AMD responds to processor shortage controversy

For the past month or so, retailers and distributors have been complaining about shortages of AMD processors. Dell’s recent adoption of AMD chips has been named as the culprit by many, and Dell even stated last month that—unlike AMD’s channel partners—it had a “bountiful” supply of AMD chips. Discontent has been growing, and a system builder in Florida was quoted a few days ago as saying that AMD was effectively “divorcing” the channel. On Tuesday, AMD offered to respond in detail to these allegations, and I recently had a chat with Stephen DiFranco, AMD’s Global Consumer Channel VP, about the subject.

According to DiFranco, the supply problems aren’t so much caused by Dell as by generally heightened demand. He claims Dell “hasn’t really had much of an impact yet” because it just started selling AMD-based systems, and because its sales are mostly concentrated in the server sector. However, DiFranco says the entire industry was caught off-guard this quarter by a combination of the holiday season rush and aggressive pricing intended to stimulate demand before the release of Windows Vista. A number of reports have been saying that demand is actually lower than expected because consumers are waiting for Vista, but PC prices are indeed dropping. DiFranco reckons most consumers and industrial buyers haven’t really paid much attention to Microsoft’s new OS just yet. Put together attractive prices and a consumer base that has no reason to wait for anything else, he says, and demand ends up increasing by a lot.

Another factor behind AMD’s channel supply problems is notebook demand. DiFranco says notebook sales are “far outpacing every analyst forecast,” so much so that AMD is “seeing a lot of inventory movement from desktop to notebook parts.” Few system builders sell notebooks, and retailers don’t sell many notebook chips, so less of AMD’s production is going to the distribution channel. Since channel demand for Athlon 64 X2 processors is also above AMD’s expectations, the tight supply is no surprise.

It’s not just vanilla Athlon 64 X2s that are hard to come by, though. AMD’s low-power “Energy Efficient” Athlons have been difficult to find ever since their introduction. About those chips, DiFranco stated, “We’re looking at our low-power desktop strategy a little bit. We don’t think we have the perfect strategy yet, and I just think we’re trying to determine what the best route to market is for those. So, until we really have that locked and nailed down, we’re gonna continue selling our main-line products.” AMD brought down prices for all its Energy Efficient chips to match their vanilla counterparts last month, but this statement suggests AMD is putting the Energy Efficient processors on the back burner for the time being.

Despite the shortages, DiFranco expects channel partners to stand by AMD as it attempts to increase manufacturing. “Actually, I’ve been getting many more calls thanking me for trying to work out a solution than people calling to complain about the problem,” he says. Additionally, holiday season orders for large PC makers have already been filled, so AMD can now “start to focus a little bit more” on the channel. DiFranco also says supply and demand “should probably match up pretty nicely” in the first and second quarters of next year, although he thinks the Vista launch makes orders for 2007 hard to predict.

Comments closed
    • LiamC
    • 13 years ago

    A very similar article appeared a day later on CRN:

    §[<http://www.crn.com/sections/breakingnews/breakingnews.jhtml?articleId=193700650&cid=CRNBreakingN…<]§

    • My Johnson
    • 13 years ago

    It doesn’t tell me if their gross margin is increasing, but rather affirms it is shrinking.

    • PerfectCr
    • 13 years ago

    I am getting a little worried here. AMD needs to capitalize on the good fortune and reputation they built up over the past several years. Just as they reached that pinnacle Conroe hit them hard.

    They need to answer Conroe and soon.

    • MadManOriginal
    • 13 years ago

    Nice excuses. Too bad they are not only semi-false but they make AMD execs look stupid too. ‘Unanticipated holiday demand’ right because the holiday season is typically a slow one for PCs?? derrrrrr

    • SGT Lindy
    • 13 years ago

    Ummm yeah AMD here is an FYI……..notebooks have been out selling desktops for a while. In fact in May of 2003 it happened for the first time.

    §[<http://www.geek.com/news/geeknews/2003Jun/bch20030703020682.htm<]§ I dont think the trend will ever go back to desktops. It will only get worse each year for desktops. With PC gaming declining in favor of consoles it will go even faster. The Pentium M was/is a gold mine for Intel.

    • HiggsBoson
    • 13 years ago

    Actually, process parity aside, does anyone want to take a stab at the margins on the notebook parts vs. the desktop parts? If they start shifting their production toward the notebook parts than by definition they get a crunch on their desktop parts which is what the complaining about.

    But since the energy-efficient parts would be terribly low yield products to begin with, well who knows how many of those they can make these days…

    • IntelMole
    • 13 years ago

    y[

      • Flying Fox
      • 13 years ago

      My version: people are not really buying the EE chips, so we are just going to shift to laptops/vanilla and keep feeding Dell.

      BS ftw?

      Ed Stroligo said it best, better wake up from the dream. They go where the money is, not where we want them to be, unless we are Dell and HP.

        • Krogoth
        • 13 years ago

        EE = Emergency Edition for both sides 😉

        enough said

        • Vrock
        • 13 years ago

        Ed Stroligo is a bitter, pompous ass who runs a second rate tech site that’s little more than a blog. Just thought I’d put that out there.

          • echo_seven
          • 13 years ago

          I’ll agree the page looks rather simple, but is Ed Stroligo’s site the same overclockers.com that is 3rd in the folding rankings?

          If so, I could never understand how that site managed to get so many active folders.

          • Flying Fox
          • 13 years ago

          Sure he is bitter, but that doesn’t mean his assessment of the situation is not correct. Big OEMs bring AMD the $$ and marketshare, and this is what they will serve. To think they always care about the “little guys like us” is just delusional.

          • MadManOriginal
          • 13 years ago

          I’m not sure what he’d be bitter about, his articles have always had that kind of tone to them for as long as I can remember. My take is it’s just the New Yorker in him showing through 😉 I do like the fact that he often looks at things from both broader and longer-term viewpoints and isn’t just a salivating hardware junkie/cheerleader about everything.

          The folding team rank is easily explained – it’s old, and the forums, which are honestly are the best part of that site, has lots of members.

            • Vrock
            • 13 years ago

            Stroligo’s whole deal is that he’s the only one who understands how business works, and everyone else is a moron, especially Intel and AMD.

            This is laughable. If Ed knew half as much about running a successful business as he thinks he does, then he’d be running a successful business. Instead, he runs overclockers.com…. an amateur hour, sorry excuse for a tech site that hasn’t been relevant since the turn of the century. Even when he’s “right”, he still comes off as an idiot.

            • echo_seven
            • 13 years ago

            I’ll give him credit for being almost completely invulnerable to hype. He’s like this hype Farraday Cage.

            There’s times that I so want to believe AMD is not severely screwed right now, that I need to consult his site at times for a “reality check”.

            • MadManOriginal
            • 13 years ago

            Versus your astounding success at posting comments in various tech venues using an anonymous name. *zing*

            Honestly you sound like the one with some sort of issue. He’s not terribly different than any other of the legion of critics and industry watchers he just doesn’t sugar-coat what he says.

            • Vrock
            • 13 years ago

            See, the difference is that I don’t claim to be some kind of expert in the tech industry, and/or accuse every other tech website on the net of being idiots, not “getting it”, etc.

            People knock the [H] all the time because of Kyle’s attitude…at least he’s got something to have a big head about.

        • IntelMole
        • 13 years ago

        I’m sure that’s true as well, but making a dual core chip on a 90nm process that only uses 35W (or whatever the figure is these days) isn’t easy.

    • melvz90
    • 13 years ago

    BOOOOOOO!!!!! Excuses!!!

      • Saribro
      • 13 years ago

      “people want more than we can make” is an excuse ?

    • Bensam123
    • 13 years ago

    Sounds like PR BS to stomp out some of the flames. Chips go to where the money is at.

      • Stranger
      • 13 years ago

      Isn’t that what they said?

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