Sign in with
Sign up | Sign in
Your question

AMD's CapEx

Tags:
Last response: in CPUs
Share
February 15, 2007 5:24:41 PM

http://www.fabtech.org/content/view/2482/

What I really concern is the following text:
Quote:
The vibes picked up over AMD's spending plans indicate at the moment that orders for Fab 36 and Fab 38 are being placed but that AMD is getting very tough on prices and contract deals, even delayed payments!


It seems that AMD is short on cash. :?

More about : amd capex

February 15, 2007 5:29:48 PM

Quote:
http://www.fabtech.org/content/view/2482/

What I really concern is the following text:
The vibes picked up over AMD's spending plans indicate at the moment that orders for Fab 36 and Fab 38 are being placed but that AMD is getting very tough on prices and contract deals, even delayed payments!


It seems that AMD is short on cash. :?

Don't worry I'm buying and AMD/ATI PC next moth :D 
February 15, 2007 5:30:14 PM

Quote:
It seems that AMD is short on cash. :?


Putting dual-cores on the street for $100 may not be the brilliant business move some people thought, huh? 8O
Related resources
February 15, 2007 5:33:12 PM

Quote:
It seems that AMD is short on cash. :?


Putting dual-cores on the street for $100 may not be the brilliant business move some people thought, huh? 8O

I don't think AMD has alternatives except cutting prices.
E4300 will be sold at $113 in April. I think AMD is still trying to flood the market with low-price chips. Whether the capacity * price can help or destroy AMD is remained to be seen. But what I concern is if AMD cannot finish Fab 38 this year, it will have a difficult time even K8L rocks.
February 15, 2007 5:33:41 PM

Quote:
It seems that AMD is short on cash. :?


Putting dual-cores on the street for $100 may not be the brilliant business move some people thought, huh? 8O

Why not? do you think they cost more than 100$ to make?
February 15, 2007 5:36:00 PM

Quote:
It seems that AMD is short on cash. :?


Putting dual-cores on the street for $100 may not be the brilliant business move some people thought, huh? 8O

Why not? do you think they cost more than 100$ to make?

I think the current prices for x2s are approaching the 90nm production costs already.
February 15, 2007 5:52:22 PM

Quote:
[

I think the current prices for x2s are approaching the 90nm production costs already.


That's intriguing. I take it you mean total lifetime all costs. But your post makes me wonder if you have a handle on the marginal cost now. How much does it cost to make an extra 1000 right now?
February 15, 2007 5:54:55 PM

Quote:
[

I think the current prices for x2s are approaching the 90nm production costs already.


That's intriguing. I take it you mean total lifetime all costs. But your post makes me wonder if you have a handle on the marginal cost now. How much does it cost to make an extra 1000 right now?

No. I am just guessing from the ASPs of the CPU and the profit margin.

Average profit margin before price cut: 36%
The prices of x2s had been cut by more than 20% already. An easy calculation can give my spectulation.
February 15, 2007 5:57:50 PM

Quote:

That's intriguing. I take it you mean total lifetime all costs. But your post makes me wonder if you have a handle on the marginal cost now. How much does it cost to make an extra 1000 right now?


Some people here are doctors, teachers, social security workers and probably lots are "technical fellows". So if you would be kind enough to explain what you mean with that question about marginal costs and stuff I personally would be very grateful :D . Thank you.
February 15, 2007 5:59:23 PM

Quote:

That's intriguing. I take it you mean total lifetime all costs. But your post makes me wonder if you have a handle on the marginal cost now. How much does it cost to make an extra 1000 right now?


Some people here are doctors, teachers, social security workers and probably lots are "technical fellows". So if you would be kind enough to explain what you mean with that question about marginal costs and stuff I personally would be very grateful :D . Thank you.

I am just a final-year university student :wink:
February 15, 2007 6:05:32 PM

Quote:
[

I think the current prices for x2s are approaching the 90nm production costs already.


That's intriguing. I take it you mean total lifetime all costs. But your post makes me wonder if you have a handle on the marginal cost now. How much does it cost to make an extra 1000 right now?

No. I am just guessing from the ASPs of the CPU and the profit margin.

Average profit margin before price cut: 36%
The prices of x2s had been cut by more than 20% already. An easy calculation can give my spectulation.

perhaps you should give an example, because I'm thinking I need to know more than only the ASP and the net profit margin.
February 15, 2007 6:09:06 PM

Quote:

That's intriguing. I take it you mean total lifetime all costs. But your post makes me wonder if you have a handle on the marginal cost now. How much does it cost to make an extra 1000 right now?


Some people here are doctors, teachers, social security workers and probably lots are "technical fellows". So if you would be kind enough to explain what you mean with that question about marginal costs and stuff I personally would be very grateful :D . Thank you.

just that given AMD has already paid for the 90nm equipment and plant, and is not going to lay off those employees, we can ignore the development costs, and the capex costs, and just ask about the current extra cost to produce an extra 1000 processors there. It would be ongoing labor, materials, electricity, and overhead for the fab divided by the production rate.
February 15, 2007 6:10:40 PM

Quote:
perhaps you should give an example, because I'm thinking I need to know more than only the ASP and the net profit margin.


Suppose the ASP for AMD's CPUs is $100. A 36% profit margin means that AMD earned $36 from $100. Now the price of the CPU is dropped from $100 to $75, now AMD can only earn $11 from $75 (15% profit margin).

In reality, the average price reduction of CPUs from AMD is slightly more than 25%. I would say that AMD will be losing money now.
February 15, 2007 6:11:23 PM

I don't have access to that type of data, but I'm sure somebody hanging around here does. It would be very interesting to come up with a fairly close net figure for CPU manufacturing costs.
February 15, 2007 6:12:44 PM

Quote:
I don't have access to that type of data, but I'm sure somebody hanging around here does. It would be very interesting to come up with a fairly close net figure for CPU manufacturing costs.


It would be very difficult to calculate..... as we do not know the actual prices that AMD / Intel sell the processors.
February 15, 2007 6:18:28 PM

Quote:
It would be very difficult to calculate..... as we do not know the actual prices that AMD / Intel sell the processors.


Hmm... It could be determined within some reasonable measure of accuracy by analysing past year reports and correlating them to the total number of CPUs processed that year, etc. etc. etc.

That's too much for my defective brain. I still have to take off my shoes to count to more than 10. :lol: 
February 15, 2007 6:20:28 PM

Quote:
That's too much for my defective brain. I still have to take off my shoes to count to more than 10. :lol: 


Just don't tell us how you get to 21... :p 
February 15, 2007 6:22:25 PM

Quote:
Just don't tell us how you get to 21... :p 


ZZZZZZZZZZIP... :lol: 

Oh, you said to not tell ya. Sorry! :oops: 
February 15, 2007 6:24:09 PM

Quote:
perhaps you should give an example, because I'm thinking I need to know more than only the ASP and the net profit margin.


Suppose the ASP for AMD's CPUs is $100. A 36% profit margin means that AMD earned $36 from $100. Now the price of the CPU is dropped from $100 to $75, now AMD can only earn $11 from $75 (15% profit margin).

In reality, the average price reduction of CPUs from AMD is slightly more than 25%. I would say that AMD will be losing money now.

So you really think that a piece of glass with a thin layer of copper wires, and smaller than the size of a fingernail costs more than 60$? :D  (I know CPU's are more than a pile of sand, but I really like to think of them like that on some occasions... )

AMD is ramping 65 nm which will almost double their capacity which also means it will almost half the costs. So in fact by ramping to 65nm and dropping prices by 25% they could actually make more money if the transition would be complete, but I'm guessing it's not and they make somewhat the same. But that's just my guess.
February 15, 2007 6:28:08 PM

Quote:
So you really think that a piece of glass with a thin layer of copper wires, and smaller than the size of a fingernail costs more than 60$? :D  (I know CPU's are more than a pile of sand, but I really like to think of them like that on some occasions... )

AMD is ramping 65 nm which will almost double their capacity which also means it will almost half the costs. So in fact by ramping to 65nm and dropping prices by 25% they could actually make more money if the transition would be complete, but I'm guessing it's not and they make somewhat the same. But that's just my guess.


I am just doing an averaged calculation. In fact the ASP of AMD was about $70 in 06Q4.
http://www.ibtimes.com/articles/20070131/amd-intel-ship...

Theoretically the transition to 65nm can relieve the problem. But there are some deviations in the reality:
1. The initial yield of 65nm fabrication is lower than 90nm one.
2. The capacity of the fabricatin plants is increased by only about 30% since the die size decrease is not high (31% of ~120mm from ~170mm).
February 15, 2007 6:29:29 PM

Quote:
perhaps you should give an example, because I'm thinking I need to know more than only the ASP and the net profit margin.


Suppose the ASP for AMD's CPUs is $100. A 36% profit margin means that AMD earned $36 from $100. Now the price of the CPU is dropped from $100 to $75, now AMD can only earn $11 from $75 (15% profit margin).

In reality, the average price reduction of CPUs from AMD is slightly more than 25%. I would say that AMD will be losing money now.

sure, that makes sense, but that profit margin includes all sorts of expenses that are independent of the production at an older fab. see my other reply nearby overhead.
February 15, 2007 6:30:12 PM

Quote:
I am just doing an averaged calculation. In fact the ASP of AMD was about $70 in 06Q4.
http://www.ibtimes.com/articles/20070131/amd-intel-ship...

Theoretically the transition to 65nm can relieve the problem. But there are some deviations in the reality:
1. The initial yield of 65nm fabrication is lower than 90nm one.
2. The capacity of the fabricatin plants is increased by only about 30% since the die size decrease is not high (31% of ~120mm from ~170mm).


So would it not be ok, for the sake of argument to stick to that $70 figure? Do you think it's close enough?
February 15, 2007 6:35:14 PM

Quote:
sure, that makes sense, but that profit margin includes all sorts of expenses that are independent of the production at an older fab. see my other reply nearby overhead.


But what I quote is the gross profit margin which excludes the capital costs and development costs already. :wink:
February 15, 2007 6:41:30 PM

Quote:
sure, that makes sense, but that profit margin includes all sorts of expenses that are independent of the production at an older fab. see my other reply nearby overhead.


But what I quote is the gross profit margin which excludes the capital costs and development costs already. :wink:

I'm curious about it, and would like to read more detail. Exactly what costs are included, and which excluded. If you have any links, I'd appreciate them too.
February 15, 2007 6:43:50 PM

Quote:
sure, that makes sense, but that profit margin includes all sorts of expenses that are independent of the production at an older fab. see my other reply nearby overhead.


But what I quote is the gross profit margin which excludes the capital costs and development costs already. :wink:

I'm curious about it, and would like to read more detail. Exactly what costs are included, and which excluded. If you have any links, I'd appreciate them too.

http://www.amd.com/us-en/assets/content_type/Downloadab...
Costs that are excluded:
1. Research and development
2. Marketing
3. Administration

:wink:
February 15, 2007 6:46:34 PM

Quote:
I am just doing an averaged calculation. In fact the ASP of AMD was about $70 in 06Q4.
http://www.ibtimes.com/articles/20070131/amd-intel-ship...

Theoretically the transition to 65nm can relieve the problem. But there are some deviations in the reality:
1. The initial yield of 65nm fabrication is lower than 90nm one.
2. The capacity of the fabricatin plants is increased by only about 30% since the die size decrease is not high (31% of ~120mm from ~170mm).


So would it not be ok, for the sake of argument to stick to that $70 figure? Do you think it's close enough?
I think in average, AMD can only earn less then $30 per chip. :?
February 15, 2007 6:49:39 PM

Quote:
Costs that are excluded:
1. Research and development
2. Marketing
3. Administration

:wink:


OK, so we see $1.344B in Q4. How many CPUs were shipped in that Q? And does this help at all?
February 15, 2007 6:54:07 PM

Quote:
Costs that are excluded:
1. Research and development
2. Marketing
3. Administration

:wink:


OK, so we see $1.344B in Q4. How many CPUs were shipped in that Q? And does this help at all?

From the $70 ASP, I would suggest about 19M processors were shipped, which agreed the expected shipment. :wink:

The article really helps. AMD's cost of production is about the same or a little bit higher than Intel.
February 15, 2007 6:56:31 PM

Quote:
From the $70 ASP, I would suggest about 19M processors were shipped, which agreed the expected shipment. :wink:

The article really helps. AMD's cost of production is about the same or a little bit higher than Intel.


Great! So we can say that the $70 figure is pretty close. Now given the fact that there are dual-cores in the channel available for $101 retail, we not only have to take into consideration:

1. Research and development
2. Marketing
3. Administration

but also the etailer's profit margin, shipping, handling, etc. etc.
February 15, 2007 7:17:06 PM

Quote:
Great! So we can say that the $70 figure is pretty close. Now given the fact that there are dual-cores in the channel available for $101 retail, we not only have to take into consideration:

1. Research and development
2. Marketing
3. Administration

but also the etailer's profit margin, shipping, handling, etc. etc.


So the CPU business is not easy for both AMD and Intel :wink:
February 15, 2007 7:26:38 PM

Quote:
So the CPU business is not easy for both AMD and Intel :wink:


Yeah, that's my point. There are some people saying that they're still making money at this price point, blah blah blah. I strongly dispute that. Given the economics we've just outlined, there is zero chance that they're making money on a $100 street CPU and they're probably losing a fair whack of change.
February 15, 2007 7:52:50 PM

Quote:
sure, that makes sense, but that profit margin includes all sorts of expenses that are independent of the production at an older fab. see my other reply nearby overhead.


But what I quote is the gross profit margin which excludes the capital costs and development costs already. :wink:

I'm curious about it, and would like to read more detail. Exactly what costs are included, and which excluded. If you have any links, I'd appreciate them too.

http://www.amd.com/us-en/assets/content_type/Downloadab...
Costs that are excluded:
1. Research and development
2. Marketing
3. Administration

:wink:

Thanks for the link. Now, if we only knew what was included in the "cost of sales". I don't see the depreciations, for instance. It may not be possible, but I'd love to figure out the marginal cost of making chips.

A mental experiment will illustrate. Suppose there was a magical switch that could create a 25th hour, for a production line, during a day, one time. During that extra magical hour, you'd pay your electriciy use, one hour of labor costs, and the extra materials for one hour of production. You'd get x number of chips, and the "marginal cost" as I call it of those chips would be *only* the electricity, labor and materials, nothing more. This isn't the same as the "cost of sales" of course.

I wonder what that cost per chip would be.
February 15, 2007 7:52:54 PM

Also, there is the cost of what the production is taking the place of. Are they forced to squeeze in cheaper processors in place of more expensive FX processors?

The key is that you want your Fabs to never run on down time. So if they can still sell processors without making much, its better then twiddling your fingers waiting for a new batch of processors.

Or, maybe they already have a stock of millions of 3800s and are trying to simply clear inventory.

I am just saying that there are other considerations to be taken into account. But the cost of the chemicals used for the manufacturing and the time it takes to bring a processor from start to finish is no small number, and I doubt they are making much if any money on those processors, but I say, hey, at least it's paying the bills and the wages (although an investor might think otherwise).
February 15, 2007 8:27:57 PM

The marginal cost to produce an extra CPU is either trivial (a few dollars) or infinite. We're talking about automated production equipment with capacity ratings, and it takes time to order, ship, and install/configure such equipment to produce more of a certain CPU a few months later.

Once produced, CPUs begin depreciating right away. The more a chipmaker waits to sell these chips, the less they'll get for them for a given amount of sales effort.

Thus I think it is extremely hard as an outsider to say at what price point AMD or Intel stop making money on a chip. We don't even know the depreciation rate of the line-specific lithography tools, much less the yields from that line. However, it is relatively easy to make the common sense statement that neither company would willingly sell a chip if it cost them more money than to leave it unsold. When is that ever the case?

It's safe to say AMD isn't losing money by offering those chips for sale as opposed to not doing so. If they need more fab production devoted to FX processors, you can bet they'll delay some lower end orders to catch the higher ASPs. The "cost of sales" reported in the balance sheets is primarily the fixed costs of powering the fabs, depreciating equipment, and paying non-research salaries.
February 15, 2007 8:38:17 PM

Try this site just happened to stumble across it.

http://kotaku.com/gaming/wii/wii-autopsy-discovers-manufacturing-cost-221736.php

this is not based on computer CPU's, but I can't see that the manufacture cost will differ greatly with say Intel's or AMD's cost which at 100% higher would place the cost of a CPU around $26.00

If these figures are correct we have been getting screwed


_____________________

I need to get out more!
February 15, 2007 8:40:57 PM

Quote:
It seems that AMD is short on cash. :?


Putting dual-cores on the street for $100 may not be the brilliant business move some people thought, huh? 8O

And what else are they going to do with those dual cores? Keep the prices high and watch them collect dust in the warehouse?

Its pretty obvious, and you yourself have said, they dont have a lot of options.
February 15, 2007 9:55:49 PM

Quote:
"Yeah, that's my point. There are some people saying that they're still making money at this price point, blah blah blah. I strongly dispute that. Given the economics we've just outlined, there is zero chance that they're making money on a $100 street CPU and they're probably losing a fair whack of change."


AMD posted an operating profit of 20Million for the last quarter of 2006, If they were selling at a loss, how could you post an operating profit?
the only reason AMD showed a net loss for the year ending 2006 was because of their aquisition of ATI.
February 16, 2007 4:41:15 AM

Quote:
Its pretty obvious, and you yourself have said, they dont have a lot of options.


In the years of running cash-short companies, I've developed a "nose" for the tactics used when your back is up against the wall. Having a fire sale has to be one of the most obvious ones. When you're that desperate for short-term cash, selling below cost is a desperate, yet necessary move. The problem is that you rarely recover from the wounds to your bottom line. It has been done, but it's very rare.

Quote:
They reported GPM less than 40%, then claimed they would recover and within weeks dropped prices on both DT and server (ouch server), ASPs are already in the 70 buck range, and now this:

http://biz.yahoo.com/ap/070215/apfn_amd_analyst_note.ht...

They are going to be in for rough waters this year, 2007 is not looking to be a profitable year.


The server news is especially worrying. Desktop is a volatile market at the best of times, but AMD had made significant solid inroads into server. If that market is starting to crumble to the point where they have to start price-slashing (to a degree that Intel is not) then it just proves my point that the AMD boardroom has to be a very unhappy place right now!

And check this out...

Ballmer Sez Vista Is Ballsup :) 

Microsoft Corp. Chief Executive Steve Ballmer said Thursday analysts' forecasts for revenue from Windows Vista in fiscal 2008 were "overly aggressive," sending shares down 1 percent.

The world's biggest software maker cautioned analysts that Vista sales will remain closely aligned to new computer sales.


YIPPEEEE!!!! So... not as many lemmings rushing to signing away their civil rights to use your new Naziware as you thought, huh, Ballmer? :twisted:
February 16, 2007 6:34:33 AM

Quote:
From the $70 ASP, I would suggest about 19M processors were shipped, which agreed the expected shipment.

Lets see. Amd had a market share of ~ 25% for Q4. You are saying that the busiest quarter in history only saw 76m chips sold? I dont think so. Amd has had months where production was over 12m, so you number may be as low as half right.
The mean cost for chip production (AFAIK) is, historicly, in the $50 range. That includes R&D, sales etc, and a lot of production bonuses have been based on that cost.
AMD's Q4 statement showed they had a bit of wiggle room between expenditures and recieveables. It also showed a fairly large cash reserve, and a healthy supply of materiels on hand.
When you consider that they just bought a company with a net worth almost double what thiers was a few years ago, I think it's safe to say that rumours of thier demise are greatly exagerated.
!