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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Tenchusatsu who wrote (111062)	9/24/2000 11:36:22 AM
From: Dan3	Read Replies (2) \| Respond to of 186894

Re:You seem like the kind of guy who thinks that if AMD's earnings grow by 40%, Intel's must fall by 40%. Most processors are sold at gross margins of about 50%. But the top 25%, and especially the top 10% of those chips sell at gross margins of 500%, 1000%, and higher. After fully amortizing FAB costs and development costs, the 50% gross margin chips are barely breaking even. It's only the top 10% to 25% of the chips that present an opportunity to make large profits. Until recently, that top quartile of the market has belonged entirely to Intel. Intel will continue to control the large X86 server market, a big chunk of the money making chip market, for somewhere between a few months and indefinitely. But starting early next year they will encounter serious competition in the server market from AMD. The success of that effort by AMD remains to be seen. Intel will very likely be losing some part of the high end business desktop market, and has already lost a substantial part of the profitable retail desktop market. The profitable part of the CPU market isn't really that big. By the middle of next year, when Dresden is pretty much ramped up, AMD will be capable of supplying the entire profitable part of the X86 market. Intel is guaranteed a substantial share of that market through sheer momentum, even if Itanium flounders and P4 ramps slowly or disappoints in performance. And Itanium could do well and P4 may ramp quickly and provide good performance. But I think the probability is high that Intel will be turning over to AMD a significant chunk of its profitable business over the next several quarters. AMD has been ramping up a copper FAB with tools designed for .13 production for several years - they now have a lot of large scale production experience with those tools and that process. AMD needs to continue to shrink feature size on its existing tools and process. Intel has developed a new process for new tools on a new feature size at a bench scale for copper and .13 that it needs to have in volume production pretty much as quickly as the tools can be uncrated next year. Maybe they'll have instant success moving from Aluminum to Copper while bringing up new tools at a smaller feature size. But it's possible there will be a pause or two in that process as glitches are found and need to be smoothed out. I expect a decent chunk of that top 25% of the market will be leaving Intel and arriving at AMD over the next several quarters. Just one person's conclusion, I expect yours is different. Dan