Re: Elmer pointed out one wrong assumption. I'll go ahead and point out another.
When you're dealing with companies that treat their investors as spies, and refuse to tell them anything about the actual operations of the business, what you need to do is follow the money.
I'd estimate that intel's ASPs last quarter were between 80% and 100% higher than AMD's. That makes Intel's CPU market a rather juicy target for AMD's lower cost production facilities. I put Intel's CPU ASPs at about $170. Here's how I came up with that number: Intel had about $6.8 Billion in revenue, their sales from flash, chipsets, motherboards, and networking were about $1.8 Billion. Figure $200 million from everything else and CPU revenues were $4.8 Billion. If they sold 28 million CPUs, that's $171 dollars, each.
For Intel, with its once high revenue per chip, costs didn't used to matter, but Intel is having to cut its mobile processor prices by 50% this month in order to maintain market share against AMD's new mobile chips.
Intel has said it will mark down prices of mobile CPUs across the board by more than 50%, effective on May 26. Depending on the speed of the processors, the price difference could range from $70 for P4-M 1.5GHZ processors to $289 for P4-M 1.8GHz processors.
digitimes.com.
Meanwhile more Intel buyers seem to be satisfied with P4 1.7GHZ at $129, and don't see the need to spend $524 for a 2.4.
AMD supplies 20% of the CPU market and about 15% of the flash market and has total costs of $900 million per year.
Intel supplies 80% of the CPU market and about 25% of the flash market with costs of $5,400 million per year.
Intel also makes and sells chipsets. Last year, when VIA and Intel each held about 40% of the chipset market, VIA's quarterly revenue averaged about 200 million, and 80% of their sales are chipsets.
So Intel's costs for chipsets (for which it doesn't have to pay a "foundry profit") according to Elmer, must be less than $160 million out of $5,400 million.
Both Intel and AMD sell flash. In 2001, AMD made $18 million selling $1,133 million worth of flash. AMD, by definition and by the design of the FASL agreement buys flash at cost. Much of that cost is for capex, but last year AMD and Fujitsu each paid in an additional $122 million. So, quarterly costs for supplying 15% of the flash market, including capex costs, were $309 million. Even if you double that figure for Intel, it shouldn't account for more than $618 million of their $5,400 million in quarterly costs including capex.
So, after figuring in flash and chipsets, AMD's remaining costs were about $600 million, and Intel's remaining costs were about $4,620 million. By the way, AMD's "other" category was $50 million this past quarter, IIRC, so their network and chipset business may be picking up - but I'll ignore that for now.
Intel also sells motherboards, so what are its costs there? Asus has sales of about $500 million per quarter, Asus produces 300K Notebook PCs, 4.5 million Motherboards, and optical devices like DVD readers and CDRW each quarter. I'll guess they make one DVD or CD units for each motherboard (the CD and DVD units that go into all those Intel motherboard systems have to come from somewhere). If the notebook PCs cost Asus $600 each to make, then a motherboard costs about $40 to make. If Intel sold half of the boards for Intel PCs, that's about 15 million boards in a quarter, or $600 million.
So, take out chipsets, flash, and motherboards, and Intel's costs are $4,120.
Intel has become a significant player in the network business, what are its costs there? 3com had quarterly costs of $307 last quarter. Intel's networking operation is probably about the same size, but let's call it $350 million in costs.
So Intel's CPU costs were about $3,770.
We took out Intel's networking and chipset costs, so we should remove AMD's "other" costs of about $50 million (which are mostly for their much smaller network and chipset businesses) so AMD's costs for CPUs is about $540 million.
It costs Intel $3,770 million to supply 80% of the market.
It costs AMD $540 million to supply 20% of the market.
It costs Intel nearly twice as much to design, build, and market a CPU as it does AMD.
Intel is having to slash mobile CPU prices because of competition from AMD. Intel is facing mhz fatigue in the desktop market. Intel is facing steadily increasing competition from AMD in the server market.
As long as Intel's marketing can continue to sell what is basically the same part for close to twice the price, Intel can make money, but that game seems to be wearing a bit thin, lately. |
