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Technology Stocks : Diamond Multimedia -- Ignore unavailable to you. Want to Upgrade?

To: John Coltrane who wrote (3433)	2/27/1998 1:33:00 PM
From: lml	Read Replies (1) \| Respond to of 4679

John: "To what do you precipitate Intel's decision to manufacture and supply chips to OEMs rather than manufacture complete add-in cards themselves?" I'm sure the market pundits have already expressed their opinions on this one. My own take is that with a multimedia, particularly graphic, evolution about to explode into the PC consumer market, INTL sees significant growth in a particular chip design & manufacturing segment. As a company that thrives on growth & mass production, INTL needs & wants to be part of this evolution. IMHO, what we are seeing is Andy Grove implementing his "inflection point" strategy for long term survival. Why not manufacture the add-on cards themselves? This would be a more radical progression for INTL right now. I raised this question earlier; see Message 3444858. INTL competes strictly in the design & manufacture of chips. It does so through volume & pricing. INTL's entry into the graphics chip market segment, IMHO, means several things: 1) the graphics market will become much larger than it is today, otherwise INTL would not be interested in entering this market since the company is a high volume, low cost producer; 2) INTL will dominate this sector & establish de-facto standards as to how these chips co-exist with the CPU, whether on the motherboard or on an add-on; 3) the price for graphic chips will fall as INTL expands its presence in this market segment, driving down profit margins of existing market participants, preventing them from competing in the larger, mainstream market for graphic processors; 4) existing participants such as TDFX will gravitate toward the high-end of this market & compete with INTL to the least extent possible, much as DEC & AMD do today in the CPU market. So, does it make sense, at some point in the future, for INTL to manufacture the add-on card itself? This addresses you 2nd question: "[a]lso, what do you anticipate for DIMD upon Intel's eventual move of the i740 to the motherboard itself." NOTE: Please keep in mind I AM FAR FROM A KNOWLEGEABLE EXPERT IN THIS FIELD; OTHERS ARE MUCH MORE INFORMED THAN I. That said my speculative answer is -- YES & NO. I SPECULATE that at the low-end of this market, where economics more are more valued than overall performance, a chip like the i740 & its successors will be on the motherboard. But as chip design is marketed toward a higher level of performance, where performance, not economics becomes the dominant marketing factor, there will always be a threshold at which design will dictate a separate card for the 3-D or video processor. INTL, competing in this market, will either: 1) require a partnering relationship like it now has established with DIMD; 2) acquire a dominant boardmaker like DIMD; or 3) develop its own add-on board manufacturing facilities. It appears that alternative 1) is already in place. At a later stage, will INTL opt for alternative 2) or 3) is an INTL "inflection point" not yet presented to INTL management, & a question only Andy or one of his successors can answer. But I think that INTL's more recent of acquisition of Chip's & Technologies may shed some light at which path INTL will choose when INTL's arrives at this particular inflection point in its strategic path forward. Its a question to ponder continually, as INTL expands into this market. JMO. JMO.