AMD CEO Optimistic For Arm-based Products, Tight Supply Chains & 5G Market

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Chip designer Advanced Micro Devices, Inc's (AMD) chief executive officer Dr. Lisa Su sat down with investment bank JP Morgan's Harlan Sur for an interview yesterday. During the discussion, the executive touched upon several important topics for her company and industry, marking the third time that she has commented on supply chain constraints facing the chip sector and AMD's long-awaited financial turnaround. Her recent talk also shared rare details on whether AMD plans to diversify and enter the telecommunications sector. This is an opportunity which the company will be able to avail once its acquisition of California-based Xilinx Corporation clears all hurdles.

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The discussion also touched on the growing prevalence of Arm-based designs in the data center and enterprise sector. While initially formulated for low power use,  the Arm architecture, aided by advances in modern-day semiconductor fabrication, has started to play an important role for data centers and other large-scale, non-consumer use cases.

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When the analyst asked Dr. Su about her view on bringing an Arm-based computing or graphics datacenter product to the market, she replied that:

. . .So I actually think it's less about ARM versus x86 and more about do you have the right compute at the right performance point, the right price point, with the right features and functions. And so that's how we see this market evolving. So there's definitely a place for ARM in the data center. I think we have deep relationships with all of the data center customers, and we're talking to them about what do they need over the next 5 years. You'll see AMD add more points to our compute road map as well to optimize for some of these different workloads. And I think the value is really in how you put things together.

And so from an AMD standpoint, we consider ourselves sort of the high-performance computing solution working with our customers. And that is certainly the way we look at this. And if it means ARM for certain customers, we would certainly consider something in that realm as well. But we look at it as really, let's talk about what problem you're trying to solve. And then we'll work with you with the best components to address the customers' needs. So that's how we think about our differentiation, and it is an exciting place in compute. So there's a lot of people who are active in the space because there's just so much need for different optimization points.

AMD chief Dr. Lisa Su.

She also reiterated her earlier statements that recent trends in the semiconductor market have resulted in demand for all of AMD's product segments go up. When asked about her and AMD's efforts to keep at pace with the demand increase, Dr. Su replied that:

Yes. Harlan, look, it's been an amazing time in the semiconductor market. I mean you and I have watched this market for a long time. In general, semiconductors do go through cycles of sort of demand is up and then supply constraints. But this one is different. I think the difference here is that you see every segment of the market having very high demand. And I will say, overall, we should remember that the demand for semiconductors, especially in our space, the high-performance semiconductors is very, very high and higher than perhaps any of us might have expected when we started the year.
That being the case, I think the supply chain has actually been very, very focused on adding more capability. We saw sort of the beginnings of this sort of late last year, in the second half of last year, we've been working very, very closely with our supply chain partners to continue to ramp up supply with adding additional capacity, doing all kinds of productivity improvements, doing all types of cross qualifications and so on and so forth. So it's been a very active time for us. But I do believe that you will see more and more capacity come online as we go through the next couple of quarters.
For us, we were able to increase our guidance for the full year. When we started the year, we were at 37% year-on-year growth at our last earnings call. We were able to update our guidance to 50% year-on-year growth. That's all supply supported and also demand supported in the sense that the demand seems very, very solid, and we're seeing good sell-through[EMPHASIS ADDED].
So I think this will continue to be a key area of focus for the entire supply chain. I know it's different for different companies. But for us, it's just about deep partnerships with our supply chain partners, deep partnerships with our customers so that we're satisfying their most important segments and their most important product lines. And we continue to believe we'll make progress as we go through the next couple of quarters.

Xilinx announced its Versal Adaptive Compute Acceleration Platform in June 2019. Such platforms will diversify AMD's product lineup should the deal go through. Image: Xilinx

AMD Chief States Customer Preferences Influence Supply Chain Management

Responding to a question inquiring about AMD's efforts at targeting the telecommunications sector due to an opportunity created by network virtualization on 5G radio access equipment, Dr. Su outlined:

Yes. The telco market is a very interesting SAM opportunity for us. I mean you would say that we really haven't had that as a key market for us in the past. I think the strength of the portfolio, I think, overall, does say that this should be a key market segment for us in the future. I think the addition of Xilinx as well, because of their very strong presence in the comms infrastructure market, I think it's good news. It adds sort of relevance to both the CPU and the FPGA solutions together. I think we view this as a key opportunity for us to continue to get the EPYC capabilities over a larger range of customers. So a key opportunity for us. Yes, we're looking forward to more engagement in the telco space and certainly with the Xilinx acquisition, having more exposure to the 5G and other end markets that we currently don't have a lot of exposure to.

She also confirmed that AMD has prioritized high-end products over low-end ones in order to manage supply effectively. The CEO explained that customer preferences have shaped her company's supply choices, with some low-end users being left out as a result.

Her full reply came as follows:

Well, I think, like most of the semiconductor companies, we would say that demand exceeds supply. So that's certainly true. I think we have done a good job at prioritizing. When we think about prioritization, it's around ensuring that we are giving our customers sort of what they need to advance their product lines and their product objectives. And that's how we think about it. There is some compute that we are leaving underserviced. So I would say, particularly if you look at some of the segments in the PC market, sort of the lower end of the PC market, we have prioritized some of the higher-end commercial SKUs and gaming SKUs and those kinds of things. But overall, I think we've done a good job working with our customers on what they need.
And as I said, probably the fact that the inventories are very lean throughout the supply chain. And so people are really now focused on, "Hey, we're not ordering stuff to put it on the shelf, right? We're ordering stuff that end customers want." And that's how we think about prioritization is prioritizing sort of the end customer needs as we go forward. But again, I think the partnership that we're seeing across the supply chain is really unprecedented, and I feel good about the progress that we're making in this space.

The author has no position in any of the stocks mentioned. NewAgeAds LLC has a disclosure and ethics policy.
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