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Comment by fortran77 | Hacker News Reader

Is AMD having production problems?

Not exactly. It's a newly-released product that uses cream-of-the-crop components, but it's sold at consumer prices instead of enterprise prices. So AMD doesn't have a huge incentive to make this specific model first in line for the top-binned chiplets, and they had good reason for getting this product onto shelves two weeks ago rather than stockpiling inventory until after Black Friday.

In the broader scheme of things, AMD is having no trouble selling every CPU they make this year. That's due to a combination of generally high demand for CPUs, Intel's own production problems (which have caused Intel to prioritize other product segments over the desktop CPU segment where AMD's dominance is now clear), and AMD having to compete with many other chip companies that are placing orders for the same TSMC 7nm fab capacity—orders which now require much more lead time than they did at the beginning of the year.

So what's the rationale for them pricing it at a point where it makes sense for people to line up around the block? Is it that the initial volume is low enough that the positive press and goodwill is more valuable than what they would gain from price discrimination based on time?

I think there are several factors.

a) based on the 3900, the supply will be coming in the next few months, and the price is right, once that happens.

b) pricing it higher now and dropping the price in 3 months looks bad

c) the pricing has to line up sensible against other chips in the marketplace, both Intel's and also AMD's other chips (including last generation). For many people, they may be willing to wait to get a 3950 at today's MSRP, but would opt for something else if the MSRP was $100 more, and that something else might be an Intel chip.

d) it can be hard to know how much demand is really there --- AMD had to order production several months ago, and their pre-launch planning included an assumption that Intel was going to launch something notable in 2019, which didn't happen.

Launch pricing is often more about PR than short-term supply and demand, especially for high-end flagship products. You don't want to establish a product's reputation as overpriced if you expect to be able to drop prices in a few weeks or months.

Having an initial shortage can reinforce the impression that a product is very popular, and the total lost revenue from under-pricing and undersupplying at first is insignificant for a low-volume high-end part.

I think AMD would much rather leave money on the table as long as they are still turning a profit than leave products in a warehouse because the pricing was a bit too high. Marketshare & mindshare are significant areas that AMD needs to claw back as well.

Especially since these chips are likely already super profitable. The 3950X ($750) is "just" 2x 3700X's ($300) glued together. It's not like the 3950X is showing any particularly good binning or anything like that.

Probably not problems per se, but rather they didn't book enough production capacity. Sounds like the lead time is ~6 months so any course corrections will probably take about that long to see results of.

AMD said demand is simply higher than they expected.

The production line for this part is split with EPYC, and the server side obviously takes priority so there's gonna be shortage for a while.

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