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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 203.76

-1.1%

Nov 21 9:30 AM EST

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To: Dan3 who wrote (64892)	12/4/2001 2:48:45 AM
From: ptanner	Read Replies (1) of 275872

Dan3, re: 6M Hammers + 4M Durons = 50% of the market with the costs of 1 FAB Your enthusiasm is nice on a rainy night but I think this one needs a reality check or two. If AMD is currently selling just under 8M processors and this is about 20% of the market how would 10M yield 50% of a total CPU market which should have seen some growth from today? Quarterly sales of 10M would only be about 10/(7.7/0.22)=28.5% of the total market (assumptions: 22% on 3Q01 @ 7.7M CPUs and no growth in total market). Of course, I see that you believe AMD may have far more production potential in the future and perhaps you meant 6 + 9 + 4 = 50% which would be about right but I am having trouble seeing Dresden producing 15M processors even at full build-out and 0.13. And regarding the cost of one fab... with CPUs produced by a foundry don't you think the foundry will be seeking the recovery of its own capital outlay (ie. AMD will be covering the fab outlay) plus make a profit on their investment? I think outsourcing can be useful for AMD to expand its potential market share in units but will do far less with respect to market share in terms of revenue. This could prove beneficial for platform expansion but I think the potential role for foundries will be limited to value processors and even these could face some severe "MHz sells" pressure when (if?) the P4 is extended down into the value space. I also wonder if the foundry production would be competing more with Dresden or Intel production? Maybe the sheer volume of the large foundries will provide them with the experience and incentive to enhance their production capabilities wrt performance processors but I tend to accept the idea that high performance processor design and production work best in close coordination for continuous refinement. The Via processors seem destined to be a footnote at the bottom end of the value space which is pretty lean margins. -PT

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