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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 214.990.0%Dec 26 9:30 AM EST
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To: AK2004 who wrote (5284)8/16/2000 5:27:43 PM
From: pgerassiRead Replies (1) of 275872
 
Dear Albert:

Re: downbinning

Downbinning is the selling of a processor below its true speed bin. This occurs due to a few reasons. The first is the downbinning of Celeron IIs, C2, for marketing purposes. This is to expand a natural performance gap to an artificial size to generate product line differentiation. They believe that Intel makes more money by reducing the speed of high speed capable Celerons so that they will not outperform lower speed binned Coppermines that sell for a higher price than by letting the prices be set naturally. This promotes that the P3E CPU is better than a C2 CPU. The debate whether this really generates higher revenue and profits is still ongoing.

The second reason is much more forced by your customers. You were contracted to supply x CPUs at a certain speed bin every so often say 1000 700 MHz Tbirds every week for the next six months at the 80% of the current ASP. Now you are in the next week and you go to the 700 MHz speed bin and there is only 100 Tbirds there. But there are 200 Tbirds in the 750 bin, 400 Tbirds in the 800 bin, and 800 Tbirds in the 850 bin. You take the 100 from 700, 200 from 750, 400 from 800, 300 from 850 and mark (now set the multiplier) them at 700 and ship them to your customer. You do this because there is less warranty returns on those higher binned CPUs than, if they were sold marked at the higher bins. This usually happens when you under estimate your speed distribution curve (although it is much better than the reverse) or its rise over time.

The third reason is simple, you do not test them that high. So they fall into the highest bin you do test for. This is probably what is happening for Dresden Tbirds if they are not being inventoried for later launch.

As you can see, there are three major reasons for downbinning. I hope this sets you straight.

Pete
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