shipped" mean they are sitting on a warehouse full of inventory they are intentionally not selling, or does it mean they truly had a no or low penalty way of reducing production?

Either way I way suspect this is at least as much about trying to explain weak sales as it is about a genuine intended strategy.

Here's what I think is working against an intentional hold back strategy:

1. I think they paid top dollar for foundry capacity, and they likely contracted for minimum volumes. Not using capacity they're paying for anyway sounds like a huge loss, and holding the output back to compete against a future environment where supply is more readily available isn't great either. Although maybe they were able to relinquish or even sell to another industry?

2. R&D and other fixed costs are substantial, and already sunk. Selling only half the number of units at 20% higher margin probably does not work out if it means the fixed costs are effectively 100% greater per unit. They aren't quite on the airline model but leaving a seat empty isn't painless for them either.

3. For most people gaming GPUs are a discretionary purchase. Generations can be skipped. Consoles can be bought instead. 4K monitors can be passed over for 1440p, or 1080p. Lower tier cards can start to look like smarter choices. More accessible hobbies can take over. All this means if you retreat for a quarter, there is no guarantee at all those sales will wait for the next quarter. That especially includes last quarter - holiday sales.

4. Obsolescence is making their inventory worth less by the quarter. This generation's products will be last generation in about seven quarters whether they sell it or hold it.

5. Inflation is making their future revenues worth less in absolute terms by the quarter, unless they think they can raise prices to keep up with it.

6. AMD missing an opportunity to increase market share vs Nvidia, even by a little, sounds bonkers to me. I think their low volume is already hurting their ability to keep up with development, mind share, and other factors. If they could get 5 more points of market share even at $0 additional profit (but substantial total revenues) they should take it.

7. If they really didn't want to compete against last generation's cards, then why even introduce this generation at all? Why not save the launch marketing dollars until they were ready?

Anyway, assuming they are telling the whole truth about their motivation, which is a big assumption, I would expect that their actions are based on rational analysis of all information available. I'd just really like to sure what the presentation outlining the choices and explaining the math looked like (and then to look back two years from now to see how true it was or wasn't.)

 

[Nobina]

Wow, so many experts in economics defending this behaviour cause they know AMD is trying to maximize profit as if we're all *****s who expect them not to. Congratulations, you figured it out! Everything is allowed cause at the end of the day they have to make profit I guess. Shell out 2 grand for a GPU now...

 

[takaozo]

Once you got the taste of honey you won't go back to eating ants.

 

[emmzo]

Wow, so many experts in economics defending this behaviour cause they know AMD is trying to maximize profit as if we're all *****s who expect them not to. Congratulations, you figured it out! Everything is allowed cause at the end of the day they have to make profit I guess. Shell out 2 grand for a GPU now...

Exactly, they can treat people like ****, because money. And as customers we can't complain, because they are just trying to make money. We got to get this into our stupid heads, anything goes, because money. How about fxck off. People defending this, getting rekt and still buying at ridiculous prices, now that's what I'd call stupid.