Chipguy:
IBM pays for its microelectronics division through sales of system integration and software. They could set any price for the CPUs even below cost and still make lots of money at the bottom line. That the division is losing money is an artifact of IBM's accounting methods, not its real worth to IBM. Without a unique Power CPU, they couldn't justify the high prices of their proprietory software and services. So its used as a loss leader. Its just like elevator companies that can give you the elevator for free including its installation. They make it all up and lots more in the required service contracts.
AMD has paid for process development and equipment purchases through AMD64 CPUs. That it is losing money is simply due to Intel's criminal acts. Without those, AMD likely would have been in a duopoly with Intel with a far larger share of the market. In part, those criminal acts helped Itanium. Because without them and the illegal profits procured thereby, Itanium would have died.
A good deal of 32nm process development has been paid by AMD64 CPUs to date. Without the ill timed purchase of ATI (a few months later would have halved the purchase price), AMD likely could have funded process development through Malta's production. As it is, this is not much different than what IBM does with its fabs. Use outside purchasers of processed wafers to help defray its costs. TFC goes one step futher, in having those customers help defray process development costs.
In another few process generations, even Intel will have to go this route. Intel is balking at equipment makers requests to directly fund 450mm wafer processing equipment development. Just like it balked at paying for EUV scanner development. When even a large fabricator like Intel, needs only a dozen or so top of the line scanners to equip all its fabs, its hard to get repaid for the equipment makers development costs.
As for that quote about profitability, I notice he didn't say what expenses he subtracted from revenue. Its just like claiming prison labor is free, when the costs to house the prisioners, to transport them to and from their holding cells, to gaurd them at the jobsite, to feed them and procure them are all handled by some other agency. Sure on the company's books its free, but in real life, it isn't truly free.
Like I said, I'm sure that they didn't take into account past development costs in that profitable statement. They don't portion out labor bonuses, options and the like. They likely didn't include any expenses for process development or equipment depreciation. They probably don't portion out the MG&A either.
Without any specifics about what is and is not included, leaves great gobs of vagueness in that statement. Its just like the State Governor who states that he lowered your taxes. After reading the footnotes, he didn't include the automatic raising of gas taxes, impact fees, expanding the coverage of sales taxes, raising licensing fees, raising permit fees, adding a wheel tax, imposing a waste reduction tax, adding a snow removal fee, boosting the excise fees and raising processing fees. After all that, one knows that the State Governor raised taxes, just not the one on income. Or Congress saying they cut the budget when they really meant, that they cut the rate of its planned rise.
I take such unjustified statements as being a load of manure. If you take them at face value, I have the world's "longest" bridge to "sell" you.
As far as your Cherry statement, its really a Corpse flower stuck on the gross margin. When it is opened (blooms), it stinks to high heaven. It always causes the gross margin to sag.
Pete
