Even before AMD CEO Lisa Su's opening speech at the Quarterly Reporting Conference, there were that the formal debut of the 7nm EPYC processors of the Rome generation is scheduled for August 27th. This date is quite consistent with the previously announced schedule, because AMD had previously promised to introduce new EPYC processors in the third quarter. In addition, AMD Vice President Forrest Norrod will be speaking at Jefferies' annual telecom hardware and infrastructure conference on August XNUMXth.
Speaking about the new generation EPYC processors, AMD representatives emphasize that the number of partners involved in the preparation of this announcement has increased four times compared to the preparation period for the debut of the Naples generation processors, and the number of platforms based on them turned out to be twice as high. The company is counting on the high expansion rates of the Rome generation processors, but has not yet undertaken to clarify the goals for overcoming the bar of 10% of the server market, which it set for itself last year. Recall that by the end of 2018, AMD was supposed to take at least 5% of the server processor market, and it planned to double this figure in a year or a year and a half. In other words, by the end of this year or the middle of next year, AMD should take 10% of the segment, but in the rhetoric of Lisa Su at the last reporting conference, some caution was heard when trying to update or confirm the relevance of this forecast.
The echo of the cryptocurrency boom still spoils the statistics
Returning to the analysis of the overall dynamics of AMD's financial performance, we should mention the impact of the “high base effect” that the “cryptocurrency factor” had on revenue in the second quarter of last year. If in a sequential comparison, the company's revenue in the past quarter increased from $1,3 billion to $1,5 billion (by 20%), then in an annual comparison it decreased by 13%. AMD CFO Devinder Kumar emphasized that such dynamics is due to the influence of the cryptocurrency factor, although the high popularity of Ryzen and EPYC processors remains the revenue growth driver this year. The same factor favorably influenced the increase in the rate of return from 37% to 41% in annual comparison.
If in the graphics segment you could talk about the favorable impact of demand for GPUs on the overall revenue of the division, then it all came down to products for server applications. They also raised the average selling price, but in the consumer sector the price dynamics was negative. Recall that AMD's 7nm graphics solutions entered the market only in the third quarter, they could not have an impact on the results of the second quarter. True, in a sequential comparison, AMD's revenue in this segment grew by 13% mainly due to higher sales of graphics processors. In physical terms, GPU sales increased by a double-digit percentage.
The average selling price of AMD CPUs continued to rise year-on-year, but sequentially was spoiled by the increased share of mobile processors, whose average selling price is lower than that of desktops. In general, as company representatives explained, in the second quarter, sales of desktop processors in physical terms decreased, as consumers delayed purchases in anticipation of the debut of next-generation 7nm products. But sales of mobile processors only increased.
In the third quarter, according to AMD forecasts, it is the PC segment that will become the locomotive of revenue, the graphics one will be in second place in importance, and the server segment will close the top three factors. Nevertheless, it is in the server market that AMD partners will have the maximum number of new products in the second half of the year. Customers value the AMD server platform not only for its high performance, but also for its attractive cost of ownership. For this reason, as explained by Lisa Su, the company is not particularly afraid of the aggressive actions of a competitor in terms of pricing.
Debut Navi is just the first step
The graphics solutions of the Navi generation, as the head of the company admitted, are only the first step towards the further expansion of the RDNA architecture, and there are “a couple more steps” ahead of AMD in this direction. The main thing, according to Lisa Su, is AMD's ability to release new products according to the previously announced schedule, and provide performance that is not lower than the promised level. With the positioning of AMD's Navi graphics solutions, everything is in order, according to the head of the company.
Lisa Su could not avoid answering the question about the possibility of the release of flagship graphic solutions in the Navi family. She confirmed that such products appear in the plans of the company, and they will be released "in the following quarters." AMD has formed a rich assortment of 7nm products, and you just need to wait for them to hit the market. In the current half of the year, the company is ready to strengthen its position in the PC segment, as well as in the graphics and server segments, Lisa Su added.
Custom products negatively impact full-year outlook AMD
Despite the general optimism associated with the introduction of a wide range of 7nm products to the market in the second half of the year, the forecast for the entire 2019 took into account an important negative factor due to the cyclical nature of the game console market. Products of the previous generation are in less and less demand, the next generation of consoles is approaching, and this cannot but affect AMD's current revenue from the sale of "custom" products.
For the current quarter, the company expects to increase revenue by 9% year-on-year and 18% sequentially. At the end of the year, the company's revenue will grow by about 5-6%, but if "custom" products are excluded from this forecast, it will grow by 20%. The profit margin for the year should reach 42%, the transition to the 7nm process has a significant impact on improving this indicator, as well as the growing popularity of Ryzen processors.
The guests of the event paid special attention to the discussion of the deal between AMD and Samsung. The head of the first of the companies explained that already this year she will receive about $100 million from Samsung, but will not only sell some ready-made developments to Korean partners, but will bear the cost of adapting her know-how to the needs of this client. Cooperation with Samsung is designed for several generations of AMD graphics architectures.
Mentioned at the reporting conference and the relationship between AMD and Chinese partners. Chinese companies that were on the sanctions list no longer receive AMD support, without which they will not be able to continue producing desktop and server processors - we are talking about licensed clones of the Hygon brand that use the first generation Zen architecture with the addition of Chinese national data encryption standards. This ban did not cause significant damage to AMD's budget, since in other areas the dynamics of revenue from the sale of processors was positive.
Source: 3dnews.ru