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To: The Phoenix who wrote (21218)	1/26/1999 4:55:00 PM
From: Tony Viola	Respond to of 77397

Gary, >>>Are Intel's competitor's fabrication processes more cost effective or are they willing to live with tighter margins?<<< No, and yes. In fact, on the first question, Intel's competitors AMD and Cyrix's fab processes are less cost effective than Intel's for at least 2 reasons: 1. Economy of scale. Intel buys raw materials, process and test equipment, everything needed to make chips in at least 10X the quantities of the competition, so volume discounts. Also, they are famous for keeping everything utilized to the max as much as possible. Intel's greatest strengths are process and manufacturing engineering. 2. Yields. Although yields are probably the most secretly kept info in the semi industry, it is still well known that Intel's are way above (probably 30 to 40% or more) their competition. Only IBM is comparable. These facts, and the tough price competition in chips, make it easy to understand why AMD and Cyrix rarely make a profit, and never a decent one, in a quarter. They undercut Intel only because they wouldn't sell anything on a one to one basis, Intel's brand name is so strong. Tough business. Tony

To: The Phoenix who wrote (21218)	1/26/1999 7:06:00 PM
From: Dave	Read Replies (2) \| Respond to of 77397

Gary, Remember, you stated that These are changes in paradigm....not bigger, faster or cheaper products of the same technology or delivery methods. And you cited examples of IBM, Dell, Apple, Smith Corona, etc. The sub-1000 computer with (at the beginning non-Intel chips) was a cheaper product of the same technology. I was just merely pointing out an exception to your rule. Remember, Intel (at first) ignored the sub 1000 computer. The first time one saw a sub 1000 computer was when Cyrix introduced the Media GX in March/April of 1997. Then, in 1998, one saw more sub 1000 computers and those computers were not last years or scratch and dent models. Intel, by far, is the lowest cost producer of chips and after they addressed the problem, i.e. the sub 1000 computer, they started to make headway. Tony Viola who is a recent Cisco investor and poster on this thread may introduce a few more facts. dave

To: The Phoenix who wrote (21218)	1/30/1999 8:01:00 AM
From: nihil	Read Replies (1) \| Respond to of 77397

Cost has nothing to do with price in the short-run. A second-rater like AMD cannot establish the superiority of its product (and its right to earn a premium on the Intel price) unless it has the fastest or the best. Intel's objective is always to dominate the high-performance end of the market and earn the huge premium seekers of quality will pay. This generates huge margins, as do Intel's server chips which have no AMD or NSM competition. It costs a bundle to make and sell medium-powered servers - and the various x86 vendors use most of the extra help that Intel can offer. Using NSM or AMD is not an option. Intel has a design lead, because its production technology is the best. When it makes a design jump (like KNI), its improved product-tech often introduced at the same time makes it a killer. Intel is almost unique among tech leaders in driving prices down very rapidly, instead of milking a leading cash cow. This cannibalistic policy crushes the competition's ability to compete. With a growing market Intel is able to introduce new product-tech (using copy exact) around the world, while AMD and NSM struggles to get production up in a single fab. When they have production problems, they lose share; when they introduce costly new technology they lose cashflow. AMD continually has to shave margins simply to sell their stuff. Holdups in new product production makes them sacrifice price simply to sell the old junk. Losses continually stress the trailing companies -- and they seem never to catch up. AMD has never had a split, never paid a dividend, never can effectively reward its engineers with options. And the current odds are it never will. I have always argued that the AMD Board should sell its P&E to whomever will buy it and invest the proceeds in Intel stock. If they had done it 25 years ago its investors would be very rich today. It's not against the law to make money by investing in gorillas in the United States!