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

To: Sarmad Y. Hermiz who wrote (201270)	6/9/2006 12:15:19 AM
From: combjelly	Read Replies (1) \| Respond to of 275872

It isn't just about cost efficiencies at a particular moment in time. It also is about a $3 billion fab becoming a turnip after a few years unless it can be upgraded. This is a crucial difference between a ramping fab and a ramped fab.

To: Sarmad Y. Hermiz who wrote (201270)	6/9/2006 12:47:12 AM
From: hammerfall_prophet	Read Replies (1) \| Respond to of 275872

>You know where I'm going with this. Is it reasonable to say that AMD will not get the cost savings from 300mm during this year ? or is there some other factor that allows AMD's fab 36 running at avg 50% for a year to be a great asset, whereas Intel's fab xx running at 50% for a year to be a disaster ? The answer is pretty simple: While a fab is ramping up, not all the equipment is in place. Consider operational costs: The land, the building, workers' salaries, etceteras are spit in the bucket compared to the typical 2 billion + in equipment, a capital investment whose equivalent rate of return may run up to 100 million a year. Slowing down an already ramped fab could therefore cost 50 million in cost of tied up capital.

To: Sarmad Y. Hermiz who wrote (201270)	6/9/2006 1:27:15 AM
From: THE WATSONYOUTH	Respond to of 275872

So back to the earlier statement. If a full fab running 24/7 is taken down to 50% for a year ? that's a disaster, right ? Intel has three 65nm 300mm plants currently in production. What percentage of that capacity is currently being utilized in your estimation? Would this also be a disaster in your opinion? How big a disaster relative to the AMD case? THE WATSONYOUTH

To: Sarmad Y. Hermiz who wrote (201270)	6/9/2006 1:36:12 AM
From: Petz	Read Replies (1) \| Respond to of 275872

Sarmad, re: Is it reasonable to say that AMD will not get the cost savings from 300mm during this year ? No, AMD said that total decpreciation would start decreasing after mid-year. This is because depreciation for Fab 30 is dropping faster than depreciation for Fab 36 is rising. This is a win-win situation, with output rising and depreciation falling. End of 2006 is the "sweet spot" of the new fab cost/benefit cycle. After that, expense of converting Fab 30 to Fab 38 will start just as Fab 36 reaches its full initial capacity. Petz