In a short span of five years, the data centre segment has become the largest revenue driver for AMD with the revenue rising 50 per cent year-on-year to cross the $6-billion mark in Q4 of 2022.
In an interview with businessline, Forrest Norrod, Executive Vice-President and General Manager of Data Centre Solutions Business Unit of AMD, who was in Hyderabad recently, spoke on the global outlook for datacentre business, the headwinds and opportunities.
He also elaborated on the company’s plans for India and on how generative artificial intelligence could drive the demand for high-performance computing and data centres. Edited excerpts.
What is the impact of the macroeconomic headwinds on your data centre business?
In the first half of this year, we are seeing some conservatism in the enterprise segment. We are seeing a drawdown in inventory because of the inventory build-ups in the preceding years in the cloud market. However, overall, we expect AMD’s datacentre share to certainly grow this year. We are also optimistic about its long-term prospects.
With respect to the Indian market, the segment is extremely important for us. We have witnessed strong growth in the last two years. We are currently in the mid-twenties with respect to market share of datacentre CPUs in India. It is about double from a year ago. Regardless of what happens in India or across the globe, we believe we are expecting a strong because of the strength of the product portfolio. We are very bullish on our ability to gain share both in India as well in other countries.
How has the recession impacted AMD’s data centre business?
I think, we are still unclear whether we are going to have a recession worldwide. But businesses are being conservative in their spending. So, we definitely see a slowdown in commitments to new projects. But again, at AMD, we have diversified our businesses to tide over such times. Today, we offer a differentiated product portfolio with substantial better efficiency and performance than our competitors.
And we believe our growth story is intact despite headwinds in the market.
Due to Covid-induced disruptions to supply chains, everyone got so concerned about the continuity of supply and they stocked up. And I think those are all now coming out. So, while I see some conservatism in the market in the first half of the year, this is a transient phenomenon. This year is going to be a story of two halves.
Companies have fast-tracked digitisation after the pandemic. How is digitisation helping the growth of the datacentre business? Can the industry meet this pace and what are the challenges that you see?
I certainly believe that digitisation will drive the growth of datacentre business. Companies are going to look at datacentre as a competitive advantage for a long time to come. If, over the last 10 years, companies updated their IT systems to take full advantage of the Internet, then I believe the next big secular trend to revolutionise datacentre segment is AI. In my view, AI is going to drive disruptions and improvements across industries. There will be enormous demand for increased computing power to directly support those AI systems and indirectly support the increasing velocity that we think is going to flow from AI-led applications and transformations in business processes.
We are just entering another massive secular growth cycle for computing demand. And this is a very good thing for companies like us.
You said that you are going to grow your data centre business. What is the plan?
AI capabilities are growing rapidly. We have been focused on incorporating AI technology into our products to provide pervasive, high-performance power-efficient AI across our entire portfolio.
People are becoming aware of what large language models and generative AI models can do. ChatGPT is the recent most obvious example. This will have a tremendous impact across a wide range of knowledge sets. Tasks that previously nobody thought computers could do, will get automated. We are going to see an explosion of very large generative models that are domain specific. Think about ChatGPT and its different versions that can do a much deeper analysis, be more accurate, and much more powerful and can perform tasks specific to sectors such as law, real estate or engineering.
We are going to see an explosion in productivity across industries over the next three to four years due to these generative models. And it’s going to require enormous computing capacity to do—both to train the models as well as to use them to run the inference.
Are you getting ready to meet that kind of demand?
Yes. We are very focused on providing leading HPC and adaptive computing solutions. We are uniquely positioned to lead because we have world-class server CPUs that have demonstrated multigenerational performance leadership against the competition. We also have extremely capable GPUs that compete directly with our competition in the space.
We are already a leader in traditional high-performance computing. The most powerful supercomputers in the world use AMD GPUs. And we have been building a multiyear roadmap. This year at CES we announced Instinct MI300 Exascale APU which we believe will give leadership performance in AI.
MI200 already offered leadership performance in HPC and a very competitive performance in AI. With MI200, We did a lot of work with key customers to build the software ecosystem around the AI product portfolio.
With MI300, we will take that to the next level. The software ecosystem will be built such that the largest users of generative models have a better choice with them.
For the inference, we are building innovative inference engines. After the acquisition, Xilinx and AMD teams are jointly working to put inference capability into virtually every chip we design—all the way from client systems for consumer PCs to datacentres for industrial applications because we think inference is required at every point.
Can you throw some light on your India business?
India is critical to us for two reasons. First, from a market perspective, we believe India is a very important datacentre market. When we think about high-growth markets, we believe India’s datacentre market is going to grow substantially, more than some of its peers. We expect the growth rate to be higher here because of various trends, including digitisation. Then there are the geopolitical and demographic realities. We think the India market is poised to grow stronger.
But more importantly, India is a critical region for us because of our workforce in the country. A quarter of the AMDers, over 6,000 of our engineers, are here in India. And these engineers help develop almost every product that we design. Over half of our networking engineers are in India. And networking is an increasingly important part of our datacentre business.
The team that assembles all of our server chips is based in India. Our Server CPUs contain IPs built around the world, but we put them together and we make the chip a reality here in India.
One big trend in datacentre business in India are Edge centres. Is AMD looking at this opportunity?
Absolutely. Our new new line of CPUs, especially for Edge applications, is coming up. Siena processor is specifically designed for Edge and industrial applications. And our partners such as Lenovo, Dell and others are building innovative Edge products around this new processor line.
Big companies like Microsoft, Google, and AWS are making huge investments in datacentre business in India. Do you see India becoming a hub for the global datacentres?
India is very attractive for international companies to invest in because of a favourable business environment. I also think India is also being thoughtful and innovative. For instance, the idea to have data embassies that will function like embassies with a different set of regulatory regimes within these datacentre space is a very innovative idea. I think this move will go a long way towards making India uniquely attractive to companies around the world.
Is AMD planning to tap data embassy opportunity?
It is a new concept and quite candidly, we are trying to understand the concept and its implications. As I mentioned a moment ago, we are very much intrigued by the idea. And I think that it could be a unique differentiator for India because you are going to divorce from regulatory constraints.
One likes to build a data centre at a place that is most efficient for business, has access to good talent pool to run the data centre and to continuously optimise it.
Then, there’s a second deciding factor that is growing in importance across the world. It is around data sovereignty and data privacy. In this context, the idea of data embassies is a powerful one. You can address the regulatory constraints without constraining operational efficiencies. We will continue to look at it further.
What is the difference between a regular data centre and a data embassy? How is it conceptually different?
As I said earlier, it’s a relatively new concept for us as well. I am certainly not the expert and so I don’t want to characterise the differences in detail, because I will probably misspeak.
My general understanding of the proposal is that it will allow adherence to regulatory guidelines of different countries within an India-located data centre. Beyond that, I don’t want to characterise it, because I am not the expert.
What is the contribution of the data centre business to AMD’s overall revenue?
By the end of 2022 (Q4 2022), we were the largest business within AMD constituting just over a quarter of the total revenues of the company.
What is the contribution of your data centre business in India to the overall AMD data centre business?
We do not provide that level of geographic detail. But the contribution of India data centre is significant and it is growing.