AMD has been “undershipping” chips for a while now to balance supply and demand

AMD previously announced its fourth-quarter and full-year results for 2022, showing that sales of consumer CPUs and GPUs fell sharply in the fourth quarter. As a result, the revenue of the customer business department was only $903 million, a year-on-year decrease of 51%, less than half of the same period last year, and an operating loss of $152 million. Since rival Intel has formulated project cuts, salary cuts, and other measures after its “catastrophic” financial report, many people speculate whether AMD will use some means to stimulate sales, such as price cuts.

According to PC World, AMD CEO Dr. Lisa Su said in the earnings conference call for the fourth quarter of 2022 that after the sharp decline in PC market demand, in the second half of 2022, AMD chose to use the “undershipped” method to maintain profit margins while avoiding inventory in terms of CPU and GPU shipments. Simply put, it is to maintain a high price and reduce the supply, so as to achieve a balance between supply and demand. AMD will continue to choose the same strategy in the first quarter of 2023 but to a lesser extent.

AMD’s choice of this approach is obviously calculated. It would rather reduce chip shipments and reduce revenue than sell at small profits but quick turnover or even losses in order to maintain revenue. This will not only maintain a better gross profit margin but also reduce the risk of high inventory. Judging from the results of the financial report, AMD has made a more correct choice after weighing its own business. In the harsh market environment, the level of gross profit margin was maintained, and the pressure on inventory was relatively light. There was no loss, and the financial report was better than expected, which was well received by investors.