More on a response to your post:
>>The profit in a PC is really split between these two pieces of silicon, the processor and memory: If you take away the overheads of a monitor and the minor bits and pieces (things that are cheap: mouse, keyboard, case, PSU, video card, sound card), then it really is simply a profit split between Intel and the memory makers. This is cyclic: at the moment Intel have the lion's share of the profit, and in 1995 the memory makers had the share. In 2000 the memory makers look as if they will be ahead again, hence Intel's interest in LG.<<
Certainly DRAM as a commodity is subject to rather extreme "boom and bust" cycles. The current lack of profits in the DRAM business are simple to explain and subject to precisely the same phenomenon as the current lack of profits in the oil industry -- too much supply and not enough demand. I take it that you are positing that there will be a much greater demand (or much lower supply, or both) in the year 2000 for DRAM -- I'd love to get you to lay out precisely and quantitatively your reasoning and compare that with the SIA.
In any case, you seem to be ignoring the concept of intellectual property. Intel has some, the DRAM vendors at the moment have comparatively little, there is little differentation for DRAM, etc. Your ignoring this may come about because you are such a "memory expert" -- after all, whatever money people can make from DRAM over the years have been in the realm of process engineering -- relatively little design engineering has helped (see Micron back when it was so successful).
Let me take a theoretical, Machiavellan, viewpoint on Intel's interest in LG. Intel badly wants Rambus to succeed. Why? Well, one above-board reason is that they badly need 10X or more faster memory such that their faster processors can shine. A not so obvious reason is that Rambus currently plans to charge 4% royalties on microprocessor vendors (e.g., AMD, National, IDT, etc.). Because Intel has up-front agreements with Rambus, it has decreased its competitors margins by at least 4% in one fell stroke if Rambus is universally adopted. Leveraging an equity investment into increased Rambus committment might make a great deal of sense to Intel.
Of course, this is just theory. Intel could be buying LG equity for the same reason most U.S. companies are currently trying to shop in SEA -- there are just some great deals over there. |
