Advanced Micro Devices (AMD) recently launched its EPYC server processors for data centers. The processors outperform Intel’s (INTC) current generation of processors and are supported by partners across the product ecosystem.
Operating system providers are also showing a strong support for optimization. Server space players are showing a strong interest in EPYC because of process technology support and dense server capabilities. This launch gives industry players an opportunity to end Intel’s command in the server market.
Reduced total cost of ownership is another plus for EPYC and Advanced Micro Devices. Leapfrogging process technology also reduces the threat of Intel’s 10nm parts.
The company also released TDP ratings of its EPYC processors, which eliminates the power consumption uncertainty. Shares of Advanced Micro Devices were up 10% Wednesday following the favorable launch.
End to Intel’s server monopoly?
The industry has finally decided to take on Intel’s monopolistic position. Intel’s high margins in the server space aren’t good for client profitability. Players in the server market have a very strong incentive to initiate price competition. This was not possible before, given Intel’s superior performance fueled by the node lead in the past. The launch of EPYC has changed that as Advanced Micro Devices demonstrated superior performance. Therefore, industry participants will take this opportunity to weaken Intel’s position in order to improve their margins.
That’s why we saw many OEMs, ODMs and cloud server providers joining EPYC’s launch. Server manufactures including Hewlett Packard (HPQ, Financial), Dell (DVMT, Financial)Â EMC, Asustek (TPE:2357, Financial), Gigabyte Technology (TPE:2376), Inventec (TPE:8201), Lenovo (HKSE:00992), Supermicro (SMCI), Tyan and Wistron introduced their EPYC-based products on the launch; cloud data center customers Microsoft (MSFT) Azure and Baidu (BIDU) announced deployments.
“Primary hypervisor and server operating system providers Microsoft, Red Hat (RHT) and VMware (VMW) showcased optimized support for EPYC while key server hardware ecosystem partners Mellanox (MLNX), Samsung Electronics (XKRX:005930) and Xilinx (XLNX) were also featured in EPYC-optimized platforms.” – Advanced Micro Devices’ press release
Note that Microsoft Azure is the only leader in Gartner’s magic quadrant for cloud infrastructure as a service (IaaS) alongside Amazon (AMZN) Web Services, or AWS. It is worth mentioning that more than 90% of Fortune 500 companies use Microsoft’s cloud services. Baidu is a leader in China’s search engine market and cloud compute. This will benefit Advanced Micro Devices as China’s market is growing at a much faster rate than the overall industry.
Hewlett Packard and Dell’s presence at EPYC’s launch also indicate that the industry is serious about ending Intel’s monopoly in the server space. Note that Dell EMC shipped around 21% of the total x86 server units during the fourth quarter of 2016. For two quarters in a row, Dell sold more EMC PowerEdge servers than any other vendor around the globe. Advanced Micro Devices' EPYC will be featured in Dell PowerEdge servers starting in the second half of the year.
Another key thing to note here is the ecosystem. Server markets are driven by support ecosystem. It was always a concern whether Advanced Micro Devices could build a decent ecosystem for its EPYC offerings. The company has done well given the fact that partners across industries are on board. Partners include server OEMs, ODMs and cloud infrastructure providers. Optimization support from server operating system providers is also a success for Advanced Micro Devices.
Purley’s launch might not hurt EPYC’s prospects
Intel’s 10nm Purley is cited as a headwind for Advanced Micro Devices by the bear camp, but enterprise server space entails a long product life cycle, which is ignored by the bears.
Enterprise clients including public cloud providers have a decision to make. They can either go with Purley, which is launching soon, or they can opt for 14nm EPYC parts. Going with EPYC can allow clients to leapfrog process technology later to jump onto 7nm. Note that Advanced Micro Devices' next generation products are expected to be based on Global Foundries 7nm process technology.
This is the primary reason Intel doesn’t hold a clear advantage with its 10nm launch. Intel isn’t just competing with the current offerings of Advanced Micro Devices, as customers will weigh their options based on process technology road map. Some street analysts conform to that thesis. Canaccord Genuity’s Matthew Ramsay notes that Advanced Micro Devices has
“The foundation to extend seamlessly as the company moves the roadmap to 7nm CPUs over the next couple years with guaranteed multi-generational socket compatibility."
Discarding Advanced Micro Devices just because Intel is going to launch 10nm is an oversight by the bears. Potential consumers will definitely weigh the cost and benefits of staying with 14nm and then moving directly to 7nm as compared to using Intel’s 10nm parts. Advanced Micro Devices has a better chance of making a winning case with EPYC as industry is looking to end Intel’s dominating and price controlling position.
Why is EPYC a winner?
Performance
Advanced Micro Devices demonstrated impressive performance over Intel’s current offerings. In 2-Sockets, EPYC has higher performance, ranging from 23% to 70%, across all price entry points. In 1S configuration, Advanced Micro Devices displayed a boost in a range of 21% to 63%. High performance differences are explained by the fact that performance comparisons are based on Intel’s current E5 v4 processors while EPYC is designed to compete with upcoming Skylake-SP parts. Advanced Micro Devices’ ability to compete with Intel’s upcoming products is another positive sign as far as the server market share is concerned.
| CPU Performance | 2-S AMD EPYC 7601 | 2-S Intel Xeon E5-2699A V4 |
| Floating Point Performance | 1840 | 1160 |
| Integer Performance | 2360 | 1890 |
| Floating Point Performance/Watt | 10.2 | 8 |
| Integer/Watt Performance/Watt | 12.8 | 13 |
Advance Micro Devices and Focus Equity estimates
Regarding memory bandwidth, Intel’s current offerings lag behind Advanced Micro Devices' equivalent. The AMD EPYC 7601 system on chip (SoC) beats Intel Xeon processor E5-2690 v4 CPU in memory bandwidth by 146% on 2P servers. See the table below:
| Memory Bandwidth | 2S-AMD EPYC 7601 | 2-S Intel Xeon ES-2690 V4 |
| Copy (MB/s) | 282,818 | 116,098 |
| Scale (MB/s) | 286,313 | 115,347 |
| Add (MB/s) | 291,532 | 118,123 |
| Copy/TDP | 1571 | 860 |
Advanced Micro Devices and Focus Equity estimates
Overall, EPYC beats Intel’s current offerings in terms of performance and power. EPYC marginally underperforms in integer performance per watt. Anyhow, Advanced Micro Devices offers a value proposition, which the industry players will exploit in order to put an end to Intel’s monopoly.
Total cost of ownership
Sever space is dominated by total cost of ownership. As EPYC supports scalable memory and I/O, clients will save on server real estate. EPYC avoids unnecessary upgrades to the 2S that are executed only for memory and I/O scaling; see details here.
In simple terms, EPYC allows data centers to fit more severs in a relatively smaller space, which can have a material impact of total cost of ownership. Advanced Micro Devices claims that 1-Socket scalable capabilities of EPYC can result in 20% CAPEX savings for data center clients. Note that EPYC eliminates the need for additional motherboards for scaling I/O and memory.
The key problem was the fact the additional cores of EPYC can lead to high power draw that can offset cost saving achieved. Previously, Advanced Micro Devices didn’t provide information on TDP of its EPYC server. Now, as the company provided TDP rating, TCO reduction seems to be a reality.
Based on Advanced Micro Devices claims, EPYC is looking at a performance per watt gain of 1.54x for integer performance and 1.76x for floating point performance. Now, as performance per watt is lower as compared to Intel’s current best-in-class 2P E5-2699A v4, material TCO gains will be a selling point for EPYC. It should be noted that TCO savings will come from smaller servers, higher density, scalable I/O and memory and performance-per-watt. Advanced Micro Devices claims that a single-socket system will have 20% lower cost of acquisition in relation to a comparable Xeon. Cost of ownership is another selling point for EPYC.
Bottom line
Advanced Micro Devices’ EPYC launch is a potential success. Scaling capabilities, higher performance and reduced cost of ownership will help the company gain market share going forward. Channel partners will help the cause as industry partners look to end Intel’s monopoly. Process support for 7nm going forward makes a compelling case for deploying EPYC as compared to Intel’s 10nm offerings.
Overall, Advanced Micro Devices is set to steal market share. It’s only a matter of forecasting how much.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
