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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (86561)	1/11/2000 3:49:00 PM
From: Bill Jackson	Respond to of 1572711

John, >>>Intel has always been relentless in their price cuts<<<, Only when they had the ability to cut where it would hurt AMD and not them. IE cross subsidization. >>>1. Determining prices based on the mix that is sold, to maintain a relatively steady GM percentage. 2. Price to keep the competition, with presumably lower GM's, unbalanced and nearly unprofitable.<<<<< They are in danger of losing this ability(in part) as they will be unable to do it without impacting their own profits severely. >>>>On the first point, Intel's manufacturing costs are going down with the transition to .18, I would guess that that will allow them to be more aggressive.<<<<<< AMD is in the same boat. It is a yield battle. Intel has more foundries and thus as they go to .18 and lower they run a higher risk of redundant operations as AMD gets share. If they cut the price so low that AMD is denied share then profits are very badly hiy. Remember the top tier makers will actively give share to AMD even if Intel is cheaper because they know what will happen if AMD is blown away....costs will double. <<<On the second point, IF they can't retake the speed lead, I would guess that they will take the GM hit until they can. Look at the balance sheets, Intel can make money at the same price point that AMD loses money, therein lies the power. The low cost producer controls the marketplace.>>> AMD has the ability to compete with Intel on most parts. As soon as they have a plastic package and full speed cache on die there will be no isolated areas. Remebre that Flash will sustain AMD for the next two years no matter what Intel does. >>>>On another point that I haven't noticed discussed on the AMD thread (I don't read it every day so I might have o be honest,...... I think that is part of the reason Gateway is not so happy with Intel.>>>>>>> This is a powerful argument. there are people within Intel who see a natural progression to total vertical integration on the part of Intel, to the point where they make a box brand and then kick the top tier to death with their internal costs versus what they sell at. AMD is quite the fly in this ointment, and Intel knows it, however it would be unacceptable on trust grounds for Intel to take this to that conclusion, so I suspect they will sell to Dell etc. Those with more fear are the mobo and Chipset makers as Intel can go vertical on them, and that is another reason why they are all jumping on the AMD bandwagon at this time. Bill