Intel is facing the heat in the data center, and the company has reportedly slashed the prices of its server processors to more effectively compete with AMD. If this is true, it would mean that AMD sees the kind of growth in shipments that Intel needs to take seriously. But it’s a little strange that this is happening now.
AMD’s processor shipments have been limited for about a year at this point, and while availability has improved, the company has been open about the manufacturing constraints it faces at TSMC. The market share between AMD and Intel has been relatively stable, with AMD gaining a few points on the server but losing ground on desktops. Conventional wisdom on this situation has not changed over the past year. Between the Xbox Series S | X, PlayStation 5, Zen 2, Zen 3, and RDNA2, AMD currently accounts for a significant portion of TSMC’s 7nm shipments.
The market share between Intel and AMD in 2021 appears to be defined less by which company is ahead to a particular extent, in other words, and more by which company actually has products to ship. While Intel was also pinched by shortages of products like Ajinomoto Build-up Film, the company experienced its own capacity constraints in 2018-19 and was therefore better positioned for the pandemic.
Intel has good reason to position itself aggressively against AMD, assuming the DigiTimes report is correct. The launch of Ice Lake-SP earlier this year improved its relative position compared to AMD, but did not put the company back into a position of global dominance.
AMD has long focused on the single-socket server market and Epyc’s I / O strength and core count in that space. According to NextPlatform, there are signs that the market for single-socket servers could strengthen in general, and certainly, many observers have been trained on AMD and its high number of cores per socket.
The problem for Intel is that losing a sale to AMD in a data center costs it more than just a processor. Intel is also making money on the chipset and any additional FPGAs or network cards the customer might order. Intel hasn’t had much to say about Optane lately, but its NAND flash alternative is now positioned solely for the business and Intel is still talking about the performance that a wide range of Optane can deliver when it is. deployed as system memory. According to Intel, the “adjacencies” it creates with the server market represent about 13% of its total revenue.
Taking server shares is also good enough for gross margins and overall operating profit. Imagine that AMD manufactures eight chips. He can use those chips to sell eight Ryzen 7 5800X, or he can ship them as part of a high-end Epyc 7763. Assuming all eight Ryzen 7 5800Xs are sold at MSRP, that’s $ 3,600. The list price for the Epyc 7763 is $ 7,809. While there are higher costs associated with the Epyc part, they do not come close to equaling the additional benefits AMD can achieve on a high-core server chip.
Intel has its own reasons for wanting to keep its margins as high as possible. The company has been frank that 10nm won’t hit financial highs of 14nm and won’t make the same amount of money for Intel. While the impact is modest – Intel’s profit margins have remained north of 50% and are expected to do so for the foreseeable future – the company also faces challenges on several fronts. Intel and AMD will both face stiffer competition and the associated margin pressure from ARM over the next several years.
The idea that Intel could fight to position itself in the server market – or that OEMs could demand that Intel make attractive deals to them so that they don’t get off the ship for AMD – is not difficult to imagine. to believe. Intel’s stated goal is to return to a global market leadership position within the next 3-4 years and maintaining a high market share is one way to keep investors confident that Intel will return to its position. former. If Intel is lowering the prices of server processors, that’s just good news for customers.
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