AMD is 'Undershipping' Chips To Keep CPU, GPU Prices Elevated (pcworld.com) 95
An anonymous reader shares a report: As the PC industry flounders, Intel suffered from such disastrous sales last quarter that it instituted pay cuts and other extreme measures going forward. AMD's client PC sales also dropped dramatically -- a whopping 51 percent year-over-year -- but the company managed to eke out a small profit despite the sky falling. So why aren't CPU and GPU prices falling too? In a call with investors Tuesday night, CEO Lisa Su confirmed that AMD has been "undershipping" chips for a while now to balance supply and demand (read: keep prices up). "We have been undershipping the sell-through or consumption for the last two quarters," Su said, as spotted by PC Gamer. "We undershipped in Q3, we undershipped in Q4. We will undership, to a lesser extent, in Q1."
With the pandemic winding down and inflation ramping up, far fewer people are buying CPUs, GPUs, and PCs. It's a hard, sudden reverse from just months ago, when companies like Nvidia and AMD were churning out graphic cards as quickly as possible to keep up with booming demand from cryptocurrency miners and PC gamers alike. Now that GPU mining is dead, shelves are brimming with unsold chips. Despite the painfully high price tags of new next-gen GPUs, last-gen GeForce RTX 30-series and Radeon RX 6000-series graphics cards are still selling for very high prices considering their two-year-old status. Strategic under-shipping helps companies maintain higher prices for their wares.
With the pandemic winding down and inflation ramping up, far fewer people are buying CPUs, GPUs, and PCs. It's a hard, sudden reverse from just months ago, when companies like Nvidia and AMD were churning out graphic cards as quickly as possible to keep up with booming demand from cryptocurrency miners and PC gamers alike. Now that GPU mining is dead, shelves are brimming with unsold chips. Despite the painfully high price tags of new next-gen GPUs, last-gen GeForce RTX 30-series and Radeon RX 6000-series graphics cards are still selling for very high prices considering their two-year-old status. Strategic under-shipping helps companies maintain higher prices for their wares.
Like de Beers with diamonds (Score:5, Insightful)
Completely normal practice for robber barons.
Re:Like de Beers with diamonds (Score:5, Interesting)
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I like how they're still trying to blame "the pandemic" for GPU shortages in 2021, while they were busy shipping product by the truckload directly to crypto miners and bypassing consumers and retailers entirely.
Sorry, but we've seen the pictures of thousands of shiny new GPU's that we couldn't buy popping up at mining farms all over the place. At least we can now buy those used GPU's at a huge discount now that mining is no longer profitable.
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Not really the same thing. DeBeers is sitting on an enormous existing supply of diamonds, while AMD has to actually manufacture what it is they intend to sell (with help from TSMC).
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That would imply warehousing product they're holding back until they actually get around to deciding to sell it.
If they are doing that, it can severely backfire if there is a shift in demand to a different product, either from themselves or another company.
Of course this could just be interpretation of semantics issues, but as they sign contracts ahead of time for most of the chip production, they won't be able to change that on a whi
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Diamonds in a vault for 100 years are as valuable as diamonds added today. silicon chips, on the other hand, lose value rather suddenly in comparison
I am reminded of government programs from the Depression, where hogs that would never be eaten, were purchased by the government then destroyed to keep the prices up for the farmers
In this case I see AMD using Self Control [psychologytoday.com] in order to take advantage of supply and demand change. I am glad to see AMD make such smart decisions, which work well primarily due to the
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Indeed. A lot of the computers shipped during COVID were underspeced, with slow CPUs and not enough memory.
This would be an ideal situation to start a performance initiative, and finally give people better computers again. But no, AMD has to put profit before the customer interests. (And Intel are possibly even worse, NVidia certainly is.)
capitalism (Score:1)
if you think there is a market for cheaper graphics chips then go ahead and start your own company. if you want cheaper CPUs, that's harder because the patents make it a duopoly right now for the de facto standard x86-64.
Ultimately functional capitalism uses government regulation to keep competition fair. Given the information (admittedly of a limited amount) I saw on what AMD is doing, I don't think it rises to the legal definition of anticompetitive behavior.
Sure (Score:2, Interesting)
I mean, you wouldn't just take that $26 billion dollars and invest it in AMD & Nvidia so you can profit handsomely from their predatory practices, right? That would make baby Capitalism cry....
Re: Sure (Score:2)
Re:We don't (Score:4, Insightful)
There are plenty of "Gen X"ers who think you are an idiot.
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citation needed
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It can be done for far less. $1 billion and less. (Score:2)
It's simple. First you hire contractors to start eliminating the competition. Bullet to the head where needed, but burning them in their beds IS cheaper. I hear falling out of a window is popular in Russia.
Then another contractor convinces the remaining owners and workers to sell everything to you and come work at the Liberabit Opus Ltd. for the unique and once in a lifetime opportunity allowing them and their family to stay alive.
And the baby Capitalism would smile and wet its diapers in joy.
No baby capitalism likes to trains to run on time (Score:2)
That's just what it says to all its girlfriends. (Score:2)
What you're describing is oligarchy not capitalism.
That's what baby capitalism wants to grow up to be - on its unreachable path towards growing into a monarchy of some sort.
"Oligarchy" is just a name that already established capitalists in secure hierarchical class systems throw at their equally exploitative country cousins who haven't yet figured out how to manipulate the public into simply giving them the power and possessions they crave.
You know... How to grow up to be a parasite instead of cancer. Cause that baby really wants to be that cancer.
Even when
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I mean you could have at least googled how much it took Intel to build up their gpus. And then extrapolated the additional costs until they
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L.C.P
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They aren't cutting prices to keep Intel out of the video card business.
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Wall Street doesn't care which company makes tons of money for them. They don't need competition or frankly want it.
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There are effective anti-dumping laws on the books [jdsupra.com] and they are exercised enough to keep the Heritage Foundation [heritage.org] and the Cato institute [cato.org] sniveling and whining
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Sorry, I do not see how "not selling every widget that you build because the market is down" is predatory
To me, it seems like the odd case of a corporation showing restraint in response to market conditions
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Intel are coming to the graphics market, albeit with teething problems. ARC Alchemist (current gen) is not very impressive (yet), but has visibly improved since launch. Next gen, Battlemage, may be be a serious challenger.
Otherwise, perhaps people need to stick with their existing stuff for a few years. Last summer, I replaced a 10 year old GPU and the new one might last me another 10.
Considering the legal side, anti-competitive behavior usually has an element of trying to hamper others in their efforts to
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and ARC alchemist outcompetes the RTX3060 and the RX6600 it's up against. Being cheaper and just as good as
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Depends on what metric you apply. Performance wise, Alchemist is good with high resolutions and current APIs (DX12, Vulkan), while 1080p and older APIs things look less appealing.
Also, reportedly the drivers are still the least mature of the current GPU generation.
There are no complaints about Nvidia.
AMD still has some homework to do in the 7000 series.
But most reports about serious graphics errors are still about Alchemist. At least the outright crashes seem to be a thing of the past.
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FYI, Intel has been trying to get into the graphics market since before Y2K [wikipedia.org]
Not much to show for it, eh?
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That has nothing to do with capitalism, it a matter of market forces. It's a pity everyone thinks they're the same thing.
Re: capitalism (Score:2)
Also a pity that above actually believes "market forces" are at all in play with Capitalism. It's pretty easy to see that they do not function in this economy to any useful degree, right John Deere, DeBeers, AMD, AT&T and Comcast? I think we can all agree on that item.
If they did, none of the above companies would look or act as they currently do. Pretty simple, pretty straight forward.
So why do people keep pretending like market forces matter, or more importantly why do they let these companies use the
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interestingly enough, not an actual force.
Wouldn't you undership too? (Score:5, Insightful)
There are lots of reasons why you might undership, not because you wanted to keep prices high...
A much, much more likely one is they see a recession looming and they do not know for sure when the hammer will come down. If they are flooding the market with chips every quarter, at some point hey will be left holding a bag with a LOT of chips for a long time, a huge sunk cost.
Far smarter to undersupply the market for a while until after any recession danger passes.
Re:Wouldn't you undership too? (Score:5, Insightful)
Agreed. The argument about "keeping prices high" is an interpretation of the PCWorld writer. Now, that's not necessarily incorrect in the short-term effects of this move, but I don't think that's the primary intent. It looks to many that a recession is looming, not to mention a drop in PC sales overall, and as you pointed out, AMD doesn't want to get caught with a glut of expensive inventory that will depreciate in value faster than it can actually be sold.
That would be great for consumers with all sorts of fire sales to reduce that inventory, but it would be terrible for AMD. It makes a lot of sense for them to try to scale production to currently foreseeable demand, which has dropped off rather sharply. By keeping production matching more closely to demand, they can more easily respond to any changes due to market or economic events (like cutting costs if needed, etc).
Re:Wouldn't you undership too? (Score:5, Interesting)
Another big factor is AMD just released new processors using the AM5 socket and DDR5 RAM. There's still a lot of inventory out there for AM4/DDR4 parts. If they push the new processors too fast, they're going to have to seriously slash prices on the older models to clear out the inventory.
I imagine once they clear out the older models they'll be more willing to get aggressive on shipments and pricing.
Re:Wouldn't you undership too? (Score:4, Insightful)
Probably. It should also be noted that that these "old" parts are in no way bad and quite usable for anything except maybe high-performance gaming.
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Although, some people may be more hesitant to buy/build Windows systems with "older designs but perfectly suitable" parts if they need to run Windows because they fear that Microsoft will pull another Windows 11 trick and make perfectly suitable hardware obsolete for "reasons".
As one who has two "daily drivers" in the household running Windows 10 (having upgraded from Windows 8.1) and being stuck there with support ending in about three years (when these systems will still be fully capable -- having added s
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The AM4/DDR4 based parts are totally fine for most things. The biggest reason to go AM5/DDR5 is because AMD usually sticks to the same CPU socket for about 4-5 years. If you're building a new PC now and go with the AM5 setup, you can probably replace your CPU with a 2026 model and keep all the other parts. If you go with the AM4 model, there's no room to upgrade, so any upgrade requires replacing everything.
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True. But there are a lot of use-cases where you do not need to upgrade, because computing power is already plenty with the older hardware.
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There are lots of reasons why you might undership, not because you wanted to keep prices high...
Another reason is to keep channel partners happy. Specifically for GPUs, AMD and Nvidia sell chips to GPU board manufacturers. Those board companies already bought a bunch of chips and need to churn through their inventory before buying more chips. It would actually result in higher sales and profits for AMD and Nvidia to sell more chips and increase the inventory glut for the board manufacturers. Instead AMD and Nvidia take the sales and profit hit, knowing that healthy board manufacturers for the long
CPU prices aren't that bad. (Score:2)
You can get a 5800X for just a touch over 200€, 16GB for 100€ and mobo to go with it for a hundred.
That combo pretty much does everything you need for less than 500€. Shit, my tablet cost more than that.
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You can get a 5800X for just a touch over 200€, 16GB for 100€ and mobo to go with it for a hundred.
That combo pretty much does everything you need for less than 500€. Shit, my tablet cost more than that.
Your combo lacks a PSU, screen, storage, battery and portability, and is likely less powerful (in single core performance) if you happen to have one of the latest iPad pros. It's a wonder it is less expensive.
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The 5800X is 14% slower than the M2
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It does everything AND heats your home.
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Not very well. If you want a home heater, get a 13900ks.
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Faster? In what, some lightly-threaded games? The 5800X is a faster applications processor and still a decent gaming CPU (though personally I would prefer the 5800X3D).
About the only AM4 bug left is the USB bug. I'll take that over the socket warping problems on LGA 1700 boards.
So how much inventory? (Score:2)
So inventory is clearly climbing according to their SEC filings.
The real question is can Intel / NVIDIA deliver some products compelling enough that AMD ends up discounting parts. Seems like risky bet on AMD's end, because if any of this stuff gets leap frogged somehow they could be bag holding.
Intel maybe (Score:3)
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AMD already lowered prices on their AM5 processors since sales there have been anemic. They're selling more old AM4 CPUs, at prices that are actually quite friendly to the consumer.
The only consumer hardware from AMD that's hard to get right now are their 7900XTX video cards.
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You hit on the entire issue right there. They're aggressively pricing the AM4 parts to clear out the old inventory. Once the AM4 parts are gone they'll get more aggressive on selling AM5. If they price AM5 lower now, no one will buy the AM4 parts.
You'd have to be young not to expect this (Score:2)
Companies always keep prices high during a recession, so they can make extra profit selling to the folks who still have the money. It's why these economic rough patches suck, because you'll likely have less money (especially if you get laid off and have to take a lower paying job), while everything you want to buy remains expensive.
Re: You'd have to be young not to expect this (Score:2)
But it's still "the best system" possible right? Lots of super rich folks seem to think so but most of the people I've spoken with say they can barely survive. That would seem to indicate at least one small issue...oh, and the fact that my very existence is also a "product" to be marketed and sold back to me at as high a profit margin as possible might be a small indication something has gone a bit sideways, wouldn't you say? What with things like insulin being dirt cheap to produce but somehow it gets supe
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If you look at actual market prices, they're coming down on most AMD products except the 7900XTX (which is sold out). AM5 CPUs all went down in price a few months ago, and AM4 CPUs are older tech (and thus heavily-discounted).
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No, it's not (Score:1)
It's not "strategic" undershipping. It's screwing your customers in a new way when the winds of supply and demand shift.
This is cartel-like behavior (just like the DeBeers diamond cartel). It's not right.
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Bullshit, go look at price trends on any of their consumer products and then get back to me. The market is glutted with supply and not enough people are showing up to buy.
AMD? A cartel? What a joke.
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AMD's goal has to be producing exactly enough chips to meet the demand. Going over or under is less efficient and less profitable.
Now, does that mean nobody profits from scarcity? Of course not - just th
Re:Screw them - buy second-hand (Score:5, Informative)
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This seems to be parroted everywhere but for the most part it's not true. Many GPU mining rigs sat in a shed, basement or dusty attic somewhere, and not an air conditioned datacenter like people believe. Another consideration is that a significant number of miners steal electricity and couldn't care less about undervolting.
Also a large number number of ex-mining Radeon GPUs found their way on to the German market recently and many were found to have water damage and cracked cores.
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And borking just-in-time business practices (Score:4, Interesting)
This doesn't surprise me. Over the last three years or more, component vendors of all kinds have starting bullshitting OEMs into believing that components are in short supply and have crazy long lead times in order to con them into buying inventory that they don't need and might get stuck with when their sales dry up. It's an epic game of economic hot potato. Small OEMs who rely on just-in-time business practices are left holding the bag in a similar way that everyone who got suckered into buying CDOs without being able to see the worthless loans that they contained back in ~2008.
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are left holding the bag in a similar way that everyone who got suckered into buying CDOs without being able to see the worthless loans that they contained back in ~2008.
They were always able to see the crap in the entire CDO package. That's how guys like Burry and Eisman were able to evaluate the the CDOs and realize they were poised to collapse. Its a case where experts (big and small) did their homework, while fund managers let themselves get snowed by CDO salesmen. Its also part of the reason no risk analysts went to prison for fraud.
Allright (Score:5, Insightful)
As long as prices are insane, we'll just keep underbuying.
Let's see who lasts longer.
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Okay, quick question: which consumer AMD products have gone up in price in the last three months?
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I doubt that "up" is a way prices could go at this point anymore. There's no need to go up with a price when it's already past anything remotely sane.
That's also not the point. What we're looking at here is an artificial scarcity. This isn't due to AMD not being able to produce the amount of goods they could sell at a profit. This is AMD trying to deliberately keeping prices inflated to create the sense that these products cost that much. I can understand why, they got used to being able to sell mid-range G
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As long as prices are insane, we'll just keep underbuying.
Except prices aren't insane, in terms of CPUs they are pretty much exactly where they would be if the last two years hadn't wildly swung market economics around due to external circumstances.
The only thing insane is a few components in the super high end, and they aren't what this article is about.
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After they spun off GlobalFoundries, they have no remaining manufacturing to their name.
Intel, while currently having a difficult time is attempting to go the other way and offer it's manufacturing to others.
Risky bet (Score:2)
Oh how the tables have turned (Score:3)
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Which prices are inflating?
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Not sure about turned as such. Intel have stated they were also doing the same all last year and intend to double down on it this year. ... While at the same time cutting prices. As will AMD.
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while AMD is abusing it's position to inflate prices.
AMD isn't abusing any position and isn't inflating any prices. What they are doing is not flooding the market causing them to need to massively discount the RRP and make a loss on products sold. Profit margins are incredibly tight in the chip world. Supply and demand have always needed to be managed especially around the time of new platform releases.
The only companies that get away with ramping production up while making a loss on units are those that have external funding (reads: unicorn startups) or thos
Not Sure I'm Opposed (Score:4, Informative)
They have clear competitors. They have to balance keeping the market they have, being competitive, and being profitable. If the sweet spot means the prices don't fall as quickly as we would like, we can make our own choices to sway the situation.
Personally I never buy the "current generation" when I'm shopping for new. I'm usually at least one back, looking for something languishing in the retailer's inventory. For instance, my next PC (shopping is underway) is probably based on an i7-12700kf. Price is dropping fast.
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For instance, my next PC (shopping is underway) is probably based on an i7-12700kf.
You should always consider your purchase based on whether the equipment fills your need. I consider an i7-13700K a sick value, considering it has the same p & e cores as the previous generation i9-12900K, and is slightly faster to boot! (Also, the 12th gen i9 is a heat pig, while the 13th gen i7 "can" be a heat pig when run under max load.) "Unfortunately" for me, I live near a Microcenter where they were bundling the motherboard for free with the CPU (i7-12700K), and it took DDR4, back in November.
Re: FTC should be looking into this (Score:3)
No it isn't. Price fixing is agreeing with a competitor to set a price. This is simply AMD intentionally not meeting demand in order to smooth out sales. It only works if demand is fairly inelastic, which AMD seems to believe. Don't like it? Change your product to not need AMD. [ftc.gov]
AMD Apologists... (Score:2)
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Hey if they're right, they're right.
In the immortal words of... (Score:1)
...The Supreme Generation of FOMO addicts...
"No Shit."
If P. T. Barnum would have patented his infamous concept, he would have been the world's first multi-trillionaire.
Undershipping what exactly? (Score:2)
The only AMD product you might want that you can't buy today at or below original MSRP is the 7900XTX video card. That's it!
All their AM5 CPUs - their latest gen consumer products - have had price cuts since they launched last year. They're all available. AM4 CPUs are still widely-available, at heavy discounts. Last gen RDNA cards, including the 6950XT, are still-available. You can buy a 6950XT direct from AMD for $699, $400 off its launch price.
All they're doing is staving off a complete price collaps
That's what monopolies do (Score:1)
It worked pretty well (Score:1)
... for the car companies, so far.
Taiwan China Tensions (Score:1)