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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 214.18-0.5%Dec 31 3:59 PM EST
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To: wbmw who wrote (247844)2/15/2008 9:32:47 AM
From: fastpathguruRead Replies (1) of 275872
 
In the absence of AMD, if Intel wanted a serious net positive effect on their ASPs, they would only accomplish this by raising prices across their product line, which would diminish demand due to pricing elasticity.

This is a fatal flaw in your argument.

Without AMD, Intel would suddenly have to satisfy 100% of global demand, rather than their current ~80%. They get an automatic 25% boost to demand before a single price adjustment is made.

Your whole price elasticity argument is bogus. It is a tool used to predict how demand (or supply) reacts to price changes, <a>assuming no other fundamental changes in the market.

The exit of AMD would result instantaneously higher prices from Intel for TWO fundamental reasons:

A) Global supply instantaneously decreases by 20% with the loss of AMD's production capacity. I.e. the resource becomes more scarce.

B) Intel's demand instantaneously increases by 25% as global demand transfers 100% to Intel.

Could Intel even supply an extra 25% overnight? I doubt it. They'd have to raise prices just to cull the windfall demand they couldn't meet.

And that's just the immediate impact. From there, Intel would have full control over supply and could manipulate prices at its whim. I.e. expect expensive capacity expansion to slow to a crawl, further promoting scarcity while profits soar and the consumer gets screwed harder and harder.

But don't worry, you already have your PC. Pray it lasts a long, long time because you won't be upgrading anytime soon.

fpg
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