AMD continued its rise into the upper echelons of the semiconductor market, posting record sales for the fourth quarter, driven by strong sales of its chips targeting PCs, game consoles, and data centers.
The company said revenue for the three months through Dec. 25 was $4.83 billion, up 49% from the prior year, a record high. Executives at AMD, which has cemented its status as one of the most valuable U.S. chip companies worth more than $145 billion, also forecast strong sales and profit for the first quarter of 2022.
Under CEO Lisa Su, AMD has rolled out chips with major performance gains, opening the door for it to take on Intel. As Intel's struggles to move to more advanced technology nodes hobbled its ability to compete with TSMC and other foundry rivals in recent years, Su also convinced customers to start dropping Intel in favor of AMD's chips. As a result, AMD has rapidly amassed market share in laptops, desktops, and data centers.
Reinvigorated PC Market
AMD is riding the revival of the PC market following the outbreak of COVID-19. The pandemic has pushed employers and students to buy desktops, laptops, and other devices to work remotely and play games. It is the second-largest vendor of graphics processors used in PCs for high-end gaming, behind NVIDIA. AMD is also facing more competition from Intel, which has started selling GPUs for PCs for the first time in years.
The semiconductor firm reported sales of $2.6 billion in its computing and graphics segment, up 32% from a year ago, buoyed by booming demand for PCs based on its flagship Ryzen CPU and Radeon GPU families.
AMD said the average selling price for both product lines increased as customers favored its high-end chips for laptops, a market where Intel is trying to strike back with chips based on its Alder Lake CPU architecture.
Cloud Giants Boost Data-Center Chip Sales
It is also gaining further ground in data centers, where Intel has long dominated with its Xeon server chips. AMD said sales of its server chips to cloud-computing giants such as AWS, Google, and Microsoft soared last quarter. They are using its EPYC CPUs in data centers that they rent out to others. The cloud sector is booming, driven by high demand for software and services related to a widespread shift to remote work.
"On the cloud side, we are in 10 of the largest hyperscalers in the world," Su remarked on a conference call with analysts. She said it more than doubled sales in its data center business last year due to high demand for its EPYC server CPUs and Instinct server GPUs, which together accounted for about 25% of its revenue.
It is also persuading other technology giants, including Meta, to use its server processors in massive new data centers. AMD said that it worked with Meta (formerly Facebook) to build a single-socket server based on its EPYC CPUs for Meta’s newest “North Dome” systems, improving performance-per-watt over a wide range of major workloads. Meta reportedly runs the fourth largest data-center operation in the entire U.S.
The new relationships sent sales in its data-center and semi-custom segment rising 75% to $2.2 billion.
Demand Peaking for Gaming Graphic Chips
The business was also buoyed by sales of Sony's PlayStation 5 and Microsoft's Xbox Series X consoles, which use graphics chips designed by AMD. The ongoing chip shortage has snagged production of the high-end game consoles for a year and a half, turning them into two of the most coveted consumer products on the market last year.
Su said that its outlook is for continued strong demand for the new PlayStation 5 and Xbox Series X in 2022. She said that, despite supply chain uncertainty, the console upgrade cycle is outpacing "all prior generations."
The strong streak of growth and profit gains also increased its gross margins—or the percentage of sales remaining after deducting production costs—to 50% in its previous quarter for the first time over a decade.
Net income for the final quarter of 2021 came out to about $975 million, or 80 cents a share, according to AMD. The company said that its gross margins would rise to 51% in the upcoming year, challenging Intel's.
The results come in the face of a global chip shortage that has gripped a wide range of industries, including cars and consumer products, for more than a year now. Inventory levels have been depleted as the demand for electronic devices continues to rise, leading to record backlogs for many types of components. Snags in the global supply chain are causing shipping delays as well as higher costs related to moving goods around.
AMD uses the same fabless model as most of the U.S. semiconductor sector, meaning that it contracts out production of its chips to TSMC and other foundries that are swamped with orders they are struggling to fill.
Supply Strategy
AMD said it has taken extra steps to assure long-term supply agreements, and, as part of its strategy, made $1 billion in advance payments in 2021 to lock in long-term production capacity at TSMC and other partners. Su said supply issues have also pushed AMD to work more closely with its customers, which means getting insight into their forecasts “multiple quarters and, in some cases, multiple years out” to plan in advance.
The company said that it has the production capacity it needs to keep growing. AMD anticipates sales in the range of $4.9 billion to $5.1 billion for the first quarter, driven by higher demand for its high-end processors.
AMD said that it expects $21.5 billion in sales for 2022, which would amount to 31% growth from the prior year. AMD has plans to roll out a new generation of its EPYC server processors, code-named Genoa, based on its "Zen 4" microarchitecture later in 2022. The chips will be manufactured by TSMC on its 5-nm process.
"We expect another year of significant growth in 2022 as we ramp our current portfolio and launch our next generation of PC, gaming, and data-center products,” said Su, who has been the company's CEO since 2015.
AMD indicated plans to close its $35 billion deal for programmable chip giant Xilinx in the first quarter. The deal would give AMD more muscle to compete with Intel in the market for server and networking chips. AMD said China has conditionally approved the deal, removing the last major regulatory obstacle to the takeover.
