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Politics : Formerly About Advanced Micro Devices

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To: Paul Engel who wrote (34105)	7/9/1998 12:14:00 PM
From: Jim McMannis	Read Replies (4) of 1570825

Paul, 3.2 to 3.7 million chips this quarter may be conservative. This has to be a first for Jerry. For illustrations sake let's say...3.6 million. Divide this by 90 days in the quarter. (The FAB runs 7 days a week) and you get 40,000 chips a day. That appears to be about the average output for the last few weeks. BUT yields are slowly increasing and just recently some daily output may have been double that amount. Nudge, Nudge. For AMD to make 5 million shipable chips next quarter this takes and output of 55,555.00/day. This seems well within the realm of possiblity from the information I have. This doesn't even include IBM coming online. AMD likely lost money on .35u but made money on the .25u chips. I estimate that 1.5 million K6s sold in qtr 2 were .35u. Some were likely dumped near the end of quarter at reduced prices thus lowering even more the ASP of the K6s overall. Now, AMD is completely on .25u. The vast majority of these chips are K6-2s where the ASP is higher. In the secound qtr the mix was probably 3.5 to 1 K6s to K6-2. Expect a reverse of that this quarter...SO despite dropping CPU prices in general...one might expect the ASP for the K6 complex to actually rise. That coupled with better yields and cheaper die cost of .25u one would expect good profitability for the K6 complex going forward. Now, the bad news...aka "OTHER". Unless Asia turns around, which it may be starting to do but it's too early to tell, "OTHER" will likely counteract the profits of the K6 complex...So when Jerry hedges about breaking even in the third quarter I can see where he's coming from. Coming off a -.45 quarter, breaking even, would be a major victory. As Kash has suggested, the whole chip industry is in poor shape due to lessened demand and a glut that's about to get worse. Greater demand going into the second half and some recovery in Asia would go a long way from the macro point of view. Jim

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