Update: Dean McCarron at Mercury Research shared updated numbers for AMD's total market share of the x86 market, which we've added to the relevant section. McCarron also provided some commentary on the report, which we also added to the total market share section.

Original Article:

Mercury Research, a CPU market analyst firm, released its market share report today, which highlights AMD's recent gains against Intel. The last quarterly share report did not include sales from AMD's Ryzen 3000 processors, but this report reflects 7nm processor sales as the company continues to claw back market share from Intel.

The report highlights that AMD grew in all segments, including desktop PCs, mobile, server, and the overall x86 market, fueled by the rise of AMD's Ryzen 3000 processors that offer a more advanced manufacturing process than Intel's 14nm chips. That affords density, power, performance, and pricing advantages.

(Image credit: AMD)

AMD's is primarily using competitive pricing as the crowbar to pry its way back into the market, particularly as its stoic rival has remained firm with its own pricing. But Intel's inaction on the pricing front came to an end last month.

Intel responded to AMD's Ryzen 3000 lineup by slashing gen-on-gen pricing for its Cascade Lake-X refresh processors in half, a practice the company has avoided in the past to preserve the value of its previous-gen processors, not to mention brand equity. Those cuts are even coming to previous-gen models, too.

Intel's price cuts are the opening salvo of what is now a price war between the bitter rivals, and it appears that the company is digging in its heels for a protracted battle.

Intel alluded to pricing pressure from AMD during its last earnings call, saying it would impact the average selling prices of its chips and would result in lowered margins. Further, Intel CFO George Davis implied during an interview with Barron's this week that the company is digging in its heels for the long haul, saying "What we’ve said though, the delay in 10 nanometer means that we’re going to be a little bit disadvantaged on unit cost for a period of time." Davis then noted the company expects to return to 'very strong' revenue growth and margin expansion in 2023 as it overcomes the late ramp to 10nm. As a result, it's rational to expect lower pricing on Intel's upcoming 10th-Gen Comet Lake processors, too.

AMD will face more pressure from Intel as its competitor opens its wallet to fight back, but AMD made solid gains this quarter as its 7nm processors flowed into the market.

We can also expect these gains to accelerate in future quarters: Shortages of AMD's high-end chips, and the resulting price hikes, hamstrung the company in the immediate months after the Ryzen 3000 launch. The company's difficulty satiating demand even led to the postponement of its highly-anticipated Ryzen 9 3950X launch.

AMD CTO Mark Papermaster shed some light on the situation during an interview at the Bernstein summit this morning. Papermaster said the company met with unanticipated demand for high-end products and reiterated that TSMC supply shortages weren't the root of the problem. In response to a question about the shortages, Papermaster responded that the problem boiled down to binning for higher-performance CPU models. That means AMD wasn't yielding enough high-end chips from each wafer to satisfy the demand for its fastest chips, but the company says it has made adjustments to ensure supply.

That means we could see better supply in the coming months. Let's see what AMD's gains looked like while it wrestled with its shortage of high-end chips.

AMD Desktop Market Unit Share

3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q2019 2Q19 3Q19 AMD Desktop Unit Share 9.1% 9.9% 11.4% 11.1% 10.9% 12.0% 12.2% 12.3% 13% 15.8% 17.1% 17.1% 18% Quarter over Quarter (QoQ) pp +0.8 +1.5 -0.3 -0.2 +1.1 +0.2 +0.1 +0.7 +2.8 +1.3 Flat +0.9 Year over Year (YoY) pp +1.8 +2.1 +0.8 +1.2 +2.1 +3.8 +4.9 +4.8 +5

Notably, all of the following numbers exclude the IoT segment.

AMD now has 18% unit share of the desktop CPU market. The company gained 0.9 percentage points compared to last quarter and has jumped an impressive five percentage points on the year. AMD's premium Ryzen 9 3900X now appears to be readily available at retail, which should improve AMD's sales next quarter. The company also has both its 7nm Ryzen 9 3950X and Threadripper 3000 processors landing this month, which should touch off a wave of upgrade sales.

AMD also has yet to refresh its high-volume Ryzen 3 series of processors with the 7nm process, and with Intel's shortage of low-end CPUs lingering far longer than anyone anticipated, those lower-end models could touch off some additional share gains.

AMD Server Unit Market Share

AMD bases its server share projections on IDC's forecasts but only accounts for the single- and dual-socket market, which eliminates four-socket (and beyond) servers, networking infrastructure and Xeon D's (edge). As such, Mercury's numbers differ from the numbers cited by AMD, which predict a higher market share. Here is AMD's comment on the matter: "Mercury Research captures all x86 server class processors in their server unit estimate, regardless of device (server, network or storage), whereas the estimated 1P [single-socket] and 2P [two-socket] TAM [Total Addressable Market] provided by IDC only includes traditional servers."

4Q17 2Q18 3Q18 4Q18 1Q2019 2Q19 3Q19 AMD Server Unit Share 0.8% 1.4% 1.6% 3.2% 2.9% 3.4% 4.3% Quarter over Quarter / Year over Year (pp) +0.2 / - +1.6 / 2.4 -0.3 / - +0.5 / +2.0 +0.9 / +2.7

AMD's gains in the server market amount to 0.9 percentage points quarter-over-quarter and 2.7 percentage points year-over-year. That gain in share amounts to 4.3% of server share. AMD's Lisa Su noted during the company's last earnings call that the EPYC Rome shipments lead to a 50% quarterly increase in server CPU sales, but it is unclear how much of those gains are included in this report.

AMD continues to see strong uptake in hyperscale data centers, but its penetration into cloud service providers is the most promising, as it reduces up-front investments from potential customers and eliminates much of the technical support overhead. The company also reported that it is experiencing stronger uptake in enterprise deployments and with OEMs, but it will take some time for the company to chew away a large amount of share in Intel's high-margin bastion.

Considering Papermaster's comments that the company initially had issues yielding enough high-performance die for high-end parts, and Su's comments during the earnings call that the company is selling a heavier mix of high-end EPYC Rome processors than it did with the previous-gen models, it's possible there was some initial supply constraint.

Su said during the company's earnings call that AMD expects server revenue to grow in the double-digits for next quarter, and for the company to achieve double-digit server CPU share by mid-next year.

AMD Mobile Unit Share

2Q18 3Q18 1Q2019 2Q19 3Q19 AMD Mobile Unit Share 8.8% 10.9% 13.1% 14.1% 14.7% Quarter over Quarter / Year over Year (pp) +1.0 / +5.3 +0.7 / +3.8

Although supply is improving, Intel continues to be plagued by shortages on the low end. It's important to remember that mobile comprises roughly 2/3 of the client market, so success here is key.

AMD's Lisa Su noted recently that the company has its Ryzen 4000 Mobile processors coming in early 2020, but it is important to remember that those chips are the equivalent of the Ryzen 3000 mainstream chips. That means they'll wield the same 7nm process for the Zen 2 execution cores, but the jury is out whether they will have Navi or Vega graphics units. In either case, the chips will bring the advantages of the 7nm process, like lower power consumption, that will address some of the relatively poor battery performance results with AMD-powered laptops, like the recent Microsoft Surface Laptop 3. That should help the company increase its share in the upper echelons of the laptop market. Intel is focusing on providing a steady supply of its 10nm Ice Lake chips to OEMs, so AMD will face some challenges.

AMD Total Unit Market Share

3Q19 PP Change QoQ / YoY AMD Client 15.8% +0.8 / +4.2 AMD Overall x86 14.6% +0.7 / +4

2Q18 3Q18 1Q2019 2Q19 3Q19 AMD Total Unit Share 15.6% 15.7% 15.6% 17.1% 16% Quarter over Quarter / Year over Year (pp) +1.5 / + 1.5 -1.7% / +0.3%

The overall market share statistics we were given did not reconcile with the previous numbers we've shared (second table), so we don't have as much historical data. We've reached out to find out if the measurement criteria have changed and will add those additional numbers when they become available.

EDIT: Dean McCarron of Mercury Research shared the updated values for overall market share, which we've added to the second data table above. He also provided this commentary:

"Intel's gain in the total share is due to the steep drop off in AMD's SoC CPUs that go into gaming consoles (we're at the end of the current console cycle so volumes are way down compared to last year and last quarter.) AMD gained share everywhere else due to new product ramps.

"...I will tell you that the biggest change in the market in the third quarter was that AMD's desktop average CPU price increased by a very large amount and is responsible for a large part of their revenue gains, and this happened due to Matisse core desktop CPUs ramping much higher in the third quarter. As AMD's public financials show it was a very good quarter for the company and Matisse had a lot to do with that (as did the Rome ramp in server.)" Dean McCarron

(According to the first set of numbers, AMD now has 15.8% of the client market, and 14.6% of the overall x86 market. That's a year-over-year increase of 4.2 and 4 percentage points, respectively.)

Thoughts

It appears that AMD is heading in the right direction on all fronts, but Intel's dominant market position makes for slow progress. In the near term, Intel is ready to exploit its advantage of incumbency and sheer scale to slow AMD's progress, but it appears Intel's strategy is to use price cuts rather than innovative new desktop PC products. We'll have to wait until next year to see the fruits of Intel's Comet Lake labors, but they largely look to be yet another iteration of the 14nm Skylake architecture, albeit with a few extra cores at the top of the stack and Hyper-Threading interspersed throughout. Without significant price cuts, that likely isn't enough to hold AMD back from stealing significantly more market share in the DIY and enthusiast markets.

AMD's EPYC Rome is also slowly gaining steam, and while it isn't a critical selling point for the client market, Intel's lack of PCIe 4.0 support is impossible to ignore for many high-performance applications, like in the supercomputing and HPC space. Systems with PCIe 3.0 will be obsolete long before their expected shelf life of three-to-five years due to the now-bottlenecked interface. That's why we see AMD nearly running the table in HPC and supercomputer wins. All of this means we can expect some drastic price adjustments to Intel's forthcoming flagship server chips, too.