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  1. Advanced Micro Devices Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual)
  2.  
  3. Sunnyvale May 24, 2021 (Thomson StreetEvents) -- Preliminary Transcript of Advanced Micro Devices Inc presentation Monday, May 24, 2021 at 12:45:00pm GMT
  4.  
  5. TEXT version of Transcript
  6.  
  7. ================================================================================
  8. Corporate Participants
  9. ================================================================================
  10. * Lisa T. Su
  11. Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director
  12.  
  13. ================================================================================
  14. Conference Call Participants
  15. ================================================================================
  16. * Harlan Sur
  17. JPMorgan Chase & Co, Research Division - Senior Analyst
  18.  
  19. ================================================================================
  20. Presentation
  21. --------------------------------------------------------------------------------
  22. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [1]
  23. --------------------------------------------------------------------------------
  24. Good morning, and welcome to the first day of JPMorgan's 49th Annual Technology Media and Communications Conference. My name is Harlan Sur. I'm the semiconductor and semiconductor capital equipment analyst here at JPMorgan. And our second key note of this conference is with Dr. Lisa Su, President and Chief Executive Officer of Advanced Micro Devices. Under Lisa's leadership over the past years, the team delivers on their 2021 outlook, the company will have driven a 28% revenue CAGR from the time of the launch of their first Zen-based compute architecture, 16 and 20 percentage point expansion in gross and operating margins and 10 to 12 percentage points of share gain in data center and client compute segments of the market. Just phenomenal execution by the team.
  25. And as the world continues to go through an aggressive digital transformation enabled by a strong compute adoption cycle in data center, in client PCs and in gaming, the team's compute silicon and software solutions will be key enablers in helping to drive this transformation.
  26. So Lisa, thank you for joining us today. Congrats to you and the team for solid execution and growth over the past 6 years.
  27. --------------------------------------------------------------------------------
  28. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [2]
  29. --------------------------------------------------------------------------------
  30. Fantastic. Well, it's great to be here with you this morning, Harlan. Thanks for having us.
  31. --------------------------------------------------------------------------------
  32. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [3]
  33. --------------------------------------------------------------------------------
  34. Yes. Thanks, Lisa.
  35. ================================================================================
  36. Questions and Answers
  37. --------------------------------------------------------------------------------
  38. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [1]
  39. --------------------------------------------------------------------------------
  40. So this morning, I think what I wanted to do is I want to focus more of the discussion on the Enterprise and data center segments of your business because it is a large TAM opportunity for the team and it's also the fastest-growing and most profitable segment. And one of the strong growth outlook is -- in data center and Enterprise is the increasing complexity and diversity of compute workloads like AI, analytics, simulations, commoditization of specialized hardware via virtualization, media and online gaming. So looking out over the next 3 to 5 years, what is the vision of the data center of the future? And how is <AMD> positioning itself to address the complexity of your customers' compute requirements?
  41. --------------------------------------------------------------------------------
  42. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [2]
  43. --------------------------------------------------------------------------------
  44. Yes, very good. Well, Harlan, thank you for starting with the data center, and we completely agree with you. I mean I think this is the most exciting part of the market for us. We see it as a huge growth opportunity, not just from the TAM, but really from sort of what people need.
  45. I think data center was our largest bet 5 years ago. And it was really around this notion that as you have more devices and as you have more data, you have an exponential growth of compute and actually gets more complicated, whether you're an enterprise player or a cloud player or someone doing research and development, you need more compute. And as you go through the next 5 years, what we see is that compute actually becomes more specialized over time because these workloads are also becoming much more complex and much higher models and data are required.
  46. And so you need the best compute. You need the best CPUs, the best GPUs. You need them combined in system solutions that allow you to take advantage of the workload and the systems that you're in. And you also need very high-speed interconnect to connect those guys. And we see that the entire ecosystem grow over time with this mix and match of different compute elements.
  47. And so our goal at AMD is to really be the leader in this high-performance computing wave. And we're very excited with some of the progress that we've made over the last few years, especially what's in store over the next 3 to 5 years.
  48. --------------------------------------------------------------------------------
  49. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [3]
  50. --------------------------------------------------------------------------------
  51. When you talked about one of the building blocks being world-class leading CPU architecture, you launched your third-generation EPYC data center and enterprise CPU platform early this year. The ramp in adoption looks quite strong. Can you just give us an update on customer traction in the data center expectations for 2021? And whether you have enough supply for the strong demand that you're seeing? And then maybe further out with your next-generation platform, is the team still on track to launch your fourth-generation EPYC CPU called Genoa based on the [Horizon] 4 architecture next year?
  52. --------------------------------------------------------------------------------
  53. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [4]
  54. --------------------------------------------------------------------------------
  55. Yes. So again, we're very happy with the launch of our third-generation EPYC code-named Milan. It's actually gone exceptionally well. So what's -- from a -- just a product standpoint, it really is the best in the industry, whether you're talking about per socket leadership or per core leadership. And that's just allowed us to really expand the range of customers and workloads that we serve. So we've made great progress with our second-generation EPYC processor.
  56. And actually in this past quarter, we more than doubled our revenue on a year-over-year basis. But what we're seeing is that we're seeing strong adoption in Tier 1 cloud providers, and that's on both Rome and Milan. You're seeing more adoption around internal workloads where people really see the TCO advantage and the value there as well as we're seeing -- we expect to have 400 instances in the cloud as we go through this year.
  57. And then on the enterprise side as well, what we see with Milan is the per core leadership has really played very, very well for some of the enterprise workloads across the board as well. And we have strong engagement with all of the largest OEMs for the enterprise.
  58. So I think the sum total is, if you look at our progression with EPYC, we've seen strong growth. We feel very good about the road map going forward. And I think customers are also recognizing that AMD is a strong and trusted partner, not just for today but also in the future.
  59. So Harlan, you asked about our next-generation, our Genoa product family, which is slated for 5-nanometer in 2022, and we're right on track with that as well and lots of customer interest with that as well. So I think key in this market is just a steady, very competitive road map, and I'm pleased with the progress that we've made.
  60. --------------------------------------------------------------------------------
  61. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [5]
  62. --------------------------------------------------------------------------------
  63. And steady road map and great execution.
  64. --------------------------------------------------------------------------------
  65. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [6]
  66. --------------------------------------------------------------------------------
  67. For sure.
  68. --------------------------------------------------------------------------------
  69. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [7]
  70. --------------------------------------------------------------------------------
  71. The other building block that you mentioned, especially as the workloads are getting more complex as GPU, it is becoming a very key building block in the data center. Can you just give us an update on your data center GPU road maps? I believe you're launching your next-gen Instinct based on your CDNA architecture this year. And so is the team on track for that? And what type of workloads are you anticipating to see early strong adoption? Is it super compute applications? Is it AI and deep learning analytics?
  72. --------------------------------------------------------------------------------
  73. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [8]
  74. --------------------------------------------------------------------------------
  75. Yes, absolutely. So as you said, the data center GPU is the other very important building block as we look at the compute landscape over the future. Data center GPU is a very strategic business for us. I would say it's starting from a smaller base, just given where we are. And we had started in the sort of cloud gaming and VDI applications.
  76. But as we introduced our new CDNA architecture, our first generation last year, actually, we've really focused on optimizing that architecture specifically for compute applications. And that's supercomputing applications for sure. That's also machine learning and AI applications as well. So I'm very happy with the progress. Actually, the technology progress has been phenomenally good. And we're very happy with the progression that we're making. We will be launching our next generation of the CDNA architecture later this year. These are key building blocks for us as we think about addressing both supercomputing as well as AI and machine learning applications as well as continuing to address sort of the cloud gaming and VDI applications going forward.
  77. So it's a growth vector for us. You'll see it grow in the second half of this year. And one of the major milestones that we talked about was getting this business to, let's call it, $0.5 billion or so from an annual revenue standpoint. And we see a good path to that over the next year to do that. So it is becoming more and more strategic, and you'll see it be a key layer on top of our CPU growth as we go forward later this year and into 2022 and 2023.
  78. --------------------------------------------------------------------------------
  79. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [9]
  80. --------------------------------------------------------------------------------
  81. Not the key -- what we're hearing about now over the next, let's say, call it, 2 to 3 years is on a unified CPU GPU architecture, right, unified memory architecture, high-speed fabric. And actually, the AMD team, your team outlined this last year, and your competition now has announced a similar offering as well. So help us understand the team strategy, AMD strategy for closer integration between the CPU and GPU. I know that the team outlined the road map with EPYC, combined with your second-generation CDNA-based GPU architecture and your third-generation Infinity Fabric? Is this a 2022 or 2023 launch?
  82. --------------------------------------------------------------------------------
  83. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [10]
  84. --------------------------------------------------------------------------------
  85. Yes. Very good, Harlan. You know our road map well. So I would say, we've been thinking about this problem really for the last 5 years. And when I say we look at every problem as an opportunity. And the opportunity is when you have these components sitting side-by-side in a system, you want to be able to share resources between the components.
  86. So if you think about a high-performance CPU sitting next to a bunch of GPUs that are better for parallel processing, you want to be able to have a very smart interconnect, and we call that our Infinity Fabric, to really connect the 2 in a very efficient way and also share resources. So yes, this has been very much on our road map.
  87. Last year, we talked about our first-generation CDNA architecture. This year, we are -- as I said, we're putting together our next-generation CDNA architecture. This is actually a key component that enabled us to win the largest supercomputer bids in the U.S. around the Frontier Brokerage National Labs installment as well as the Lawrence Livermore National Labs installment with El Capitan and many others. But it's a coherent interconnect between CPUs and GPUs that allow us to fully optimize for HPC and for AI and ML applications. And we will be launching the next generation of that architecture actually later this year. So we're very excited about it. I think it's progressed extremely well, and it's the next big step in sort of innovation around the data center architectures.
  88. --------------------------------------------------------------------------------
  89. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [11]
  90. --------------------------------------------------------------------------------
  91. And as we think about the complexity of the compute workload and the requirements for different types of solutions to tackle some of these increasing -- the increasing complexity of compute, you've got a great portfolio. But you're going to be adding to that, right, adding to that heterogeneous compute portfolio with the Xilinx team. So can you just give us an update on the pending acquisition of Xilinx, their leadership in FPGA and adaptive system-on-chip capabilities? And given the requirements for more compute acceleration, how does their technology and portfolio fit with your heterogeneous compute strategy for data center? And what does the Xilinx team bring to AMD from a market expansion opportunity?
  92. --------------------------------------------------------------------------------
  93. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [12]
  94. --------------------------------------------------------------------------------
  95. Yes, absolutely, Harlan. We're very excited about the Xilinx acquisition. I think if you think about sort of 2 companies that are extremely complementary, that's really AMD and Xilinx. And what Xilinx brings is, frankly, they're #1 in the FPGA market and the accelerated adaptive computing market. When you look at strategically in the data center, our vision of a very heterogeneous architecture includes a world where you have CPUs, GPUs and FPGA, ASICs, sort of all connected in the same ecosystem. So bringing that FPGA leadership from Xilinx to the AMD portfolio really gives us a tremendous overall end-to-end portfolio in terms of capability. They've made some very good progress on SmartNICs and sort of the adaptive SoC concepts that we believe will be important as you look in the future cloud as well as enterprise applications.
  96. And then in addition to that, they also bring quite a bit of base foundational technology on both the hardware and software side that we think will add to our overall portfolio and really open up some other market segments that, to date, I would say AMD hasn't been overly focused on, things like communications, industrial, automotive. These building blocks, when you put them all together with our capabilities in the CPU and GPU and fabric, really is a tremendous portfolio.
  97. So we're excited about the acquisition. I would say that things are going well. We have gone through several important regulatory milestones. We are on track to close this by the end of the year. And we're very excited. I think our customers are excited as well to see what we can bring to the table as they think about their future solutions. So it's something that we think is very strategic for our growth vision going forward.
  98. --------------------------------------------------------------------------------
  99. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [13]
  100. --------------------------------------------------------------------------------
  101. On the topic of -- when we think about heterogeneous compute and the portfolio, one of the topics that -- topics that comes up is ARM-based CPU architectures in the data center. And as you know, there have been many that have tried to bring in off-the-shelf general-purpose ARM-based CPU to the market, and all of these merchant solutions have never really gained much traction. However, there has been a lot of activity on the custom chip side, where some of your cloud customers are choosing to design custom ARM-based processors for specific internal workloads. The AMD, at one point, had a very, very competitive ARM-based architecture, the K-12. What's your view on AMD, either bringing in off-the-shelf ARM-based version of EPYC to the market or doing a semi-custom arm processor chip for your cloud customers?
  102. --------------------------------------------------------------------------------
  103. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [14]
  104. --------------------------------------------------------------------------------
  105. Yes. So Harlan, as you mentioned, I think AMD has a lot of experience with the ARM architecture. We have done quite a bit of design in our history with ARM as well. And we actually consider ARM as a partner in many respects. So the most important trend that we're seeing in the market is this idea that as the trend that I talked about earlier that compute is sort of expanding at an exponential scale, it really means that people want to optimize for their own workloads. And we completely get that. Customers want the choice of using the right compute for the right application. And we want to be a great partner in that.
  106. So for example, in the cloud, you see a variety of different instances, depending on whether you're handling the highest performance workloads or the most data-intensive workloads or, in some cases, you might be more price performance sensitive. And all of these will require a slightly different compute optimization point.
  107. So I actually think it's less about ARM versus x86 and more about do you have the right compute at the right performance point, the right price point, with the right features and functions. And so that's how we see this market evolving. So there's definitely a place for ARM in the data center. I think we have deep relationships with all of the data center customers, and we're talking to them about what do they need over the next 5 years. You'll see AMD add more points to our compute road map as well to optimize for some of these different workloads. And I think the value is really in how you put things together.
  108. And so from an AMD standpoint, we consider ourselves sort of the high-performance computing solution working with our customers. And that is certainly the way we look at this. And if it means ARM for certain customers, we would certainly consider something in that realm as well. But we look at it as really, let's talk about what problem you're trying to solve. And then we'll work with you with the best components to address the customers' needs.
  109. So that's how we think about our differentiation, and it is an exciting place in compute. So there's a lot of people who are active in the space because there's just so much need for different optimization points.
  110. --------------------------------------------------------------------------------
  111. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [15]
  112. --------------------------------------------------------------------------------
  113. Well, let's talk about the core technology portfolio for a second. On the topic of advanced and heterogeneous packaging, 2.5, 3D, the AMD team was the first to introduce and implement the strategy with their chiplet-based strategy. Now we're seeing competitors moving to this type of architecture. And we're also seeing a lot of your peers, for example, in advanced networking move to the chiplet-based strategy as well. There are further innovations like 3D [dye-stacking] and interconnect. Help us understand this. So what the road map is for AMD in advanced packaging?
  114. --------------------------------------------------------------------------------
  115. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [16]
  116. --------------------------------------------------------------------------------
  117. Yes, absolutely, Harlan. So look, we've been sort of a leader in this idea of sort of advanced packaging and how do you use silicon for its best performance and feature set. And really, this is the key aspect of innovation.
  118. When you think about sort of all that's said about Moore's Law slowing it means that you're getting performance gains by going to smaller geometries, but not necessarily the same gains that you got a few years ago. So we were very early in sort of the idea of using 2.5D packaging with high-bandwidth memory together with our GPUs as well as using a triplet architecture to really get the incredible performance that we're seeing with each generation of EPYC. And you'll see us continue to innovate on that road map.
  119. So 3D trip stacking is definitely on the road map. We see it as another tool in the tool chest as you think about how do you put these different pieces together. And I think what you'll also see is you might see different technologies used along the price curve. So you can imagine the highest performance technologies can afford different elements. And then as you get into more cost sensitive, you might not be able to use all that complexity.
  120. But think about it as AMD will push the envelope on 2.5D and 3D packaging as we go forward because it's a key element to unlock that next level of performance. And again, we'll talk a little bit more about that as we go through the next number of months as we roll out the next phase of our road maps.
  121. --------------------------------------------------------------------------------
  122. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [17]
  123. --------------------------------------------------------------------------------
  124. Well, think about SAM expansion for the AMD team, most of the team's success thus far in the data center has been with your cloud and supercomputing customers. Despite the move from on-prem to cloud, though, Enterprise still represents a pretty sizable segment of the server market. And as you know, we did do a CIO survey last year, and we're pleasantly surprised to see that 20% of the top CIO survey showed interest and potential intent on wanting to move to an EPYC-based server architecture for some of their on-prem applications. And I know that with third-gen EPYC, the architecture fully supports all of the mainstream enterprise workloads. So how long are the Enterprise qualification cycles? And how does the adoption momentum look like so far in Enterprise?
  125. --------------------------------------------------------------------------------
  126. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [18]
  127. --------------------------------------------------------------------------------
  128. Yes. Harlan, we've made a lot of progress with Enterprise accounts over the last couple of quarters, and we see that momentum picking up. So we see a very strong pipeline in the enterprise.
  129. I will say we liked your CIO survey. So we think it's -- as we have continued to build sort of the EPYC franchise, I think that there is good recognition of the value that we offer with the -- with Rome. And in the second generation, we had a very good set of platforms, a broad set of platforms. We added some additional higher frequency SKUs that were helpful for the Enterprise, and that certainly was very good.
  130. And then with Milan, we really see an opening up sort of that end-to-end leadership in per core performance, translating into significant performance and total cost of ownership benefit in the enterprise. So I think the Milan platform coverage is fantastic, particularly when you think about -- we launched -- we just launched Milan sort of in the middle of March. And the number of platforms that you can order today across all of the top OEMs is just a testament to the tight partnership that we've had with the OEM development teams to get those platforms ready. And I can say that Enterprise will be a significant growth vector for us as we continue to ramp Milan. And we like the diversity of customers. We like the diversity of workloads, and we're building out our go-to-market capability and our customer support capability to also serve this much larger number of customers going forward.
  131. --------------------------------------------------------------------------------
  132. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [19]
  133. --------------------------------------------------------------------------------
  134. The other market opportunity, telco service provider segment of the market, that's a -- smaller than Enterprise, but it's still sizable, $5 billion to $6 billion per year [SAM] opportunity for the AMD team driven by virtualization of the core of the service provider networks. And now that virtualization trend, as you know, is moving to the radio access part of their networks in the case of 5G operators, what is the AMD team doing here to try to penetrate this potential SAM opportunity?
  135. --------------------------------------------------------------------------------
  136. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [20]
  137. --------------------------------------------------------------------------------
  138. Yes. The telco market is a very interesting SAM opportunity for us. I mean you would say that we really haven't had that as a key market for us in the past. I think the strength of the portfolio, I think, overall, does say that this should be a key market segment for us in the future. I think the addition of Xilinx as well, because of their very strong presence in the comms infrastructure market, I think it's goodness. It adds sort of relevance to both the CPU and the FPGA solutions together. I think we view this as a key opportunity for us to continue to get the EPYC capabilities over a larger range of customers. So a key opportunity for us. Yes, we're looking forward to more engagement in the telco space and certainly with the Xilinx acquisition, having more exposure to the 5G and other end markets that we currently don't have a lot of exposure to.
  139. --------------------------------------------------------------------------------
  140. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [21]
  141. --------------------------------------------------------------------------------
  142. I'll touch on something that's maybe a little bit more near term. So given the -- near term and long term, I mean given the industry-wide shortages on foundry capacity, advanced packaging substrates, which is also impacting AMD as well, how are you and the team working with your wafer foundry and assembly and test and packaging suppliers to ensure that the team can meet what looks to be a very strong growth profile, not only for the remainder of this year but for the next few years.
  143. --------------------------------------------------------------------------------
  144. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [22]
  145. --------------------------------------------------------------------------------
  146. Yes. Harlan, look, it's been an amazing time in the semiconductor market. I mean you and I have watched this market for a long time. In general, semiconductors do go through cycles of sort of demand is up and then supply constraints. But this one is different. I think the difference here is that you see every segment of the market having very high demand. And I will say, overall, we should remember that the demand for semiconductors, especially in our space, the high-performance semiconductors is very, very high and higher than perhaps any of us might have expected when we started the year.
  147. That being the case, I think the supply chain has actually been very, very focused on adding more capability. We saw sort of the beginnings of this sort of late last year, in the second half of last year, we've been working very, very closely with our supply chain partners to continue to ramp up supply with adding additional capacity, doing all kinds of productivity improvements, doing all types of cross qualifications and so on and so forth. So it's been a very active time for us. But I do believe that you will see more and more capacity come online as we go through the next couple of quarters.
  148. For us, we were able to increase our guidance for the full year. When we started the year, we were at 37% year-on-year growth at our last earnings call. We were able to update our guidance to 50% year-on-year growth. That's all supply supported and also demand supported in the sense that the demand seems very, very solid, and we're seeing good sell-through.
  149. So I think this will continue to be a key area of focus for the entire supply chain. I know it's different for different companies. But for us, it's just about deep partnerships with our supply chain partners, deep partnerships with our customers so that we're satisfying their most important segments and their most important product lines. And we continue to believe we'll make progress as we go through the next couple of quarters.
  150. --------------------------------------------------------------------------------
  151. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [23]
  152. --------------------------------------------------------------------------------
  153. Demand in compute is quite strong right now, client compute and data center compute. I'm wondering, if you had more capacity available to you, could you be shipping at higher levels than what you are currently right now?
  154. --------------------------------------------------------------------------------
  155. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [24]
  156. --------------------------------------------------------------------------------
  157. Well, I think, like most of the semiconductor companies, we would say that demand exceeds supply. So that's certainly true. I think we have done a good job at prioritizing. When we think about prioritization, it's around ensuring that we are giving our customers sort of what they need to advance their product lines and their product objectives. And that's how we think about it. There is some compute that we are leaving underserviced. So I would say, particularly if you look at some of the segments in the PC market, sort of the lower end of the PC market, we have prioritized some of the higher-end commercial SKUs and gaming SKUs and those kinds of things. But overall, I think we've done a good job working with our customers on what they need.
  158. And as I said, probably the fact that the inventories are very lean throughout the supply chain. And so people are really now focused on, "Hey, we're not ordering stuff to put it on the shelf, right? We're ordering stuff that end customers want." And that's how we think about prioritization is prioritizing sort of the end customer needs as we go forward. But again, I think the partnership that we're seeing across the supply chain is really unprecedented, and I feel good about the progress that we're making in this space.
  159. --------------------------------------------------------------------------------
  160. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [25]
  161. --------------------------------------------------------------------------------
  162. Your -- the team's long-term revenue growth outlook is greater than 20% growth per year over the next few years. As I mentioned, since you and the team started launching Zen-based compute platforms, you've driven a 28% annualized growth rate. But going forward, how confident are you in the growth targets? And how do you unpack that growth? How much is TAM growth? How much is due to share gains and penetration into new market segments?
  163. --------------------------------------------------------------------------------
  164. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [26]
  165. --------------------------------------------------------------------------------
  166. Yes, absolutely, Harlan. So look, we're very happy with our revenue growth. We are a bit ahead of our target model. If you look at our financial analyst model, I think we are tracking ahead of that. That revenue growth is really a result of just the great products and very strong customer adoption. So we have every business line that's growing very strong double digits, and that's leading to sort of this growth.
  167. That being said, I think we feel very good about the long-term growth prospects. So I think our model of 20% CAGR is a good model. We feel like we have significant room to grow in 2022 and 2023, even though it's on top of a higher base.
  168. The way we think about it is, look, our organic TAM, let's call it TAM without Xilinx, is approximately $80 billion. And we are still very underrepresented in that market, right? So we're very much on a getting -- continuing to grow market share, continuing to extend into some of the SAM that we haven't yet addressed like telco, as we talked about. And then when we add Xilinx, we add another $30 billion of TAM, so we have $110 billion TAM.
  169. So our expectations are -- we're a growth company. We're always going to be focused on putting the right products out there in these large market segments. So it's really more about TAM expansion and share gains and customer adoption. But the fact that we have some tailwinds with the market being strong is obviously a welcome thing.
  170. And the important thing within that is also the mix of our business. And we've said that we have this long-term target to get the business to, let's call it, greater than 30% sort of data center centric. And I believe we're on our way to that road map with our significant growth in data center. So that's the way we think about it is keeping a very balanced model amongst these market segments and continuing to grow significantly above the market for the coming years.
  171. --------------------------------------------------------------------------------
  172. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [27]
  173. --------------------------------------------------------------------------------
  174. And on the financial side, this year's financial profile, strong revenue growth outlook: 50%, revenue growth; 47%, gross margins; 26%, OpEx profile. On the OpEx side, that would be pretty substantial growth in OpEx. So what segments, applications, products is the team focusing a majority of the incremental R&D dollars this year?
  175. --------------------------------------------------------------------------------
  176. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [28]
  177. --------------------------------------------------------------------------------
  178. Yes. So it's great that our revenue growth has actually enabled us to double down on the future. And so we invested heavily last year. We hired a significant number of engineers, and we're doing the same this year. And our focus is really on ensuring that we continue to build out our leadership.
  179. So if you think about our key R&D bets, it's around the core CPU and GPU road map. It's around strengthening the data center, and that's not just from a pure R&D standpoint, but also from a software and software support and customer support standpoint. It's significant investments in sort of machine learning and AI as we believe these are key future growth vectors for us. It's also a strong go-to-market organization.
  180. As I said, as we're servicing a much larger footprint of customers, I think the coverage model has expanded, and it's enabled us to touch a lot more customers as we've scaled. So look, I think our revenue growth has definitely enabled us to scale the company in a very significant way. And I think that's all good news because it allows us to cover more ground.
  181. That being the case, Harlan, we're always very disciplined in our financial model. So our above-average revenue growth allows us to continue to invest in OpEx, but we're actually at the lower end of our OpEx model because of that. And we'll always try to keep that balance in place. But I think the additional spending is going in the places that will make us stronger as we go forward in the future. So significantly investing in the business from an R&D and a go-to-market standpoint.
  182. --------------------------------------------------------------------------------
  183. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [29]
  184. --------------------------------------------------------------------------------
  185. And congratulations on the recent $4 billion share repurchase announcement. I think this is AMD's first repurchase of any real size is going back a long ways. It speaks, I think, to the confidence in your business going forward. How do you determine that now is the right time to initiate a buyback? And why through share buyback versus dividend?
  186. --------------------------------------------------------------------------------
  187. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [30]
  188. --------------------------------------------------------------------------------
  189. Well, we've been on this sort of multiyear growth strategy, and really a -- that strategy is both a technical and customer strategy as well as a financial road map. And from a financial road map standpoint, I think the business performance has been extremely strong. That's now leading us to see significant cash generation as we go through certainly the rest of this year and into 2022 and 2023.
  190. So as we've been thinking about sort of our capital allocation strategy, we believe it is the right time to start a share repurchase program. It does say something about our confidence in the business. I think we feel very, very good about the trajectory and the cash generation aspects. But as I said in the previous question, our first priority is investing in the business. So we are investing heavily in R&D and sales and marketing. And then we also want to ensure that we start the capital return to shareholders. I think the share buyback gives us good flexibility to modulate as we look at market conditions and so on and so forth. But I think the main message is, I think we're executing to the road maps that we've put in place, both from a technical standpoint and a customer standpoint as well as from a financial standpoint. And so this was the right time to start our share buyback program.
  191. --------------------------------------------------------------------------------
  192. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [31]
  193. --------------------------------------------------------------------------------
  194. Well, so we're just about out of time. I mean thank you very much for your insights. I want to thank you for joining us today. We look forward to the team executing on yet another what looks to be a very strong growth year in 2021. Thank you very much, Lisa.
  195. --------------------------------------------------------------------------------
  196. Lisa T. Su, Advanced Micro Devices, Inc. - President, CEO & Non-Independent Director [32]
  197. --------------------------------------------------------------------------------
  198. Thank you so much for having us, Harlan. Have a great conference.
  199. --------------------------------------------------------------------------------
  200. Harlan Sur, JPMorgan Chase & Co, Research Division - Senior Analyst [33]
  201. --------------------------------------------------------------------------------
  202. Thank you.
  203.  
  204.  
  205.  
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