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Technology Stocks : DELL Bear Thread -- Ignore unavailable to you. Want to Upgrade?

To: divvie who wrote (1989)	9/30/1998 4:27:00 AM
From: Bilow	Read Replies (1) \| Respond to of 2578

Hi divvie; Thanks for responding to my post. You wrote: INTC were forced into doing this, not because falling component prices made it expedient to do so (as you have argued in the past)... For the life of me, I can't remember arguing that way. If I did, my logic was incorrect, please post a link to it, and I'll correct it. In fact, the cheaper (in terms of the total costs, which includes assembly and stocking costs) a component becomes, the less likely it is to be sucked into the core processor, all other things being equal. In order to be clear, I'll repeat my arguments on the advance of integration, and its consequence to box makers here, using the example of the L2 cache: (1) The L2 cache being necessary for performance reasons, it must be included either on chip or off chip. So a question is where does it go? (2) The amount of space required by a given processor (relative to a "full" chip) decreases as integration technology advances. In other words, at one time it was impossible to put an L2 cache on the same silicon as even the smallest processor. Then, with the progress of technology, it becomes possible to do so. (3) The L2 cache is more effective on chip than off due to the elimination of the propagation delay and pin count limitations of the I/O pins. Consequently, it becomes important to put the L2 on chip, when integration levels allow it. (4) Since the smaller processors have more available room, the L2 is added to their dies first. (5) When integration levels improve, the L2 is added to the higher end processors. Thus the integration wave moves up through the product line, from low end to high end. Now lets take a look at some consequences of adding the L2 to the processor. I realize that this is a small change, but the nature of this change is identical to the nature of the changes that will (in the fullness of time) bring the mother board down to a single chip. (A) There once was a time when it was possible for the user to choose different sizes for his L2 cache. That time is now gone, except, as before, the user can choose different processor chips. The trend towards commoditization continues, in that the products are now going to be a little more standard. (B) The reduction in mother board parts counts reduces the amount of value added by the box maker. It is inarguable that the amount of labor required to build a box just went down. (C) The ability of box makers to distinguish their products from each other's just decreased slightly. No longer can a company use a cheaper, but perhaps equally effective, SRAM than usual. No longer can a company use a more reliable SRAM than the others. Instead, everybody builds the same thing. This is a part of the trend towards true commoditization. (D) The amount of engineering required to design a new box by the box makers just decreased slightly. (This is more significant to those of us who make our living designing than it does to investors.) (E) A little bit more of the technology of designing a personal computer just got absorbed by the companies that design the processor, and given up by the box makers. (F) Another company just got eliminated from the number of companies required to assemble a computer. This is gets back to our recent discussion on this thread of vertical integration. All the box makers just got a little more vertically integrated. In fact, some of the (horizontally integrated) SRAM makers just went obsolete. This shows one of the benefits of vertical integration (avoiding the risk of going completely obsolete due to technological change), as well as the continued advance of vertical integration. -- Carl