Is AMD using bitcoin's deflationary rewards structure to boost chip prices?

[Hydrogen]

Less supply to balance out demand—and keep prices high.

As the PC industry flounders, Intel suffered from such disastrous sales last quarter that it instituted pay cuts and other extreme measures going forward. AMD’s client PC sales also dropped dramatically—a whopping 51 percent year-over-year—but the company managed to eke out a small profit despite the sky falling. So why aren’t CPU and GPU prices falling too? In a call with investors Tuesday night, CEO Lisa Su confirmed that AMD has been “undershipping” chips for a while now to balance supply and demand.

“We have been undershipping the sell-through or consumption for the last two quarters,” Su said, as spotted by PC Gamer. “We undershipped in Q3, we undershipped in Q4. We will undership, to a lesser extent, in Q1.”

With the pandemic winding down and inflation ramping up, far fewer people are buying CPUs, GPUs, and PCs. It’s a hard, sudden reverse from just months ago, when companies like Nvidia and AMD were churning out graphic cards as quickly as possible to keep up with booming demand from cryptocurrency miners and PC gamers alike. Now that GPU mining is dead, shelves are brimming with unsold chips.

This article originally published with the headline “AMD is ‘undershipping’ chips to keep CPU, GPU prices elevated” but it has been updated to reflect AMD’s clarification.

Despite the painfully high price tags of new next-gen GPUs, last-gen GeForce RTX 30-series and Radeon RX 6000-series graphics cards are still selling for very high prices considering their two-year-old status. Strategic under-shipping helps companies maintain higher prices for their wares.

AMD isn’t the only one doing it, either.

“We’re continuing to watch each and every day in terms of the sell-through that we’re seeing,” Nvidia CFO Colette Kress said to investors in November. “So we have been undershipping. We have been undershipping gaming at this time so that we can correct that inventory that is out in the channel.”

Since then, Nvidia has released the $1,200 GeForce RTX 4080 and $800 RTX 4070 Ti, two wildly overpriced graphics cards, and tried positioning them as enthusiast-grade upsells over the RTX 30-series, rather than treating them like the usual cyclical upgrades. AMD’s $900 Radeon RX 7900 XT offers similarly disappointing value and the company recently released a blog post also positioning its new GPUs as enthusiast-grade upsells.

Overall gross margin is a key metric for chip companies, which burn through a ton of cash investing in R&D and cutting-edge technological processes. AMD’s market tricks helped it achieve a 51 percent non-GAAP gross margin last quarter, while Intel forecasted a terrifyingly low 34.1 percent gross margin for the upcoming quarter (hence its belt-tightening moves).

This all helps explain why street prices for standalone GPUs haven’t plummeted, even as deals on desktops and laptops have started ramping up. We expect—hope?—that as stocks dwindle down and competition ramps up, sanity will return to graphics card prices, mirroring AMD and Intel’s recent CPU price adjustments. Just this morning, Intel announced that its Arc A750 graphics card was getting a price cut to $250, instantly making it an all-too-rare tempting target for PC gamers on a budget.

https://www.pcworld.com/article/1499957/amd-is-undershipping-chips-to-keep-cpu-gpu-prices-elevated.html

....


Everyone knows that bitcoin mining rewards halve on a regular cycle. In theory this halving reduces active liquidity and volume in BTC. Resulting in it becoming an increasingly scarce asset. This reduction in supply is  theorized to correlate with rising price and value.

Here we have AMD reducing the supply of chips it ships, in an effort to create artificial scarcity and deflation of its assets. This is not a noteworthy or unique strategy. Rather a typical and broadscale approach used by many suppliers, manufacturers and producers. Here we have years of history and commentary to draw upon to verify the trend.

Can bitcoin reward halving and artificial reductions in supply by AMD be considered near to identical strategies?

This could be a valid question, considering most appear to not have many good examples to draw from, when it comes to putting bitcoin reward halving into perspective.

[The Sceptical Chymist]

The bitcoin halvenings don't reduce supply or increase scarcity--admittedly I've been awake for 38 hours straight, and my logic might have grown some fuzz around the edges, but I don't see any relationship between that and what AMD is doing.

There's no scarcity of graphics cards in general, just the overpriced new ones that are being doled out at a rate that gives the impression of scarcity--but it's artificial of course.  And Jesus, I'm not a gamer but how much do you need out of a GPU anyway if you're not mining altcoins?  You can check eBay and see a whole bunch of very powerful GPUs that were selling for outrageous prices prior to September of last year, when ETH moved to PoS, but are now pretty much bargains.  I don't know how much of an improvement a 4080 or 7900 XT really is or why anyone would buy one at MSRP.  It's astonishing how the manufacturers are trying to hold onto the GPU boom that was due solely to ETH mining.

Those days are long gone and aren't coming back as far as I can tell.  AMD and NVIDIA better wake up and realize that.

[Ucy]

Bitcoin deflationary model is quite unique and different in the sense that production of new Bitcoin is reduced unlike the method used by the companies you quoted, which could be considered hoarding. I wonder how long things will be hoarded before they get bad. Not a good idea to hoard something that expires or could become outdated for too long... unlike the current Bitcoins which could last as long as the network exists. Anyway this doesn't fit well though.
To fit it into Bitcoin deflationary model both companies will have to keep reducing the amount of new cpu/gpu they produce or manufacture until they nolonger produce anymore, then the sellers and consumers will now focus reselling/redistribution/reusing of old and existing cpu/gpu which could increase price significantly like Bitcoin price if demand is high (assuming they are the only of such companies in existence) and supply is low as no new cpu/gpu is manufactured any longer.
Hope you see why this isn't a good comparison to the Bitcoin deflationary model

[Coin Gorilla]

Less supply to balance out demand—and keep prices high.

As the PC industry flounders, Intel suffered from such disastrous sales last quarter that it instituted pay cuts and other extreme measures going forward. AMD’s client PC sales also dropped dramatically—a whopping 51 percent year-over-year—but the company managed to eke out a small profit despite the sky falling. So why aren’t CPU and GPU prices falling too? In a call with investors Tuesday night, CEO Lisa Su confirmed that AMD has been “undershipping” chips for a while now to balance supply and demand.

“We have been undershipping the sell-through or consumption for the last two quarters,” Su said, as spotted by PC Gamer. “We undershipped in Q3, we undershipped in Q4. We will undership, to a lesser extent, in Q1.”

With the pandemic winding down and inflation ramping up, far fewer people are buying CPUs, GPUs, and PCs. It’s a hard, sudden reverse from just months ago, when companies like Nvidia and AMD were churning out graphic cards as quickly as possible to keep up with booming demand from cryptocurrency miners and PC gamers alike. Now that GPU mining is dead, shelves are brimming with unsold chips.

This article originally published with the headline “AMD is ‘undershipping’ chips to keep CPU, GPU prices elevated” but it has been updated to reflect AMD’s clarification.

Despite the painfully high price tags of new next-gen GPUs, last-gen GeForce RTX 30-series and Radeon RX 6000-series graphics cards are still selling for very high prices considering their two-year-old status. Strategic under-shipping helps companies maintain higher prices for their wares.

AMD isn’t the only one doing it, either.

“We’re continuing to watch each and every day in terms of the sell-through that we’re seeing,” Nvidia CFO Colette Kress said to investors in November. “So we have been undershipping. We have been undershipping gaming at this time so that we can correct that inventory that is out in the channel.”

Since then, Nvidia has released the $1,200 GeForce RTX 4080 and $800 RTX 4070 Ti, two wildly overpriced graphics cards, and tried positioning them as enthusiast-grade upsells over the RTX 30-series, rather than treating them like the usual cyclical upgrades. AMD’s $900 Radeon RX 7900 XT offers similarly disappointing value and the company recently released a blog post also positioning its new GPUs as enthusiast-grade upsells.

Overall gross margin is a key metric for chip companies, which burn through a ton of cash investing in R&D and cutting-edge technological processes. AMD’s market tricks helped it achieve a 51 percent non-GAAP gross margin last quarter, while Intel forecasted a terrifyingly low 34.1 percent gross margin for the upcoming quarter (hence its belt-tightening moves).

This all helps explain why street prices for standalone GPUs haven’t plummeted, even as deals on desktops and laptops have started ramping up. We expect—hope?—that as stocks dwindle down and competition ramps up, sanity will return to graphics card prices, mirroring AMD and Intel’s recent CPU price adjustments. Just this morning, Intel announced that its Arc A750 graphics card was getting a price cut to $250, instantly making it an all-too-rare tempting target for PC gamers on a budget.

https://www.pcworld.com/article/1499957/amd-is-undershipping-chips-to-keep-cpu-gpu-prices-elevated.html

....


Everyone knows that bitcoin mining rewards halve on a regular cycle. In theory this halving reduces active liquidity and volume in BTC. Resulting in it becoming an increasingly scarce asset. This reduction in supply is  theorized to correlate with rising price and value.

Here we have AMD reducing the supply of chips it ships, in an effort to create artificial scarcity and deflation of its assets. This is not a noteworthy or unique strategy. Rather a typical and broadscale approach used by many suppliers, manufacturers and producers. Here we have years of history and commentary to draw upon to verify the trend.

Can bitcoin reward halving and artificial reductions in supply by AMD be considered near to identical strategies?

This could be a valid question, considering most appear to not have many good examples to draw from, when it comes to putting bitcoin reward halving into perspective.

Pretty much a common/regular tactic used throughout different industries, I'm not surprised, the first that comes to mind - oil.

Maybe they're also shifting more toward enterprise, IDK if this relates to their whole portfolio or just consumer.

[slapper]

AMD's plan to build fewer chips follows the bitcoin reward halving. Both make something scarce and valuable. Bitcoin splitting halves fresh coin supply. Existing coins become more valued. AMD is also limiting chip production to raise prices.

It's intriguing that these methods aren't limited to enterprises or IT. Supply control is used in several sectors to raise prices. Bitcoin's reward halving is scheduled and predictable. AMD, however, can adjust their supply. Both techniques aim to increase asset value by making it difficult to obtain

[adaseb]

This scarcity card is what many auto makers are also claiming of doing. They noticed people overpay for vehicles so they decided to reduce supply to keep prices high. It worked somewhat they had more margins per vehicle sold and the vehicles were higher and more expensive trims.

However what I can see happening is some smaller automaker like Mitsubishi which wants to get more market share will basically pump out tons of vehicles and gain market share. Then all the auto makers will see this and they will also increase production. With AMD and Nvidia I can see the same happening.