5 ms·

Your ability to gain market share ends when supply ends. If the demand is exceeding AMDs manufacturing capacity, then they should have priced higher or need to

Your ability to gain market share ends when supply ends. If the demand is exceeding AMDs manufacturing capacity, then they should have priced higher or need to increase manufacturing capacity in order to actualize the potential market share to be gained.

mattigames 7y ago
Except if you want to be known for being as the cheaper option and not just thinking about short-term profits; even if it takes a little delay to actually get the supply needed to satisfy the demand.
leoh 7y ago
What? Increase price to lower demand so they have a lower market share than they do now so they can have a higher market share later?
- missosoup 7y ago
  If they're supply-limited, they can increase price all the way until demand falls to meet supply. Selling widgets priced below the equilibrium point achieves nothing for capturing market share, it just loses potential revenue. I.e. if they can only manufacture 1000 widgets, but 10,000 people want to buy one at the given price point, the gained market share is still only 1000 individuals. The number of people who want one but can't get one due to lack of supply is not market share. Temporary under-pricing might be a valid strategy if AMD is planning to ramp up manufacturing capacity, but comments further down in this thread suggest they lack the fabs to do that.
  - imtringued 7y ago
    You're completely forgetting about the future loss of sales when someone only looks at AMD CPUs once. The buyer will switch to Intel immediately and then when prices are finally down again won't be shopping around for prices. The impression that AMD is overpriced remains.
    - missosoup 7y ago
      They could have priced higher and still dominated intel price/perf ratio wise. The supply/demand equilibrium point is somewhere higher than the current price and lower than intel break-even price. The only way they'd set the impression of overpricing is if they actually overpriced. They did the opposite. Whether it was a mistake in pricing or some calculated second-order strategy, we'll never know. What we do know is they're leaving cash on the table whether intentionally or not. Temporarily (keyword) underpricing to hurt competitors is not unheard of but I don't see how it will hurt intel unless it significantly shifts mindshare for the next ~2 years and allows AMD to get a real foothold in the server market.
      - zwaps 7y ago
        They have basically one opportunity to set the expected price point and as it turns out, they prefer to get all the positivity and hype on their side, than perfectly optimize to marginal demand. I am not sure it is a bad choice.
  - keithnoizu 7y ago
    Selling out of inventory isn't a bad move if you seeking to raise capital or debt to increase production capability. E.g. were profitable and selling out at this price point and arguably would continue to do so as we ramp up production. Especially if looking down the road long term. In the short term it generates buzz, thus this very post here on hacker news, which isn't necessarily negative unless it is a prolonged inventory shortage.
nordsieck 7y ago
> If the demand is exceeding AMDs manufacturing capacity, then they should have priced higher or need to increase manufacturing capacity in order to actualize the potential market share to be gained. That's the standard micro economics answer. You're not wrong. However, I don't think you're right either. The pricing of consumer products is a black art because people don't necessarily behave like economics textbooks say they should. Some possibilities: 1. This is a short term supply hiccup. The good will of keeping the price the same of the medium term is worth more than the money AMD would make by raising and then lowering the price of their chips. 2. They are constrained in their ability to raise their prices by Intel, which is broadly thought of as a superior product (leaving out the technical analysis of the current generation). 3. They want to create the perception of scarcity.
- navjack27 7y ago
  They've been binning these chips for months maybe even a year at this point. The binned CCDs used in the 3950X are also used in Epyc. I'm sure server has a higher priority over DIY.
  - paranoidrobot 7y ago
    From what I've read/heard - AMD are selling every chip they can make. So whatever the highest test the chip passes, it's sold as that. This is apparently why nobody is having much luck getting any kind of overclocking beyond the on-box specs - AMDs just very good at ensuring chips go where they're required.
disordinary 7y ago
Then you have consumers feeling ripped off when the next batch arrives, as has said above they could be trying to build brand loyalty.
galaxyLogic 7y ago
> If the demand is exceeding AMDs manufacturing capacity, then they should have priced higher If they did that the news would have been AMD is expensive which is not much of a news-story. Whereas now the news is that AMD is sold out because it is so good.

mattigames 7y ago

Except if you want to be known for being as the cheaper option and not just thinking about short-term profits; even if it takes a little delay to actually get the supply needed to satisfy the demand.

leoh 7y ago

What? Increase price to lower demand so they have a lower market share than they do now so they can have a higher market share later?

missosoup 7y ago
If they're supply-limited, they can increase price all the way until demand falls to meet supply. Selling widgets priced below the equilibrium point achieves nothing for capturing market share, it just loses potential revenue. I.e. if they can only manufacture 1000 widgets, but 10,000 people want to buy one at the given price point, the gained market share is still only 1000 individuals. The number of people who want one but can't get one due to lack of supply is not market share. Temporary under-pricing might be a valid strategy if AMD is planning to ramp up manufacturing capacity, but comments further down in this thread suggest they lack the fabs to do that.
- imtringued 7y ago
  You're completely forgetting about the future loss of sales when someone only looks at AMD CPUs once. The buyer will switch to Intel immediately and then when prices are finally down again won't be shopping around for prices. The impression that AMD is overpriced remains.
  - missosoup 7y ago
    They could have priced higher and still dominated intel price/perf ratio wise. The supply/demand equilibrium point is somewhere higher than the current price and lower than intel break-even price. The only way they'd set the impression of overpricing is if they actually overpriced. They did the opposite. Whether it was a mistake in pricing or some calculated second-order strategy, we'll never know. What we do know is they're leaving cash on the table whether intentionally or not. Temporarily (keyword) underpricing to hurt competitors is not unheard of but I don't see how it will hurt intel unless it significantly shifts mindshare for the next ~2 years and allows AMD to get a real foothold in the server market.
    - zwaps 7y ago
      They have basically one opportunity to set the expected price point and as it turns out, they prefer to get all the positivity and hype on their side, than perfectly optimize to marginal demand. I am not sure it is a bad choice.
- keithnoizu 7y ago
  Selling out of inventory isn't a bad move if you seeking to raise capital or debt to increase production capability. E.g. were profitable and selling out at this price point and arguably would continue to do so as we ramp up production. Especially if looking down the road long term. In the short term it generates buzz, thus this very post here on hacker news, which isn't necessarily negative unless it is a prolonged inventory shortage.

nordsieck 7y ago

> If the demand is exceeding AMDs manufacturing capacity, then they should have priced higher or need to increase manufacturing capacity in order to actualize the potential market share to be gained. That's the standard micro economics answer. You're not wrong. However, I don't think you're right either. The pricing of consumer products is a black art because people don't necessarily behave like economics textbooks say they should. Some possibilities: 1. This is a short term supply hiccup. The good will of keeping the price the same of the medium term is worth more than the money AMD would make by raising and then lowering the price of their chips. 2. They are constrained in their ability to raise their prices by Intel, which is broadly thought of as a superior product (leaving out the technical analysis of the current generation). 3. They want to create the perception of scarcity.

navjack27 7y ago
They've been binning these chips for months maybe even a year at this point. The binned CCDs used in the 3950X are also used in Epyc. I'm sure server has a higher priority over DIY.
- paranoidrobot 7y ago
  From what I've read/heard - AMD are selling every chip they can make. So whatever the highest test the chip passes, it's sold as that. This is apparently why nobody is having much luck getting any kind of overclocking beyond the on-box specs - AMDs just very good at ensuring chips go where they're required.

disordinary 7y ago

Then you have consumers feeling ripped off when the next batch arrives, as has said above they could be trying to build brand loyalty.

galaxyLogic 7y ago

> If the demand is exceeding AMDs manufacturing capacity, then they should have priced higher If they did that the news would have been AMD is expensive which is not much of a news-story. Whereas now the news is that AMD is sold out because it is so good.