Formerly About Advanced Micro Devices Message Board

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Politics : Formerly About Advanced Micro Devices

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To: Process Boy who wrote (71048)	9/4/1999 8:28:00 PM
From: Dan3	Read Replies (2) of 1575354

Re: They're shipping every thing they make at the highest speed grade they can generate... No, it may be counter intuitive, but it is absolutely not the case that they would necessarily maximize income by shipping all processors at the highest speed. Maximizing profitability through market segmentation is a fine and complex art. The slope of the demand curve for CPUs is quite steep. If AMD marketed only 600 and 650 Athlons and were producing equal quantities of each, then in order to get sell through at the highest speed grade they would have to reduce that price to whatever the 50th percentile customer was willing to pay. This is why Intel has long shipped downrated chips. If all of your product is at one speed grade, you must price it low enough to capture the buyer who is willing to pay only a low price. If you were to do that, you would forego the profits that could have come from buyers who are willing to pay more for better performance. This is why you only want a small percentage of chips at the highest speed and many speed grades. Then you capture most of what buyers are willing to pay and don't forego profits. Dan

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