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

To: Sarmad Y. Hermiz who wrote (201249)	6/8/2006 11:22:52 PM
From: combjelly	Read Replies (1) \| Respond to of 275872

"How would one figure out whether AMD Fab 36 meets the criteria of "partially full" and its attendant disaster ?" It is still being ramped, as you know. The clock has just started to tick. The problem with a fab is that it hs a definite lifespan. Once it is ramped, companies are loathed to reduce wafer starts. Look at the DRAM industry for the classic case. It goes through cycles of feast and famine. But during times of famine, they still run 24/7, shoving through as many wafers as possible. Because the clock is ticking, as long as they can sell for more than direct costs, they are ahead of the game, even if it results in a net loss. It is only when the price drops below actual direct costs that manufacturers slow down production and reducing the glut on the market. Intel has tried to insulate themselves from this by adding flash and other products. Their embedded line was good because those products could be manufactured on fully amortized fabs that would otherwise be shut down. Ditto with chipsets and other products. The problem is that the non-CPU products for a variety of reasons never made much money. Now that Intel is chunking them overboard, they are exposing themselves more and more to the cyclical aspects of the market. I've watched this industry for 30 years. It has a definite cyclical nature to it. Now the cycle is moderated in CPUs because the barrier to entry is high and there are essentially two competitors with limited interchangeability. But AMD is adding capacity at a time when Intel has a lot of capacity and a product line that has certain deficiencies with respect to their competition. So they are glutting their part of the market. However, they can't afford to slow production.