Albert,
re: Yes, variable cost is down but fixed cost is through the roof. Think.....
I'm thinking.
Yes, Intel had to invest in new equipment. On the other hand, that will save them money in building new fabs, to handle (a presumed) expanding market. So is expanding the capacity of existing fabs, v. building new fabs (buildings) with new (and outdated) equipment really increasing fixed costs? Coupled with the material cost savings, it certainly seems like a good business decision to me. You've got to remember the industry is in constant transition, a still photo doesn't really tell the story.
And Intel is running around 50% gross margins, while AMD seems to have close to negative gross margins. Lots of different products fit into that on both sides, but you have to figure Intel knows how to manage it's costs a little better than AMD.
Then you've got Intel producing $308K revenue per employee v. AMD's $264K. More efficient.
You can always make an argument for standing still, it looks good on paper, because you can always stretch your resources for a brief period of time. But the market is a moving target, and with the time it takes to build capacity, you have to lead it to hit it. Like skeet shooting.
John |
