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

To: Tenchusatsu who wrote (219892)	12/10/2006 10:33:56 AM
From: economaniack	Respond to of 275872

I think I covered most of these points in my other post. Barriers to entry may lead to a sustained monopoly, even if it is not natural in the sense that one firm has a substantially lower cost at market output than two. Suppose a firm must invest $4 billion in nonrecoverable costs (say building a fab and developing a product) in order to produce any product (say CPUs). The high capital costs constitute a substantial barrier to entry, perhaps even an insurmountable one if it is hard to gain market share so that such a firm would have difficulty selling all of the output from such an efficiently scaled facility. Nonetheless a company which went ahead and made the investment could achieve approximate parity in average cost, compared to the established firm ( I will expand on just what I mean by that in a post to kpf). I picked the 30% because that is AMD's target, and they seem to be in the high 20s and don't want to suggest I am being precise with the numbers I'm throwing around. The fact is that analyzing AMD and Intel financials over the last 10 years does not (to my knowledge) support an argument that Intel's production costs are so much lower than AMD's that it drives industry structure. In fact given presumed ASPs and reported gross margins, it appears that their respective average costs are about the same to a first order approximation. By the hardware analogue to Linux and Firefox, I meant only that AMD is the 30% of the market to the dominant player, not that the cost structures were identical, indeed my entire argument is that they are not. e