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

To: dale_laroy who wrote (57436)	10/6/2001 3:26:19 PM
From: wanna_bmw	Read Replies (1) \| Respond to of 275872

Dale, in that case, I do not agree. For one, I think you are underestimating demand for CPUs, and for another, I think you underestimate how strong the Pentium 4 brand will become once they are ubiquitous in the market with more chipset and memory support. You are saying that you expect the lowest speed grade Northwood to cost less than the current lowest speed grade Willamette, even though Willamette will coexist at the time. The current lowest speed grade Willamette at 1.3GHz is probably selling for $100 or less in order to clear out whatever few are left in inventory. The 1.5GHz Willamette, which is the lowest speed grade that Intel is still producing, is probably selling for $120. Let's fast-forward to the second half of next year when (presumably) Northwood will at least make it 2.5GHz, and at least accounts for 50% of the Pentium 4 market. Willamette will probably still exist in 1.8GHz to 2.0GHz speed grades. According to your logic, the lowest speed grade Northwood at 2.0GHz will cost less than $120, and the Willamette speed grades will of course have to sell for less than this. I think you are off in this estimation, since any recovery in the market will probably improve artificially lower ASPs right now, and that has a good chance of happening before the end of 2002. Second, AMD will also be improving their ASPs, since they must in order to survive. They are in for a $100 million loss this quarter, not including one time restructuring charges. If flash does not improve dramatically, if market share does not improve dramatically, if market demand doesn't improve dramatically, then AMD has no choice but to raise ASPs, which will also allow Intel to raise theirs. Third, the price of the CPU is becoming less of an issue now, since current CPU pricing allows the chips to make it into current market segmentation models. In other words, if a 2.0GHz Northwood is to be put into a $1200 system, it won't make a huge difference if the cost is $170 as opposed to $120. The extra $50 starts becoming negligible at higher price points. OEMs have shown that they are perfectly willing to go with a video adapter, hard drive, or memory configuration that's $50 less, than a CPU that's $50 less. Thus, I don't see ASPs falling much more than they are now. Of course, we shall soon see what happens, but if you are correct, and Intel is forced to sell a mainstream product like Northwood at below $120, what will AMD have to sell their products for? By the time Intel's 2GHz chips reach the low end, AMD will just be starting to launch 2GHz chips, and requiring .13u SOI to get there. wanna_bmw