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To: Jdaasoc who wrote (63218)	12/22/2000 10:42:39 AM
From: Dan3	Read Replies (1) \| Respond to of 93625

Re: Again looking at Intel's pricing they must feel they can safely make more money on 1 P4 chip at $267 using 210 mm2 of silicon than overstuffing the channel with 2-3 Celeron or PIII chips utilizing that same 210 mm2 of silicon which would not generate any more revenue since they would only be worth $70-80 ASP The thing to keep in mind, is that as die size goes up, die cost rises faster than die size. Yield is determined by the number of good die that result from each wafer. The current Celeron is 90mm2 and the current P4 is 217mm2. A little over 300 Celerons fit on an 8" wafer, while only about 125 P4s fit on the same wafer. But here's where it gets interesting. Intel is said to have a very good process, yielding over 70%, perhaps getting close to 80% on existing (Celeron/P3) chips. This means there are typically about 60 to 90 defects on a wafer - each defect results in one lost die. With P4's much larger die, there will be more overlap of defects (where a second defect occurs on a chip already lost due to a first one) so the number of die lost will be in the range of 50 to 70. The result is that Intel gets 240 P3s or Celerons from a wafer (they are the same size) but only 55 to 75 P4s. If the direct cost of a Celeron / P3 is $25, then the direct cost of a P4 is $80 to $100. Now add in the $60 Rambus subsidy Intel is including for Q1 and Intel's cost per P4 is around $150. Intel has a strategy of trying to keep its competitor's supply of "oxygen" (capital) low. So they need to make plenty of Celerons and sell them cheap. But they have to make money somewhere. Their quarterly costs are nearly $6 Billion, and the non-X86 parts of Intel must be subsidized since they lose more than a half Billion per quarter, so the Intel Architecture Group must make big profits. So Intel has to keep margins high on all but the least expensive of its processors. A looming factor is the big change in PC infrastructure costs that started happening this week. Integrated motherboards for the Duron / Athlon started showing up at retail (I'm sending this from such a system) and this means that there is a huge change the costs seen by the market for Celerons vs. Durons. Old Distributor Prices $70 Celeron + $75 Motherboard = $145 cost $50 Duron + $125 Motherboard = $175 cost New Distributor Prices $70 Celeron + $75 Motherboard = $145 cost $50 Duron + $75 Motherboard = $125 cost The Duron substantially outperforms celeron, and has been moderately successful at retail even under the old cost structure. Under the new cost structure, celeron will be a lower volume part (even if celeron is given away free - the cost to move to a better performing duron system would only be $50 - a price many are willing to pay), and Intel can't afford to shift too much volume to P3 (which remains the bulk of their line for the rest of the year) or they will impact the corporate desktop market which would bring their ASPs down to the level of AMDs - at which point AMD still makes money, but Intel starts losing $1 to $2 Billion per quarter. Bottom line is, Intel is going to make a less from Celerons and low end P3s this year than they did last year. So that seems to reinforce your suggestion that they use those otherwise nearly valueless wafers for P4s. Trouble is, costs are high for P4, and the mediocre reviews have keep demand depressed, so if they try to move too much product into the market they'll push prices down to near cost on P4 making it less profitable even than Celeron. Athlon continues to put more and more pressure on P3, so it's hard to see just where Intel can go. In Q2 the Rambus subsidy for P4 goes away, and that will help P4 costs enormously, but it won't help demand much. Late Q3 or Q4 Intel's costs will come down if the triple move to .13, copper, and low-K goes off without a hitch. Until then I think they're damned if they do and damned if they don't. Intel has a business model that is based upon $200 ASPs and they are facing a competitor who's business model is based upon $100 ASPs. Intel has to be very, very, very, careful about letting the perceived value of its mid range and high end processors drop. Regards, Dan