The chip shortage that began during the pandemic is almost over, but some products are still not readily available in the market.
AMD Undershipping Helps Maintain Higher Prices
AMD CEO, Dr. Lisa Su, confirmed that the company has been “undershipping,” shipping less than actual demand, to balance supply and demand.
Due to the rise in PC consumption during the pandemic, technology companies, including AMD and Intel, experienced their golden age. However, after the pandemic, there was a drop in sales for both companies. Despite a 51% YoY drop in client PC sales, AMD managed to maintain a small profit, thanks to its undershipping strategy.
This method, while uncommon, is used by major chip makers like Nvidia to correct the inventory in the market. It helps the company maintain a high gross margin, which is a key metric for chip companies.
Under-shipping to Avoid GPU Price Decrease
The undershipping practice is one reason why GPU prices haven’t plummeted despite the decrease in demand. It’s unclear how long this strategy will continue, but as long as it does, the price increase in PC parts doesn’t seem to end.
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