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Technology Stocks : Intel Corporation (INTC)
INTC 42.53+5.0%10:19 AM EST
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To: Elmer who wrote (123927)1/2/2001 11:01:51 AM
From: Hightechhooper  Read Replies (2) of 186894
 
Elmer,

I think the INTC plan is to take advantage of demand weakness to accelerate the move to P4. For example, lets assume that INTC has capacity to make 30 million P3 size MPU's per quarter (or about 15 million P4's at .18). Up until now the demand was actually higher than that so moving quickly to P4 could not happen until more capacity was brought online.

Suddenly, however, demand is down to 25 million units or so per quarter. So INTC has two choices. Either produce 25 million P3 size MPU's and have 5 Million units of unused capacity or run 20 million units of P3 and 5 million units of P4. The second option will fully utilize the capacity of the .18 fabs while meeting the lower unit demand of 25 million units. It will also accelerate the move to P4 so when the .13 capacity becomes available the shift to P4 will happen much quicker.

Given the high proportion of fixed costs in the fab I think INTC will choose to utilize the excess capacity because it comes at very little marginal cost. This will help to accelerate the transition with no P&L implications at .18 (maybe even a benefit, depending on how INTC would have to price P4 to move that many units).

Anyway, this is what I HOPE they will do. We'll know for sure in a couple of weeks.

talk to ya later,

HT
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