Dear Monica, "How can anybody in their right mind use a lame argument that AMD has lower costs than Intel?"
I am not sure which mind is right, yours or mine, but
let's see. I know it might be hard for you with all
the math, but try to follow:
For IAG, Intel reported total sales of $5,768M with
profit $1,802M. Which means that their official cost
to produce 32M processors is about $4B, $3,966M. This
means that the cost per CPU is $124, including
unseparable costs to maintain the business, i.e. R&D
and administration.
( 32M of Intel's CPU are calculated on 8M units from
AMD and the alleged 20% of their unit market share)
Now, AMD does not report the breakdown between CPU
and flash, but even assuming the worst (best?) case
that manufacturing of flash cost them zero, their
total cost per CPU is $916M/8M = $114,5, under equivalent
terms with Intel (+R&D+Mkt).
Now you can say that AMD spends less for R&D and
marketing, but this is the way how they managed to
sustain their business so far, and do not forget that
we assumed that their flash comes for free. Actually, since
AMD does not trumpet flash financial victories, it
would be safe to assume break-even, and subtract $160M
from $916M of total expenses, which brings the cost
per their CPU down to (916-160)/8 = $95.
So, what do you think about costs now?
- Ali |
