Role of the EPYC Processor in AMD’s Data Center Strategy
AMD bets on data center
So far, we have seen that Advanced Micro Devices (AMD) is targeting the PC market with its full lineup of Ryzen CPUs (central processing units) and Vega GPUs (graphics processing units). The company is now looking to leverage its CPUs and GPUs in the data center market.
With the launch of the EPYC server processor and Radeon Instinct GPU, AMD has made its biggest bet on the data center market, where it practically has no share.
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At the Deutsche Bank Technology Conference, AMD’s chief financial officer, Devinder Kumar, stated that the company is targeting the data center market because of the attractive margins it offers. It started ramping up production of EPYC processors in 2Q17, but the process would take time. The production ramp-up in the server space is slower than in the PC space.
AMD’s data center strategy
During the conference, Kumar discussed the company’s data center product strategy. AMD is looking to tap “a very large portion of the data center market” by bringing more memory and more IO (input/output) to EPYC processors. The company looks to reduce data center’s TCO (total cost of ownership) by delivering high performance, power efficiency, security, and flexibility.
AMD expects enterprises to be the early adopters of EPYC processors, followed by hyperscale data centers and cloud companies that order server processors in bulk.
Benchmark reports from third-party benchmarking website ServeTheHome showed that AMD’s EPYC 7351P single-socket CPU is competitive with Intel’s Xeon Silver CPU. Five hyperscale cloud companies—including Google (GOOG), Baidu (BIDU), and Amazon (AMZN)—have shown interest in the EPYC processor.
Kumar stated that EPYC is seeing strong demand as data center customers welcome competition in the server processor space.
AMD’s long-term growth target in the server space
At the 2017 Investor Day, AMD stated that its server CPU offers a $16 billion opportunity while the GPU side offers another $5 billion opportunity. At the Deutsche Bank Technology Conference, Kumar stated that AMD aims to capture a 10% server processors market share in unit terms. The server processor market is currently owned by Intel (INTC), with a market share exceeding 95%.
Jeffries bullish on AMD’s server business
Jefferies analyst Mark Lipacis expects AMD to gain 2% share in the server processor market in 2017 and increase it to 8% by 2018 as companies like Microsoft (MSFT), Baidu, and Tencent announce their intentions to use AMD’s chips for cloud computing.
Next, we will look at the GPU side of AMD’s data center business.