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Politics : Formerly About Advanced Micro Devices
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To: Charles R who wrote (86690)1/12/2000 1:22:00 PM
From: Greater Fool  Read Replies (1) of 1574136
 
>>tell us a little about your interest

Well, I've been a longtime observer, and at one point made a terrific amount of money (for my dinky portfolio, at least) but then lost it again. Overall I made a few bucks but at great risk and at the cost of an ulcer or two.

I believe AMD would be a better -- more valuable -- company today had it walked away from microprocessors at the end of the 486.

I find it an interesting case study -- a perennial lure of high margins, but the risks are huge and the economics don't favor the new entrant.

The demand curve for PCs is relatively steep -- witness that PC volume didn't rise to twice when the average price dropped to half. As the microprocessor is a minority component of the PC's costs, lowering microprocessor prices won't stimulate overall demand volume much. So AMD can only sell microprocessors by taking market share away from others. This would work just fine, except that manufacturing semiconductors is dominated by fixed costs, so Intel's and AMD's supplies are quite unaffected by price. Hence AMD's entry into the market will drive the microprocessor prices down fast.

For a hindsight look, consider that the K6 was introduced at about the same time that DRAM prices, hard drive prices, and video card prices all fell. This did help stimulate overall PC demand and so helped K6 enter the market. PC prices have now stabilized, more or less, so what's going to absorb the new production from Fab 30?
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