Advanced Micro Devices Inc (AMD)

[wbmw]

HM, Re: 100000 Itaniums at $1000 profit each is only $100M. The research on IPF has to be in the billions by now, isn't it? Or is that another overblown number that gets tossed around?

You are trying to reconcile the money that has gone into IPF in total with the revenue generated in one year. I have seen plenty of estimates of total IPF $ spent, but if we are talking profitability, I would be more inclined to compare the costs for one year with the revenue for one year.

In terms of costs, there is R&D (fixed costs) and manufacturing (variable costs). I think Chipguy's estimate of R&D is a good place to start - $300-400M. I would estimate the manufacturing costs to be $200-300 per chip.

In terms of revenue, I think you are being conservative about ASP. I think it's closer to $1750, given that a large amount of CPUs sell into Superdomes or Altix 3000 machines for $4,600 a piece. It also seems that Intel exceeded their goal of 100k Itanium 2 CPUs and instead sold about 110k. Given about $250 in manufacturing costs, that's 110k CPUs for $1500 of profit each, or $165M.

IPF may have a lot of expenses going into it, in terms of compilers, software porting, marketing, sales, etc, but from a purely CPU R&D perspective, I think $165M is already covering that. If Intel reaches their goal of 200k units next year, it will come close to covering the other expenses, too.