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Technology Stocks : Intel Corporation (INTC)
INTC 37.83-4.3%Dec 12 3:59 PM EST
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To: Paul Engel who wrote (128138)2/23/2001 12:01:30 AM
From: Dan3  Read Replies (3) of 186894
 
Re: AMD will "enjoy" Intel's added capacity when the economy - and demand - pick up.

With Clawhammer now slated to be 90mm2, Dresden should be good for more than 10 million CPUs per quarter. Austin should be able to produce another 5 million or so. VIA will be producing 5 million or more processors as well. So we have the potential for 20 million non-Intel CPUs going into a 40 to 45 million CPU market. Intel already has the capacity (and is paying to depreciate the capacity) for 50 million CPUs. It's hard to see what affect building new FABs can have for Intel other than to render useless 10 billion dollars worth of Intel plant.

There is an enormous quantity of new, high quality foundry capacity coming on line in Taiwan for low margin commodity chips. There appears to be a lack of imagination and flexibility on the part of Intel management. When they weren't being pushed, and FABs cost "only" a billion dollars, it made sense to build only new FABs and shutter or commoditize existing FABs. But Intel is junking $2 Billion FABs and replacing them with $4 Billion dollar FABs while AMD spends a few hundred million to upgrade their existing plant - and the result is a 9 layer .13 copper process on SOI for AMD while Intel trails with a 7 layer .13 copper process.

At the rate it is going, in 2 years Intel will have exhausted a cash reserve built up over decades. Meanwhile AMD is increasing its cash reserve at the same time it is gaining market share. Investing heavily in advanced plant can be a great strategy in this business, but investing wastefully is never a good strategy in any business.

Dan
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