AMD Execution Thread [2024]

trinibwoy said:
Lol the irony.
Click to expand...
Yeah, do it.
Think he's Silicon Delivery guy. Moved in circa march'22! Ran Rome/Milan before. Very, ugh, to the point guy.
trinibwoy said:
Got a source for that?
Click to expand...
Wait for the next JPR or build a financial model yourself.
trinibwoy said:
It’s not as easy for us mortals to see this “blatantly obvious” internal AMD proprietary financial stuff.
Click to expand...
No it's called "doing financial modeling while sitting on a pile of $AMD".
Eases anxiety, you know.
 
Uhm.
Bondrewd said:
The answer is so beyond obvious it's silly: Radeon margins are nowhere near as dogshit as you thought they were.
RDNA3 did suprisingly well in the market given how mediocre the actual products are.
Click to expand...
I think you probably misunderstood my question. Compare these 2 graphs:
https://twitter.com/x/status/1653497427922681856
https://twitter.com/x/status/1785412626979373104

-48% revenue but operating margin only dropped from 18% to 16%.

Operating profit = Revenue - Cost Of Goods Sold (e.g. wafers from TSMC) - Operating Costs (e.g. R&D salaries).

Typically when a company's revenue drops by ~50%, their fixed costs mean their operating margins crash horribly, e.g.:
- $100M revenue
- $60M costs of goods sold (=> 40% gross margins)
- $25M operating expenses
=> $15M operating profit with 15% operating margins.

If you lose 50% of revenue (but don't fire 50% of your employees...):
- $50M revenue
- $30M costs of goods sold
- $25M operating expenses
=> $5M operating *loss* with -5% operating margins.

The implication is either their gross margins for gaming somehow increased massively, or they reduced their operating costs. I am assuming the latter, but they didn't fire half their employees, so where did those costs/employees go? I am assuming some of them are now in the datacenter BU at least for accounting purposes, but I am very open to other explanations, I just can't personally think of any which is why I'm asking!
 
Arun said:
The implication is either their gross margins for gaming somehow increased massively
Click to expand...
The opinc was always heavily weighted to Radeon. Consoles make little to no actual money.
It's just a strategic market you keep for moat points.
Arun said:
I am assuming the latter, but they didn't fire half their employees, so where did those costs/employees go?
Click to expand...
Nothing happened.
Arun said:
I am assuming some of them are now in the datacenter BU at least for accounting purposes
Click to expand...
They were there since at least 2021, I had your exact question no less when they bracketed MI200 revenue under Data Center in Q3'21.
Turns out the entire Instinct BU lives under Data Center for a while and responds to Forrest Norrod directly!
Arun said:
I just can't personally think of any which is why I'm asking!
Click to expand...
Radeon is doing pretty good actually.
 
Bondrewd said:
It means Radeon ASPs went up the same quarter.
Click to expand...
But the ASP of RDNA3 GPUs has gone down constantly, the 7900XTX, 7900XT, 7800XT, 7700XT all are sold for lower than launch prices.

videocardz.com

AMD Radeon RX 7800 XT drops to $469 for the first time - VideoCardz.com

The cheapest RX 7800 XT costs $469 A new pricing barrier has been breached. The AMD Radeon RX 7800 XT made its market debut in September 2023, hitting shelves with a price tag of $499. Equipped with a full Navi 32 GPU boasting 3840 Stream Processors, it also comes packed with 16GB of GDDR6...
videocardz.com videocardz.com
videocardz.com

AMD Radeon RX 7900 XT now available for $689, GeForce RTX 4070 Ti SUPER drops to $749 - VideoCardz.com

High-end GPU market heating up Two graphics cards, relatively close in performance, have been temporarily discounted. The Radeon RX 7900 XT, which saw an official MSRP adjustment to $749 in January, quickly dropped to $700 through various retailer discounts. Now, the card is being sold at $689...
videocardz.com videocardz.com

Bondrewd said:
Radeon is doing pretty good actually.
Click to expand...
How can that be when AMD themselves speak of lower Radeon sales and the GPUs are sold for less than MSRP?
 
Arun said:
Uhm.

I think you probably misunderstood my question. Compare these 2 graphs:
https://twitter.com/x/status/1653497427922681856
https://twitter.com/x/status/1785412626979373104

-48% revenue but operating margin only dropped from 18% to 16%.

Operating profit = Revenue - Cost Of Goods Sold (e.g. wafers from TSMC) - Operating Costs (e.g. R&D salaries).

Typically when a company's revenue drops by ~50%, their fixed costs mean their operating margins crash horribly, e.g.:
- $100M revenue
- $60M costs of goods sold (=> 40% gross margins)
- $25M operating expenses
=> $15M operating profit with 15% operating margins.

If you lose 50% of revenue (but don't fire 50% of your employees...):
- $50M revenue
- $30M costs of goods sold
- $25M operating expenses
=> $5M operating *loss* with -5% operating margins.

The implication is either their gross margins for gaming somehow increased massively, or they reduced their operating costs. I am assuming the latter, but they didn't fire half their employees, so where did those costs/employees go? I am assuming some of them are now in the datacenter BU at least for accounting purposes, but I am very open to other explanations, I just can't personally think of any which is why I'm asking!
Click to expand...

Console margins are really low. It doesn't have much operational overhead, but the gross margin is very low. AMD is able to make this a winning venture thanks to it really being semi-custom designs (rather than fully custom) so they can re-use a lot of existing (or already in development) IP. Additionally, the console makers help with the R&D expenses. So, AMD doesn't have to spend much to develop the chips (relatively speaking) and there's little overhead costs once the designs are finished. On the flip side, they make very little profit per chip. So it's low cost, low margin, but also basically guaranteed volume (and thus steady income) across multiple years with little risk to AMD.

All this to say, as console sales shrink and GPUs become a larger piece of the revenue in the quarter, margins go up because GPUs are a higher margin business than console chips (especially during the Lisa Su era). They have more ongoing operating costs, but the gross margins are much higher and are typically high enough to more than offset the higher operating costs. Thus, the higher the GPU to console sales ratio is, the higher the gross margin for the gaming category. Combine that with the fact that there are typically increased costs around the launch of new products (RDNA3 was still in it's launch window Q123) and you can get to roughly flat operating costs Y/Y.
 
DavidGraham said:
But the ASP of RDNA3 GPUs has gone down constantly, the 7900XTX, 7900XT, 7800XT, 7700XT all are sold for lower than launch prices.

videocardz.com

AMD Radeon RX 7800 XT drops to $469 for the first time - VideoCardz.com

The cheapest RX 7800 XT costs $469 A new pricing barrier has been breached. The AMD Radeon RX 7800 XT made its market debut in September 2023, hitting shelves with a price tag of $499. Equipped with a full Navi 32 GPU boasting 3840 Stream Processors, it also comes packed with 16GB of GDDR6...
videocardz.com videocardz.com
videocardz.com

AMD Radeon RX 7900 XT now available for $689, GeForce RTX 4070 Ti SUPER drops to $749 - VideoCardz.com

High-end GPU market heating up Two graphics cards, relatively close in performance, have been temporarily discounted. The Radeon RX 7900 XT, which saw an official MSRP adjustment to $749 in January, quickly dropped to $700 through various retailer discounts. Now, the card is being sold at $689...
videocardz.com videocardz.com


How can that be when AMD themselves speak of lower Radeon sales and the GPUs are sold for less than MSRP?
Click to expand...

Perhaps the prouduct mix might have shifted more towards higher end RX 7000 series GPUs and depletion of whatever little remaining RX6800/6900 stock in the channel. Looking at the steam survey for example, I can see the Radeon RX 7900 XTX with a small but increasing market share, but the RX 7600 dosen't even make it to the list. So lower volume, but higher ASP.
ka_rf said:
Console margins are really low. It doesn't have much operational overhead, but the gross margin is very low. AMD is able to make this a winning venture thanks to it really being semi-custom designs (rather than fully custom) so they can re-use a lot of existing (or already in development) IP. Additionally, the console makers help with the R&D expenses. So, AMD doesn't have to spend much to develop the chips (relatively speaking) and there's little overhead costs once the designs are finished. On the flip side, they make very little profit per chip. So it's low cost, low margin, but also basically guaranteed volume (and thus steady income) across multiple years with little risk to AMD.

All this to say, as console sales shrink and GPUs become a larger piece of the revenue in the quarter, margins go up because GPUs are a higher margin business than console chips (especially during the Lisa Su era). They have more ongoing operating costs, but the gross margins are much higher and are typically high enough to more than offset the higher operating costs. Thus, the higher the GPU to console sales ratio is, the higher the gross margin for the gaming category. Combine that with the fact that there are typically increased costs around the launch of new products (RDNA3 was still in it's launch window Q123) and you can get to roughly flat operating costs Y/Y.
Click to expand...

I suspect this contract structure is a remnant of the earlier console gen when AMD had to agree to such terms to essentially stay alive, which continued to the current gen as well. AMD was in a relatively weak position until almost the end of the decade and in need of cash, so MS/Sony funded a part/most of the R&D (most of which would have been incurred in 2017-2020 for the end 2020 launch) and the silicon design/tapeout costs. Once the chips are in production, they pay a relatively small Gross Margin and/or royalty which is essentially "free money" for AMD from each sale. Further shrinks are also paid for by MS/Sony I suppose. However post 2020 AMD's financial position has been much better and I expect they would probably not agree to such terms for the next gen. This combined with the much larger wafer cost for the newer nodes (some variant of 2nm given the 2026+ timeframe) leads me to believe that the next gen consoles will be significantly more expensive than the current gen.
 
Erinyes said:
Perhaps the prouduct mix might have shifted more towards higher end RX 7000 series GPUs and depletion of whatever little remaining RX6800/6900 stock in the channel. Looking at the steam survey for example, I can see the Radeon RX 7900 XTX with a small but increasing market share, but the RX 7600 dosen't even make it to the list. So lower volume, but higher ASP.


I suspect this contract structure is a remnant of the earlier console gen when AMD had to agree to such terms to essentially stay alive, which continued to the current gen as well. AMD was in a relatively weak position until almost the end of the decade and in need of cash, so MS/Sony funded a part/most of the R&D (most of which would have been incurred in 2017-2020 for the end 2020 launch) and the silicon design/tapeout costs. Once the chips are in production, they pay a relatively small Gross Margin and/or royalty which is essentially "free money" for AMD from each sale. Further shrinks are also paid for by MS/Sony I suppose. However post 2020 AMD's financial position has been much better and I expect they would probably not agree to such terms for the next gen. This combined with the much larger wafer cost for the newer nodes (some variant of 2nm given the 2026+ timeframe) leads me to believe that the next gen consoles will be significantly more expensive than the current gen.
Click to expand...

Unless Phil Spencer comes long with his patented Phil Spencer Math, the one that swore up and down Gamepass would grow eternally and be the most profitable thing since the iPhone, I don't see any console being over $599, and $599 only being for the highest end option.

Costs can go up all they want, demand aint budging much and the lack of node shrinks has hurt Sony and MS in overall consoles sales versus earlier eras like the PS2 where the same hardware could come out cheaper and cheaper.

The "core!" fans that demand graphics go up steadily forever are out of luck, a successful next generation of consoles looks like a mobile first $399 ≥ base console and the cheaper the better. EG why hasn't "Final Fantasy VII Rebirth" sold well? First off Square Enix you Wii-U'd it by giving it an utterly confusing to a casual audience name that gives 0 indication that it's "Pt 2", but also you sold it exclusively on a platform that has half the install base of the previous release and to relate a direct story I saw "My girlfriend loves Final Fantasy, she bought a PS4 cheap just to play Final Fantasy VII Remake. But she doesn't want to spend $470 just to play Rebirth right away."

I do suspect AMD knows this. And with their growing concentration on laptops in the consumer space anyway and already being successful in this "not a mobile console but basically is" stuff like ROG Ally they'll be well positioned to sell to MS and Sony. Watch Sony end up with a 2027 mobile PS6 on RDNA6/TSMC 1.6 despite their very recent plans for 2028.
 
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Bondrewd said:
A mix of sequel fatigue and marketing failure.
Click to expand...

Marketing failure definitely helped, felt like I saw absolutely nothing of that game while I saw FF XVI a good amount.

But that's not this case, she knew what the game was and was willing to pay $70 for it. But wasn't willing to shell out another $400 for a new box. People buy hardware to use software on it, no one buys a shiny $1k box because it's shiny. And "better graphics" just isn't cutting it for the average customer anymore for why that game they want needs a new $400 box.
 
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Frenetic Pony said:
Marketing failure definitely helped, felt like I saw absolutely nothing of that game while I saw FF XVI a good amount.

Regardless, people buy hardware to use software on it, no one buys a shiny $1k box because it's shiny. And "better graphics" just isn't cutting it for the average customer anymore for why that game they want needs a new $400 box.
Click to expand...
Yeah both consoles suffer from acute nogames problems, MS more than Sony.

Imagine having no Fallout games in the pipeline despite having effectively three Fallout studios (Fargo with inXile, Urquhart with Obsidian and Todd with BGS).
Just visionary IP management from uncle Phil.
 
There was a weird commit that was copied out to Steam Fallout 4 directory specifically mentioning "New Vegas 2" just a few months ago. I mean, Obsidian already has 2 teams up working on Avowed and The Outer Worlds 2, why not a third team on Fallout, lead by New Vegas Lead Josh Sawyer?

Err... AMD. Right...
 
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