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To: Sarmad Y. Hermiz who wrote (200827)	6/7/2006 10:05:50 AM
From: Cravey	Read Replies (3) \| Respond to of 275872

I think you are confusing price with cost. As you point out, cost is much less than price in the past to generate those gross margins. A 40% reduction in cost does not equal a 40% reduction in price. In this scenario, margins go down. Intel getting hammered this morning. Not sure what is really new out there.

To: Sarmad Y. Hermiz who wrote (200827)	6/7/2006 10:21:48 AM
From: eracer	Read Replies (1) \| Respond to of 275872

Re: There was an Intel paper a year or two ago comparing production cost in 200mm fabs and 300 mm fabs. It claimed that when a product was moved from a 90nm process in a 200mm fab to 65 nm process in a 300mm fab, the expected cost savings would be 40%. I think that is the exact amount of the price reduction that Intel made in April. So if before the price cut P4's (in their hey day -- y05 q4!) were getting 60% gross margin, then woody and siblings will also fetch 60% once the fabs are at full util. You still don't get it. It's not the size of your fabs that counts, it's what you do with them. You constantly talk about large production capacity and small, cheap cores being Intel's salvation. The specs (performance, power consumption, etc.) of the cores produced is far more important. Intel can NEVER return to its glory days without offering much better products than they do now. So what if Intel cuts production costs by 40%? If a die was $15 and now costs $9 and Intel sells 45 million CPUs in a quarter then Intel "only" saves $270 million. But in the 90-nm days almost every CPU had a single core. With chips like the Pentium D Intel needs two $9 cores ($18 total) versus one $15 core. The only reason to hold Intel stock now is on the belief that the competitive advantage NGA products will eventually stop the market share bleeding and lift ASPs. It may take a year or more before those advantages actually turn into a substantial economic improvement for Intel and a rebound in share price.

To: Sarmad Y. Hermiz who wrote (200827)	6/7/2006 10:54:45 AM
From: AK2004	Read Replies (1) \| Respond to of 275872

I think that is 40% reduction of variable cost which is smaller part of overall cost for a single chip. Overall cost reduction probably not more than 10% that is if we are lucky -AK

To: Sarmad Y. Hermiz who wrote (200827)	6/7/2006 12:04:28 PM
From: Joe NYC	Read Replies (1) \| Respond to of 275872

Sarmad, There was an Intel paper a year or two ago comparing production cost in 200mm fabs and 300 mm fabs. It claimed that when a product was moved from a 90nm process in a 200mm fab to 65 nm process in a 300mm fab, the expected cost savings would be 40%. I think that is the exact amount of the price reduction that Intel made in April. LOL. Does one have to have a lobotomy to become an Intel shareholder? I guess it has to be lobotomy plus brainwashing. I know this will not penetrate, but let me try anyway: Suppose, that silicon cost does, hypothetically go down 40%. So the $20 dollar of the silicon cost goes down to $12, for savings of $8. Intel cuts prices by 40% from $150 to $90, for loss of revenue of $60. I doubt this will ever connect in the brain of an Intel shareholder, but I tried again... For nth time. In the meantime, intel is putting 2 of those dies in the package Pentium D, for silicon cost of $24, and the packaging cost will go up (because of MCM) from $8 to $16, so the cost actually went up from $28 to $40, or $12, while the price went down by $60 for net revenue loss of $72. No wonder Intel guided for HIGHER costs, lower margins, (implicitly for) lower ASPs and of course lower revenues... Joe