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To: kash johal who wrote (37778)	4/29/2001 12:52:44 PM
From: fyodor_	Read Replies (1) \| Respond to of 275872

Kash: I think that you and the thread are under a severe misconception on PIV costs. The die cost difference is only $20-30. So intel will make tons of money on $200-250 PIV's compared to $150 PIII's. The issue is not so straight-forward. Intel can make 1 P4 instead of 2 PIIIs: (using your numbers, roughly) Profit on 1 P4 ~ $250 - $50 = $200 Profit on 2 PIIIs ~ $300 - $60 = $240 Yeah, these numbers are not that good, but it does get the message across. Intel's key will be to try and maintian PIII vs perhaps reduce celeron. Exactly. However, you can strike the "perhaps". Intel won't be increasing total wafers out this Q, so every P4 produced "steals" capacity from PIII or Celeron. If Intel can keep PIII unit shipments steady (while increasing P4), they are going to make a bundle of money. However, if PIII shipments fall by 2x the rise in P4 shipments (which I consider more likely), it's going to hurt. -fyo

To: kash johal who wrote (37778)	4/29/2001 3:59:08 PM
From: Dan3	Respond to of 275872

Re: I think that you and the thread are under a severe misconception on PIV costs. If a P3 costs $15 to produce, then a P4 2.25 times as big costs $45 to $75 to produce. Far more important though, is that in some ways, the accounting for semis is more complex than the the engineering. AMD is maintaining or improving its market position with capex of about .5 Billion per year. Intel, with 4 to 5 times the sales is being forced to spend 10 to 15 times as much on capex to keep from losing additional market share. If the P4 core weren't such a nightmare to produce, Intel wouldn't have to (effectively) write off approximately $2.5 Billion "extra" in plant this year. Allocate the $2.5 Billion over 25 million P4 processors and you get a cost of $100 per chip. If the volume sold is smaller, the per chip cost goes up. Intel is continuing to provide subsidies (check out best buy's ad this week, where a mail in rebate of $250 is being offered on any P4 system, $100 on non-P4 systems. Intel is certainly providing some of that money. A guess is that, even as the RDRAM rebate is ending, $50 to $75 per chip continues to be spent on moderating the penalty for P4's exorbitant platform costs. So it is costing Intel $195 to $250 to deliver each P4 to an enduser. If you want to assume that plant doesn't need to be built or depreciated, and that chip specific marketing costs aren't costs, then feel free to do so. But I think that these costs are very real and should be taken into consideration. The transition to P4 is forcing Intel to replace its plant well ahead of schedule, and at the worst possible point in the semi cycle (when margins will be low in the critical first year of that capital's use). IMHO, These costs should be taken into consideration. Regards, Dan

To: kash johal who wrote (37778)	4/30/2001 3:26:02 PM
From: AK2004	Read Replies (1) \| Respond to of 275872

Kash I am really surprised at your logic. Intel's profit margin comes from average asp - average cost. Intel was able to sell cheap celerons and maintain profit margin due to more expensive pIII. And, as you know, cost itself is not actual cost but rather an artificial number derived from cost of production and depreciation schedules. example: let say intel projects to sell 100 chips and to write off $200 with manufacturing cost of $30 per chip. Let say intel sold 50 chips instead of a 100 then what is the cost per chip? The point is that intel can pretty much define their own cost and GM. Intel can make cost of p4 less than 1/10 of the cost of celeron if they would really want to and then recognize the losses as one time non-recurring losses couple of years later. Regards -Albert