Intel will have to raise prices
The screw is tightening for Intel. As AMD take more and more market share, Intel will have to raise prices to delay its BK time. The math is simple. AMD is expected to exit 2006 with 40% market share(run rate), leaving Intel at 57%, and VIA at 3%. Right now, low end CPUs are priced below 512MB DRAM.
Under such circumstances, if the CPU price keeps steady, Intel will BK in five quarters.
Therefore, I expect Intel to raise prices to delay it bankruptcy by two quarters to 2Q08.
posted by Sharikou, Ph. D. @ 10/09/2006 04:02:00 PM
42 Comments:
I think anything above 33% for AMD will launch the death spiral for Intel.
Do I hear 33.5, 33.5, going once going twice....SOLD to netrama for 33.5% :)Youz guys are sooo silly. NOW GO SEARCH FOR PORN.
By your logic, wouldn't AMD be the first to go?
AMD is expected to exit 2006 with 40% market share(run rate)
All blather aside, once and for all: please DEFINE, using a SIMPLE FORMULA, the term market share(run rate).
Feel free to use variables, greek letters, differential calculus, whatever makes you happy. But give us all a formula that we can happily calculate MS(RR) ourselves.
Extra credit will be awarded for a sample calculation for a prior quarter or year.
It doesn't matter if Intel is selling low-end CPUs for $30, $50, or $70. My hunch is that they aren't losing money at $30, but they aren't making much of anything either.
Regardless, given the inventory on hand last quarter, any revenue generated from the sale of those processors is better than the cost of writing the inventory down to $0. Look at it this way- assume I am carrying a finished-goods inventory of $2b in CPUs, with a manufacturing cost of $1.3B (~50%GM), and I am looking at writing the lot off. If I can generate $1.3B in sales off that inventory, I'm technically whole on the transaction, certainly better off than dumping them in the garbage, and preventing my competitors from getting those sales (Bonus!). And best of all, since I sell them at or above manufacturing (variable)cost, nobody can say I am illegaly dumping them!
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20060920005231&newsLang=en
92% and up with Woodcrest for workstations.
http://www.toptechnews.com/story.xhtml?story_id=0110014KR4I7
51% in June, 58% in August, a 13.73% gain for Intel.
http://www.xbitlabs.com/news/cpu/display/20060801151424.html
Yes, I realize the title;) AMD down 2.56% in mobile.jrn
By your logic, wouldn't AMD be the first to go?
No. Intel will BK because its cost is 10X of AMDs. Intel has 100K workers, AMD has only 10K. AMD only needs $700 million revenue to stay positive. Intel needs $7 billion.
My hunch is that they aren't losing money at $30, but they aren't making much of anything either.
No. Intel needs to sell CPUs at above $110 to stay in green. It has 100K people to feed. If they sell CPUs at ASP of $30, their revenue will be only $1.5 billion, and they BK in one quarter.
Why is INTEL raising prices has nothing to do with preventing BK.
Sharikou again and again refuses or is so stupid to understand the most basic financials that INTEL is the most profitable semiconductor company and also the most profitable manufacturing entity on earth. Bankruptcy .. I don't think so..
Mr PhD doesn't seem to understand a thing about economics or supply and demand curve. If AMD had the superior product and capacity then there would be no way INTEL can raise prices. In an elastic market raising prices would drop demand and total revenue at INTEL would fall as nothing is more expensive then an empty fab. Incresing profit per chip at the expense of dercreased revenue due to lower volume at higher prices would reduce total revenue. So the PhD is wrong in every assumption about how higher prices would prevent INTEL from going bankrupt. I laugh at your stupid conclusion.
The reason INTEL can raise prices is that they have a superior product and can price it accordingly. Remember when AMD had highe prices till COre2 came along and force them to where AMD value is, at the bottom of the stack.
Sharikou will claim what he means by 40% is you take the trend line from Q1-Q4 and extend it will indicate soon to achieve 40%. By the same extrapolation you would have figured AMD to dissapear in prior years or INTEL/AMD stock would have gone to 60 bucks in a few short quarters. Clearly a PhD couldn't be so stupid but he doesn't really have one.
Sorry Pretender you got it wrong.
Why is INTEL raising prices has nothing to do with preventing BK.
Sharikou again and again refuses or is so stupid to understand the most basic financials that INTEL is the most profitable semiconductor company and also the most profitable manufacturing entity on earth. Bankruptcy .. I don't think so..
Mr PhD doesn't seem to understand a thing about economics or supply and demand curve. If AMD had the superior product and capacity then there would be no way INTEL can raise prices. In an elastic market raising prices would drop demand and total revenue at INTEL would fall as nothing is more expensive then an empty fab. Incresing profit per chip at the expense of dercreased revenue due to lower volume at higher prices would reduce total revenue. So the PhD is wrong in every assumption about how higher prices would prevent INTEL from going bankrupt. I laugh at your stupid conclusion.
The reason INTEL can raise prices is that they have a superior product and can price it accordingly. Remember when AMD had highe prices till COre2 came along and force them to where AMD value is, at the bottom of the stack.
Sharikou will claim what he means by 40% is you take the trend line from Q1-Q4 and extend it will indicate soon to achieve 40%. By the same extrapolation you would have figured AMD to dissapear in prior years or INTEL/AMD stock would have gone to 60 bucks in a few short quarters. Clearly a PhD couldn't be so stupid but he doesn't really have one.
Sorry Pretender you got it wrong.
how do you know how much it costs for them to produce a chip, Sharikou?
You get that from their income statement, which shows various costs, and you know Intel sells about 40 million CPUs per Q.
Sharikou said...
"No. Intel will BK because its cost is 10X of AMDs. Intel has 100K workers, AMD has only 10K. AMD only needs $700 million revenue to stay positive. Intel needs $7 billion."
First off, please look at the numbers, its getting late and I am not trying to screw up, thanks in advance :)
If Intel has sold 5 Million Conroe and 1 Million Woodcrest, even at there lowest prices that is...
5 Million * 180 = $900,000,000 for Conroe.
Prorate 5 Million over 3 months and now you have 7.5 Million Conroe...
7.5 Million*180=$1,350,000,000 on Conroe...
Prorate 1 Million over 3 months and now you have 1.5 Million Woodcrest...
1.5 Million * $210=$315,000,000
$1.35 Billion + $315 Million...
$1,665,000,000 for one quarter, and they are not even at 25% production yet, which would leave about 27 Million chips unaccounted for.
9 Million (low end server chips) * $200 = $1.8 Billion
9 Million (low end chips) * $80 = $720 Million
9 Million (midrange chips) * $150 = $1.35 Billion
You are at about $5,535,000,000.
This is without chipssets and integrated video.
Here is a rough estimate for chipsets, 60% of all processors sold will sell a chipset.
21.6 Million * $40 = $864 Million
Now you are at $6,399,000,000 and without factoring in highend desktop, mobile and servers processors which carry the premium prices.
Now to reach your $7 Million mark all we have to do is add a 15% (which is not much, example $200 Woodcrest is now $230) to the processor sales and you have $6,365,250,000 + $864 Million = $7,229,250,000.
Do you really still believe that Intel will go bankrupt?
They almost make there revenue without highend sales.
Do you really still believe that Intel will go bankrupt?
You are assuming Intel still has 75% of the market. Replace each of your 9 million with 6 million and redo the calculation.
Sharikou, Ph. D said...
how do you know how much it costs for them to produce a chip, Sharikou?
You get that from their income statement, which shows various costs, and you know Intel sells about 40 million CPUs per Q.
LOL the pretender forgot a minor detail.. INTEL doesn't break out the losses from their many money losing operations; Itanium, Flash, x-scale, etc. etc. Drop all those money losing ball and chain items and the CPU cost/profit structure is like minting money. Bankrupt.. I don't think so.
Try as you might Sharikou you can't change the fact INTEL has been and will continue to be the most profitable manufacturable enitity on earth for a few more years. For the next few quarters I'll say INTEL will make about 3 billion dollars. That is more then 3x AMD's revenue..
Poor sharkiou go sharpen your pencils some more but you can't change the fact INTEL is damm profitable and you can't change that.. too bad you don't work there...
So what percentage of the market does intel have doc?
"AMD is expected to exit 2006 with 40% market share(run rate)" What does this run rate mean? Give us a standard number sharikou. Intel currently has ~75% of the overall market share, so what will the number be by the end of 06?
ashenman wrote: dr. yield, a formula can't accurately predict market trends ever
Yeah, I've read the various rants about market share(run rate). And my point is that it is a make believe metric. Never heard it used in the industry, discussed in b-school, seen it in a textbook. It's a make believe construct for an invalid extrapolation best I can tell. I'm not the only one who has asked for a definition of the metric- and a straight answer has never been given. Who knows, maybe we'll get one someday.
In the meantime, I would bet that the market share #s won't approach 40%- even Hector Ruiz' predictions were for 40% in '08-not end '06 as our host claims. CEOs don't typically sandbag 2 years for that sort of marketshare- the Street frowns on not knowing what your business is doing.
I believe with "run rate" Sharikou means you extrapolate the 4Q sales of AMD to a full year, i.e. multiply it by 4. BTW, the term "run rate" is not really necessary in combination with "market share", since that you can apply it to whatever period you specify, in this case: the microprocessor sales in the last quarter of 2006.
intel asp for q2 wud hv been far higher than $30. If intel sold 40mill cpus in q2 with a revenue of $8bill, revenue earned per cpu sold is $200. that is including sales of chipsets etc. removing chipset cost and cost of other chips assuming at $50, asp would be $150. This going down to $30 is far fetched. Go see any online retailers, the top selling Intel cpus are priced well above $150 price point. even if intel loses market share, i don't see a possibility of asp dropping. rather there is a strong chance that it will increase as intel is leading across the board in top end.
INTEL doesn't break out the losses from their many money losing operations; Itanium, Flash, x-scale, etc. etc. Drop all those money losing ball and chain items and the CPU cost/profit structure is like minting money.
It doesn't matter. Intel hasn't dumped most of these businesses. So they average in. You can say the only engineers Intel needs is the Israeli conroe dudes, but somehow Intel can't lay off the Netbust folks yet, and they sit there and eat. If Intel can lay off 80% of its workers, it will be very profitable.
AMD will be extremely successful, taking 40% market with only 10K workers.
"INTEL doesn't break out the losses from their many money losing operations; Itanium, Flash, x-scale, etc."
Flash business should be very profitable for them and I think they sold the XScale thing and had plans of selling Itanium to Japanese. They also have chipsets, entire motherboards, set-top-boxes HW, RAID controllers, Ethernet devices, SATA controllers, storage systems and optical network devices. CPU's are just one of its many products, though probably one of the biggest ones.
Intel should also make some money off of their software, training cources, books and other things. Most likely not that much but not a total loss also.
Btw, how big was AMD's market shaew in the scale you are using in the end of this years previous quarters? I mean that weird run-rate thingie you are using. I'm just curious how fast are you expecting AMD's market share to rise.
I think that blog is laughable not just does this guy lack any common sense about the whole Intel AMD standpoint. But he has no knowledge about economics and he cant even keep his story on the same level every day.
On the front page he in this post is projecting a Intel BK (and I newer heard any other than him to use BK as a short version of bankrupt) I Q208 yes he 4 hours before didn’t expect dell to use 100% AMD chips before the end of 2008 so what will they be using from Q2 to Q4?
In this thread he is stating that Intel is selling 40 million chips a quarter. Yet he only want to use 27 million in the calculation enumae made.
Besides this he is forgetting that Intel have other profitable areas than selling CPU’s and he still want to support the whole workforce of the sales of CPU’s only. He also seems to forget that AMD has yet to make a serious dent in Intel’s laptop CPU sales. The laptop market today is around 40% of the total sales and that number is expected to rise to 50% within the next few years. The Centrino platform is dominating the laptop sales and every time a Intel Centrino laptop is sold they sell a chipset and a wifi card also. Thus making much more money than AMD can if they sell a laptop CPU.
Last but not least a company does not go bankrupt just because they don’t have any cash in the bank.
Should I make a expectation on how it will go in the future. AMD will continue to make a good dent in the server space as servers are the only computers that today are limited by the low bandwith of the Intel frontside bus. On the desktop Intel will be able to hold its own until K8L debuts in Q207 and even then their advantage in process will mean that they are already in transmission to 45 nm technology when AMD is finally running on 65 nm. This will give Intel another 6 months or so just from the raw speed. And then they only have to wait a couple of quarters before they have their own chip with integrated memory controller.
Ohh and they will make money all quarters between now and Q208
Man you've got a few chips on your shoulder! :)
You sound as if you want Intel to go BK - This would not a good thing for AMD nor us... We need them to kick each other's asses constantly so that better faster and cheaper processors get produced.
I got an AMD64x2 4200+ and a Conroe 6600, and I'm pretty damn impressed with the Conroe overclocked to 3.4GHz with stock cooler. If AMD 4x4 live up to the hype then I'll get one of those too. If not, then Woodcrest...
I don't care who 'wins', but I want Intel and AMD to survive so we can get the fastest processors at a good prices. Don't need a PhD or an attitude to work that out!
If Intel has to raise prices, its for only one reason - To keep AMD in business.
AMD is choking to death between increased silicon costs due to ramping dual core demand and falling prices due to loss of performance leadership.
If AMD has to make any decent money, it will be possible if Intel raises prices letting AMD fill the higher price points Intel comfortably occupies now.
Sharikou said...
"You are assuming Intel still has 75% of the market. Replace each of your 9 million with 6 million and redo the calculation."
You yourself had stated that Intel makes 40 Million processors every quarter, I am only using 36 Million, so which is it?
“run rate” might be all the cpu sold sales less old inventory sales (new product only)
I am hoping that some of you people here have some elaborate systems and I am hoping you will try this...
I am running AVG, Everest stability test, Cinebench 9.5 and Desktop Screen Record 5 that records all screen activity.
In cinebench I got a 56, but that is expected if you start that test last.
Here is a link to the video recorded, the 94 in Cinebench was when it was started first.
“run rate” might be all the cpu sold sales less old inventory sales (new product only)
So by that standard, AMD will have 100% share. Intel CPUs always go into inventory, and then to the customers. Intel always maintains decent inventory to be able to suppy reliably. On the other hand, AMD chips go out of stock, and they have to ship them directly to the customers.
"He also seems to forget that AMD has yet to make a serious dent in Intel’s laptop CPU sales. ... every time a Intel Centrino laptop is sold they sell a chipset and a wifi card also."
I expect Turion's market share to increase by the end of this year. AMD acquiring ATi certain helps that to some extent. The current Turion64 X2 is very competitive to Core Duo. It is somewhat slower than Merom, but better at power efficiency and pricing.
Turion was at a disadvantage to Centrino from late 2005 to early 2006, when Core Duo was available but not Turion X2. Plus, in terms of system power usage, Intel's Centrino platform was better than AMD's no-platform. That's just one of the reasons that AMD acquires ATi. Also, Merom's power efficiency is disappointing. I guess the super large 4MB cache doesn't help there.
"Intel CPUs always go into inventory, and then to the customers. Intel always maintains decent inventory to be able to suppy reliably."
Wow... you say that as if it was a good thing to do so. Isn't it one of the first rules of business to keep your inventory as low as possible?
And are you deliberately being dense about the run-rate definition? It is really not that difficult to grasp. You see, you count a sale into run-rate only if the CPU sold was not in inventory at the beginning of the period. it's that simple! Lets say you want to measure the 4th quarter run-rate. If a CPU was in Intel's inventory before October, its sale will be excluded from the measurement; otherwise it won't.
Do you still think AMD would get 100% market share by run rate? Do you expect ALL Intel CPUs sitting there to age 1-3 months before making any revenue? In that case Intel might actually bankcrupt sooner than Sharikou said...
http://www.tomshardware.com/2006/08/22/amd_dual_core_laptops_have_arrived/page19.html
To Edward..
"However, compared to an Intel platform based on the Core Duo and the company's own GM 945 chipset, the combination of AMD CPU and ATI chipset is inferior in terms of battery time and multitasking performance. Therefore, under equal conditions, it can only be regarded as the second choice - if it is worth getting at all."
http://www.xbitlabs.com/news/cpu/display/20060728114723.html
"AMD was not able to make any progress in the notebook universe, however. Intel’s share increased from 86.3% in Q1 to 86.7% in Q2. AMD unit share declined to 13.3% from 13.6% sequentially."
Another fine example of Intel "partnerships" gone bad.
Link
Intel has to cut "marketing" dollars which means some partners are going cold-turkey.
Remember distributors in Dubai going belly-up because Intel was cutting off marketing funds.
What is a prediction if it keeps changing.
Excuses excuses from the Phd.
Next thing you'll here is the dog ate his homework.
I expect Intel to raise prices to delay it bankruptcy by two quarters to 2Q08.
Intel has to cut "marketing" dollars which means some partners are going cold-turkey.
Intel provides marketing $ to help sell their processors as part of an integrated system. They do not provide $ to subsidize buying large volumes of CPUs that then get dumped on the grey market. Sounds like they are auditing these folks to make sure that they are complying with the program terms. So what?
" Anonymous said...
http://www.tomshardware.com/2006/08/22/amd_dual_core_laptops_have_arrived/page19.html
To Edward..
"However, compared to an Intel platform based on the Core Duo and the company's own GM 945 chipset, the combination of AMD CPU and ATI chipset is inferior in terms of battery time and multitasking performance. Therefore, under equal conditions, it can only be regarded as the second choice - if it is worth getting at all."
http://www.xbitlabs.com/news/cpu/display/20060728114723.html
"AMD was not able to make any progress in the notebook universe, however. Intel’s share increased from 86.3% in Q1 to 86.7% in Q2. AMD unit share declined to 13.3% from 13.6% sequentially." "
diferent hardware, diferent batteries... nice benchmarks dude :D
might want to compare a huge 18' display laptop using turion vs a 12 ' laptop core2duo using a 9 cells battery
Is there a reason you will not answer my previous post?
"Sharikou said...
"You are assuming Intel still has 75% of the market. Replace each of your 9 million with 6 million and redo the calculation."
You yourself had stated that Intel makes 40 Million processors every quarter, I am only using 36 Million, so which is it?"
I would like to know if my numbers are wrong or about right.
Intel provides marketing $ to help sell their processors as part of an integrated system. They do not provide $ to subsidize buying large volumes of CPUs that then get dumped on the grey market.
Large volumes of CPUs couldn't get dumped if they are sitting in Intel warehouses. Now, who's doing the dumping?
Looks like the poor saps overbought Intel cpus and couldn't return the excess to the distributors. It also didn't help when Intel kept unloading excess inventories at lower prices so others could have cheaper costs than the same poor saps.
"diferent hardware, diferent batteries... nice benchmarks dude :D"
Right... these fanboys keep feeding themselves with those "benchmarks" that were designed to make Core Duo look better. I found most of them rediculous. Those site simply do not want to make fair comparison between Turion X2 and Core Duo.
When comparing performance, they use an ultra-light Turion X2; when measuring battery life, they use a super-graphics one.
"To Edward..
"However, compared to an Intel platform based on the Core Duo and the company's own GM 945 chipset, the combination of AMD CPU and ATI chipset is inferior in terms of battery time and multitasking performance."
This THG review is the worst one I've ever seen. They compare two Turion 64 X2 with three Core Duo. When comparing performance, they put the ultra-light MSI Turion X2 against a much larger Asus Core Duo. When comparing battery life, they put the heavy HP Turion X2 against the a Core Duo with IGP and super large battery.
There is simply no way you can scientifically normalize the results to get any meaningful data out of these comparisons. Their claims are total BS at best.
In fact, for the same price, a Turion X2 notebook will be faster and have long battery life than a Core Duo one. There are matching models of Turion X2 and Core Duo from Compaq and Acer. Get two and compare their price/performance and battery life and you will see.
Well, I know fanboys are not capable of objective evaluation. So nevermind.
"AMD was not able to make any progress in the notebook universe, however. Intel’s share increased from 86.3% in Q1 to 86.7% in Q2. AMD unit share declined to 13.3% from 13.6% sequentially."
Turion X2 was not on sale until end of Q2 (May) this year. Apparently you didn't read my comment before you comment on it. Typical for an over-zealous fanboy, aren't you?
"Do you still think AMD would get 100% market share by run rate? Do you expect ALL Intel CPUs sitting there to age 1-3 months before making any revenue? In that case Intel might actually bankcrupt sooner than Sharikou said..."
Sharikous has always said runrate "exiting 2006". In this manner he can make up any number he wants as he is defining a rate withoout any refernce time period. What if this calc is based on the last day of the quarter? week? month?
By not providing any valid mathemaical definition, Sharikou has proven that he will just manipulate #'s to say look I'm right - look at the crap where he claimed to predict capacity based on 300mm and 65nm calcualtions and then compared it to some web refernce which showed desktop sales. He completely ignored notbeook and severe and claimed he was accurate down to <1%!
Sharikou - put up or shutup! Define your calculation of market share runrate and as an example use the formula to calculate AMD market share runrate at end of Q2'06.
"might want to compare a huge 18' display laptop using turion vs a 12 ' laptop core2duo using a 9 cells battery"
Hmmm... thanks for this nugget of wisdom buddy, I suppose an 18 FOOT display would probably consume a fair bit of power.
"might want to compare a huge 18' display laptop using turion vs a 12 ' laptop core2duo using a 9 cells battery"
Hmmm... thanks for this nugget of wisdom buddy, I suppose an 18 FOOT display would probably consume a fair bit of power.
Any idiot can see that he meant inch and he used the same symbol anyway for both, ie, 18' display laptop vs 12' laptop.
So you are either lower than an idiot or are just being one for the sole purpose of 'nitpicking' or, more likely, malicious sarcasm.
For you people who love Anandtech and THG so much, just stay there or even better, go concentrate on your studies or go let off steam elsewhere.
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