The march towards the x86 duopoly continues
The first one explains they can buy all the materials for $5 and sell their product for $3. The second one questions the wisdom of losing $2 for every item they sell. The first one says "don't worry, we will make the money back with volume"
Well, what the second one didn't get is that volume means cost reductions:
"The first one then meticulously explains to the dim one: 'The unit cost is related to volume, say f(x) = 2 + 3/x. If we sell 1 unit the cost is $5, if we sell 3 the cost is $3, and if we sell a thousand the cost is $2.003'. The second one just makes a grimace in total confusion. So the first one fires his dumb arse and hires a competent partner."
AMD's current strategy is probably best summed up by Sander's mantra: "Volume is the vaccine". AMD continues its march towards a duopoly undeterred, although clearly not unaffected, by the harsh conditions on the battle field.
AMD has already put in place the manufacturing capability and expansion plans to serve 30% or more of the market. Unless Intel's price war really succeeds in killing AMD, or at least bleeding AMD to such degree that AMD is unable to progress with these plans, the x86 market has changed for good. Intel will no longer benefit from a market dominant position. This is why the Intel stock has not moved for a long time, despite Intel enjoying superior products in the current development cycle, and despite Intel enjoying healthy profits while AMD again is bleeding red.
As I see it, there is a window of opportunity for the Intel stock to move in the next two quarters, but it all depends on Intel taking back unit share and increasing ASPs (GM). As soon as AMD's next product family is brought to market, barring a major stumble or substantially inferior products, the window closes. Intel's clear product superiority will be gone and market share erosion will continue, and probably accellerate, due to AMD's lower ASPs and cost structure.
Intel may respond with better products, but the cycle will repeat as long as AMD is alive and kicking. This is the trend since the K6 in the late 90's. As was made clear in AMD's Q4 CC, AMD is not content with a niche position, nor is that a sustainable business strategy (despite analysts dismay at the current fighting). In simple terms, fight for share or die.
AI
