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Thursday, February 03, 2005 2:12:06 PM
AMD does not break out the inventory based on location... I.E. WIP, raw goods, and finished goods. The weeks I quoted includes all of this. If we assume the factory TPT is about 14 weeks and value is added about linearly through the production line, then we can assume a fully loaded factory without any excess inventory would result in about 7 weeks of inventory reported on the balance sheet. Add in about two weeks of finished good we get about 9 weeks of inventory when things are running well.
In terms of the conversion to K8 and impact on inventory, I think there are two effects. The first is related to the above in that the TPT is likely longer for the K8 due to more metal layers. With the rumor that AMD is moving to 11 metal layers for a 90nm upgrade we can expect TPT to increase more, and thus the "optimal" inventory level will increase.
The second factor is that I use a backward looking COGS to calculate a forward looking weeks of inventory. What it sounds like Hector is saying is that COGs is going to increase with an increase mix to K8. That makes sense, but is not really a good thing. As cogs increases it will reduce the weeks as I calculate them.
We can see what happens when we get Q1 results, but I don't expect a big change.
--Alan
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