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AMD gives upbeat sales forecast on demand for chips

Lisa Su, AMD’s chief executive officer, faced questions on whether she can get enough chips to meet demand and how much more profitable the company could be if it can pull this off.

AMD’s 2021 forecast takes into account tight supply in the first half of the year. Profitability is increasing and margin expansion will depend on which market is growing faster, she said.
AMD’s 2021 forecast takes into account tight supply in the first half of the year. Profitability is increasing and margin expansion will depend on which market is growing faster, she said. (REUTERS)

Advanced Micro Devices Inc. gave an upbeat forecast, reflecting strong demand for its chips and gains against rival Intel Corp.

First-quarter revenue will be about $3.2 billion, plus or minus $100 million, Santa Clara, California-based AMD said Tuesday. That compares with an average analyst estimate of $2.73 billion. For 2021, the company projected a sales increase of 37%, well ahead of Wall Street expectations.

AMD has struggled for decades to make sustainable gains against Intel, the world’s largest chipmaker. However, the smaller company has revamped its products and outsourced production, helping it create processors that match or exceed the performance of Intel’s offerings. That has spurred early market share gains and a surge in AMD shares in recent years.

Lisa Su, AMD’s chief executive officer, faced questions on whether she can get enough chips to meet demand and how much more profitable the company could be if it can pull this off.

“Overall demand has been high in 2020 and exceeded our plans,” she said in an interview. “All of our businesses are firing on all cylinders.”

AMD’s 2021 forecast takes into account tight supply in the first half of the year. Profitability is increasing and margin expansion will depend on which market is growing faster, she said. AMD’s profit margins aren’t being squeezed higher production costs or price cuts, she added.

In addition to competing with Intel in processors for personal computers and servers, AMD supplies graphics chips used in Microsoft Corp.’s Xbox and Sony Corp.’s PlayStation. New versions of these video game consoles went on sale during the recent holiday period, raising expectations for this part of AMD’s business, which rivals Nvidia Corp.

AMD’s chips are made by Taiwan Semiconductor Manufacturing Co., which has better production technology than Intel. TSMC also supplies Apple Inc., Qualcomm Inc., Nvidia and many other technology companies, and the Taiwanese company is struggling to keep up with demand. Last week, Intel reported better-than-expected earnings and gave an upbeat forecast for the first quarter. Strong demand for laptops to support working and studying from home has fueled growth and will continue in the first half of 2021, Intel said.

AMD reported fourth-quarter net income of $1.78 billion, or $1.45 a share, compared with $170 million, or 15 cents, in the same period a year earlier. Revenue rose 53% to $3.2 billion. Profit, excluding certain items, was 52 cents. Analysts were looking for a profit of 47 cents on sales of $3 billion. Net income was boosted by a tax benefit of $1.3 billion in the quarter, AMD said.

AMD shares slipped about 1% in extended trading. The stock has soared almost 90% in the past year.

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