‘AMD India biz more than doubled in 2 yrs’

How big a role does India play in AMD’s data center business, and how has it grown?

India plays a big role in AMD’s development resources, both company-wide and for data centers. We have over 6,000 engineers in India, and they touch every aspect of AMD’s data center business. It is headed by Jaya Jagadish, and they do a lot of work for server chip design, locally. We also have new teams from Xilinx and Pensando, which work on network equipment development.

India is the second largest market in APAC apart from China, and we expect over time, as the capacity builds, for India to even challenge the size of the Chinese market, as digitization and network proliferation continues.

We have seen our business double in the past two years. Our India market share in data center hardware was 11.4% in CY20, which grew to 20.1% in CY21. As of CY22’s September quarter, our market share was at 23.6%, and we expect it to grow further.

Do India’s semiconductor production incentives offer benefits to AMD?

It is absolutely critical to have the chip design being done here, with the vast engineering talent pool here.

This is a strategic asset not just for us, but could be a key factor for India’s semiconductor industry.

We primarily use TSMC as our chip fabricator. Hence, we do not directly influence where manufacturing is done, so that’s something that we’re generally going to look for leading edge manufacturing standards.

Having some geographic diversity is helpful, so we will continue to work with our partners to encourage that, but our impact on this is secondary.

How has the downturn in consumer demand affected AMD’s overall revenue growth?

In 2017, when we reentered the data center market, our revenue from data center hardware was less than 2% of our overall revenue. In 2022, this was above 25%, and we were the largest business segment in the December quarter. We see the importance of data centers continuing to grow. More importantly, five years ago, over 90% of our revenues were from directly consumer-related businesses. Today, we have data centers, embedded networking products, game consoles, and PCs contributing about a quarter each to our overall revenue.

Today, such a distribution gives us more resilience from market shifts. You should continue to see us focusing on all of these segments equally. In India, our employee base is similarly divided and distributed in terms of their areas of focus.

Have data localization legislations also affected how data center revenues could have grown?

It’s too early to say that. You could argue that the most efficient operating model is to have one large data center in every region, from a purely engineering point of view. This can minimize data transit times, and so on. But, that would still be entirely wrong. The concerns around data sovereignty, latency and response times, and people keeping an eye on their core assets more closely with cyber security and privacy concerns, will not diminish.

With or without legislation, we will continue to see a push from governments and companies to not have all their eggs in one basket, and have a distributed data center model. That is good for the industry, from a demand side.

What is your stance on the present spree of layoffs in the tech industry, and does that affect the India headcount in any way?

We continue to monitor the situation closely, but we have not announced any layoffs. We still see our business to be growing. In India, we do expect our headcount to increase in the eventual future. That being said, we too are being cautious in the market right now in terms of our overall hiring. As soon as the overall caution eases off, we’ll certainly look to grow our India team.

What impact can digitization, 5G and other new technologies like AI have on data center businesses?

Increasing digitization is going to continue, and I don’t see that slowing down. The demand blip that we are in right now is largely induced by the strong growth pace of the past years due to the covid-19 pandemic.

Now, with the macroeconomic murmurs rising, we see all of that heavy demand come down, and a change in perspective on the kind of inventories that companies and people expect or anticipate. That is what we are probably seeing right now, and it is not a factor of demand disappearing from the market. The long-term trend is still towards growth based on digitization. On top of this, we expect a tsunami to hit the tech market driven by AI.

AI is quickly transitioning to a tool that can transform businesses fundamentally, and that can drive enormous disruption and increase in requisite investments. This demand is relevant, because it will create additional demand on the server side, and thus expand opportunities that we have. The GPU business, in particular, would be a huge demand generator for data center hardware businesses.

The other aspect is networking. The advent of high-performance computing (HPC) and AI means that hundreds of thousands of embedded systems will have to network together in order to produce the intended results, and networking technology is critical to making that happen.

The promise that 5G has brought has not yet been delivered. For instance, latency sensitive applications out in the edge of the network periphery, and connecting with local data centers for enabling such applications, have not been built yet. This is one of the key narratives that are expected to drive infrastructure needs for 5G, beyond radio.