Stockman,
Let me enlighten you a little bit on AMD's Flash arrangement with Fujitsu. They have jointly built a $1.4B Flash fab together in Aizu-Wakamatsu Japan. They have territorial agreements on where they can sell Flash chips. For AMD, they can sell Flash in the US, Europe, South America and Southeast Asia. For Fujitsu, they can sell into Europe, Japan, Asia and Southeast Asia. Until recently, AMD had exclusive rights to sell into Europe, but a law prohibits exclusivity beyond a 12 month period.
So I don't think AMD will be negatively impacted by crash of the Asian currency market. In fact, this will boost AMD profitability since the dollar is stronger against the yen. And with a fab in Japan, that makes AMD's buying power much better. Simply stated, AMD's Cost on the Flash devices is going down as the Dollar is going up.
As far as profitability goes, AMD had $596M in sales in Q3 and lost $30M. That means the break-even point is somewhere around $625M - $630M. A fab is pretty much a fixed cost. If they lost $30M while shipping 1 million processors, why do you think they'll break even if they ship 2 million processors? Where's the logic in your statement? |
