The goal of the question is to look at supply and demand issues (and
related income/margin issues) in perspective, prompted by an earlier
post on short-term market share. In the past, AMD has hit 20%+ market
share, though they appear to be in the 15% range currently based on Q1
data. It appears they have dropped market share but gained
profitability by being less aggressive on pricing cuts (which is good
for both companies, IMO, and may be related to Sanders' lessening
control). Without profits, they have no long-term expansion
capability.
AMD's market share figures have been reasonably stable for quite about
5 years now. They've varied a bit, but most been in the 15-20% range.
According to reports, AMD's ASP is rising, but it's not clear to me
whether that's because they're selling a larger percentage of high-end
CPUs or discounting the entire line less. I'm sure someone here knows
more detail.
From what I've seen it's mainly that they are selling a larger
percentage of high-end CPUs. They still sell a lot of dirt-cheap
AthlonXP and even Duron chips. Just have a look at the prices that
AMD themselves list for an AthlonXP 2500+, only $79, and you KNOW that
HPaq is getting them for a lot less. On the other hand, the AthlonXP
3000+ and 3200+ seem to still be selling reasonably well and the
Athlon64/Opteron line has been fairly successful, and those are all
high-margin parts.
Where AMD has been hurting a bit, from what I've seen, is in the
mobile space. The AthlonXP-M is actually a rather competitive
product. It's performance and power consumption are well within
striking distance of the Pentium-M, but the Centrino marketing
campaign at Intel has been VERY effective. As a result AMD has had to
compete with the Mobile Celeron chips instead. The AthlonXP-M is a
MUCH better mobile processor than the Mobile Celeron (and even better
than the new Celeron-M), but AMD has still had to compete on price to
get anywhere in this market.
The thought is that, regardless of Intel's perceived screwups and
AMD's performance benefits, AMD's upside and market share impact is
somewhat limited by their mid-term capacity,
Somewhat limited maybe. But I don't think that is the primary
limiting factor. The biggest factor working against AMD right now
seems to be Intel's marketing department, who seem able to more than
make up for any faults in the products themselves.
while Intel's large
manufacturing base and ongoing transition to increased 300mm capacity
allows them extra production flexibility and continuing margin
pressures. As I see it, it's physically impossible for AMD to pick up
more than 10-15% of Intel's CPU business,
That's probably fairly accurate. Note though that AMD does have a
fairly large new fab coming on-line in 2006, so if you're looking at
this for a somewhat more long-term deal than AMD could end up with a
much larger chunk of the market.
and if they picked this up
in the lower-end CPUs, it would hurt them more than it would hurt
Intel.
I doubt it. The economics of computer processors tend to emphasize
volume over almost everything else. Even if they're only selling
AthlonXP chips for $35 or $40 than AMD is probably still making a
profit on a per-chip basis. The real costs are all in R&D, and those
are mostly sunk costs when it comes to the low-end chips.
The thing that might hurt AMD would be to take away the low-end of the
market from Intel but lose the high-end in the process. They might
end up with a larger chunk of market share in the process, but they
wouldn't be making the high margins on the new processors where R&D is
still an on-going expense.
I'm aware that this is holy war material, and I don't care to go
there. I'm just looking for facts and educated guesses to base my own
long-term plans on.
If you're talking about long-term plans in terms of stocks and such, I
personally wouldn't want to get too much into either company. However
if you've got some kind of stock options for Intel, they aren't going
anywhere any time soon. Despite any advantages that AMD has shown,
Intel still has pretty much a strangle-hold on the business PC market.
Dell sells Intel chips exclusively and even HPaq sells only a very
small number of AMD-based business systems. Same goes for IBM and
Toshiba in the business laptop market.
Personally, I'm all for a healthy AMD; as I said, I think it's good
for both companies.
That much is certainly true.
