AMD’s Graphics business
Advanced Micro Devices (AMD) is the only company that has both CPU (central processing unit) and discrete GPU (graphics processing unit) technologies. Its Graphics business consists of consumer GPUs for gamers and crypto miners that are sold through AIB (add-on-board) partners like Gigabyte, discrete GPUs sold to PC OEMs (original equipment manufacturers), and data center GPUs.
The consumer GPU sales have been falling since October 2018 as AIB partners have accumulated huge inventory after crypto-related sales vanished. The crypto trend boosted GPU sales in late 2017 and the first half of 2018 and reduced it in the fourth quarter of 2018 and the first quarter of 2019.
AMD’s first-quarter Graphics revenue fell 26% YoY as lower consumer GPU sales were partially offset by an increase in higher-end data center GPU sales. A higher mix of data center GPUs increased AMD’s GPU ASP (average selling price) YoY and sequentially.
At the first-quarter earnings call, AMD’s CEO Lisa Su stated that the company is seeing accelerated sell-through of channel inventory and increasing demand for its new high-end Radeon VII gaming GPUs. AMD’s Radeon Vega GPUs are increasingly being adopted by PC OEMs. For instance, Apple is using Radeon Pro Vega GPUs for its new iMacs.
AMD expects GPU demand to pick up among gamers in the second half, and it plans to tap this growth by launching its next-generation 7-nm (nanometer) Navi GPU in the third quarter.
Data center GPU
AMD is gaining traction in the data center market, as its GPUs are being adopted for various types of workloads such as game streaming, machine learning, and HPC (high-performance computing). Lisa Su stated that Google adopted AMD’s high-performance Radeon GPUs and SDK (software development kit) to power its upcoming Stadia game streaming platform. AMD’s Radeon Instinct GPU will also power the world’s fastest supercomputer, Frontier.
China is a major market for AMD’s gaming and data center GPUs. Its second-half growth outlook does not include the increased tariffs between the United States and China. Higher tariffs will slow demand, thereby impacting AMD’s sales from China. It remains to be seen to what extent the new 7-nm GPUs mitigate the impact of the trade war.
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