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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (36150)	4/17/2001 8:30:56 PM
From: Petz	Read Replies (1) \| Respond to of 275872

John F, re:[If the market doesn't grow then] "AMD (and it's shareholders) are screwed also, probably more, because the ASP's will drop substantially." Get it through your head, AMD is the low cost producer. Intel, with a $180 ASP for its CPU's and those were mostly cheap-to-make P3's had an operating profit margin of 642/6677 or 9.6%. AMD, with an ASP of less than half of that, will have a larger operating profit margin, despite being more dependent on the worst sector of the semiconductor industry, Flash. This means that AMD's breakeven cost per CPU are less than half of Intel's. If Intel needs $160 per CPU to break even, imagine how much they will need for the P4, which yields less than half as many chips per wafer! Of course, Intel can get more $$$ per CPU because of its brand name, but continuing to get more than double the ASP fo AMD is asking a lot when your market share is dwindling. In a low-demand environment, it is the low cost producer, not the "big name" producer, that will flourish and be the most profitable. Petz

To: Road Walker who wrote (36150)	4/17/2001 10:19:03 PM
From: Joe NYC	Respond to of 275872

John, I a commodity type market, I think 300 mm would be a big plus, in microprocessors, I think it is not as big (but still a plus). .13u is much more important, because it improves performance of products. The profit margins of the highest performance parts is probably an order of magnitude higher than low performance parts in the the x86 CPU market. From competitive standpoint, .13u is huge, 300mm is fairly minor. Intel is betting on a growing marketplace. I think Intel bet that it may be more profitable to have 1 or 2 fabs idle than be short 1 or 2. If the margins are really going to get squeezed, it may turn out not to be a good decision short term. But on the other hand, Intel needs more capacity just to stay even, given the size of P4 vs. P3. And at that point the assumption is that Intel is the low cost producer. I think this is a never ending subject. My take on it is that the fat Intel margins make it seem like Intel's costs are very low. But the margins are fat because the ASPs are high. I calculated recently that Intel is able to charge 75% more for comparable CPU than AMD (the numbers might have changed since). The Intel Inside brand / premium was the difference between profit and loss this quarter. There are many components in what goes into cost (as in low cost producer), but you can roughly divide it to manufacturing costs (which are about the same), R&D (chip / chipset / process technology design) where Intel probably has some advantage, since the costs are spread over more units sold. But Intel's share is falling and AMD's is growing, so the differences are getting smaller. For your point (that Intel is the low cost producer) to be true, Intel would have to close down all of the money losing enterprices, and remain CPU only company, which I don't think is going to happen. (or the non-CPU businesses would have to become as profitable as the CPU business). I suppose AMD has more of a flash problem as a percent of sales. We will find out tomorrow night. Agreed. AMD has not said much about flash since Q4 / beginning of Q1, which was before or about at the time $**t was hitting the fan. Joe