Advanced micro-devices (NASDAQ: AMD) took the market share away from Intel (NASDAQ: INTC) in the central processing unit (CPU) space for some time thanks to its excellent technology.
The good news for AMD investors is that this has not yet been done. The latest sales report from a major third-party retailer tells us that AMD is making progress in a critical area against Chipzilla: pricing.
AMD bends its price capability
According to data from German e-commerce retailer Mindfactory.de (reported by Reddit user Ingebor), AMD Intel is absolutely crushing. The December 2020 sales figures show that Mindfactory ships 40,000 units of AMD’s processors, accounting for 83% of the retailer’s unit sales.
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AMD’s unit share decreased from 85% in November. However, the disc maker grabbed 86% of Mindfactory’s processor revenue in December, an increase of one percentage point above the November level. In simpler terms, AMD’s revenue share at Mindfactory rose in December despite a decline in unit share due to an increase in the average selling price.
Mindfactory data compiled by Ingebor and reported by ExtremeTech shows that the average selling price (ASP) of AMD’s top four CPUs in December was 318.20 euros (about $ 386.45 at the current exchange rate) – an increase of 14.9% compared to November and higher 32.2% since September 2019. Intel, on the other hand, lost its price capability. The average selling price of its four best processors for December 2020 is 249.50 euros, a decrease of 10.5% from November 2020 and a decrease of 21.7% from September 2019.
AMD has seen a sharp increase in its average selling price since October 2020. Its latest Ryzen 5000 processors were launched in the last quarter of 2020 at premium price points compared to their predecessors. AMD’s higher ASP is thus proof that consumers are willing to pay a higher price for the improved performance offered by the new Ryzen 5000 processors. Meanwhile, Intel has seen a steady shift in its price capability since April 2020, with AMD surpassing Chipzilla on the ASP front in December 2020.
There is now a restriction on Mindfactory’s data, as it represents only one retailer from Germany. But it does give us an idea of how things are going in the CPU market, as Mindfactory is an established seller that has been operating since 1998 and sold more than $ 362 million in 2019. There are additional reports suggesting that the rise of AMD will rise. CPU dominance, so Mindfactory’s data can be considered as an additional measure to get an idea about the improved price capability of the disk maker.
Stronger prices and greater market share will be the wind for the stock
AMD has dropped its earlier strategy of offering competitive chips at aggressive prices, and it seems to be bearing fruit. A closer look at the prices of Intel and AMD’s CPUs suggests that the latter is trying to capitalize on its process advantage and milk the stronger performance that its chips deliver.
AMD’s latest Ryzen 5000 CPUs are based on a 7-nanometer (nm) process while Intel is stuck with the 14nm process. With a smaller process node, AMD can make chips that are more powerful and consume less power since the transistors are tightly packed. Intel’s competitive desktop components based on the 10nm process are only expected in the second half of 2021, indicating that AMD may continue to charge a premium for its advanced process.
Throw in the market share gains that AMD is constantly clocking, and it will not be surprising to see that the chipmaker continues the tremendous growth of its computer and graphics segment that generates almost 60% of total revenue. The segment’s revenue increased by 31% in the third quarter of 2020, and AMD also pointed out that the ASP of its processors increased quarter on quarter due to higher prices.
Rosenblatt Securities analyst Hans Mosesmann expects AMD’s CPU market share to rise to 50% in 2021. That would be a big increase from the 22.4% stake he put at the end of the third quarter of 2020, according to Mercury Research. And as the company looks set to improve its ASP, a higher market share would be ideal in 2021 with stronger growth on the top and bottom line.
Analysts estimate that AMD’s revenue could rise 27% this year, coupled with a 47% increase in earnings per share. AMD therefore looks like a growing stock worth buying as it can continue its new run in the market in the new year thanks to the growing dominance in CPUs.