And what makes you so sure? What kind of magic happens at the 25-30% MSS area? AMD climbed as high as 22% during one of their quarters in 2001, IIRC. What followed shortly thereafter was the ramp of Pentium 4, which brought AMD from their high prospectives down to a "sea of red" (as you call it). Gee, if they had only gained 3 extra points of market share, things would have been much different... is that would you're saying??
Me...
Granted 25 to 30% is somewhat arbitrary, it might be 35%, but somewhere in that Neighborhood INTC will start to feel enough pain that major changes will have to be implemented.
During 05 it is to neither AMD’s nor INTC's advantage to get into a price war but particularly for INTC. With both AMD and INTC capacity constrained and INTC suffering from inferior products as well as inferior production processes the inevitable price war has been put off until 06.
With the dawning of 06 both AMD and INTC will be bringing on more capacity than either currently needs. Currently, INTC though having inferior production processes enjoys the benefits of 300mm-production capacity. That's probably the reason they haven't been more capacity constrained despite having both lower bin splits and yields than AMD.
Another thing that stinks in the sty is INTC's inability to predict its' chipset needs, while at the same time predicting, with incredible precision a quarter in advance, what its' revenues will be. INTC management must think its' stokholder are a bunch of idiots.
Anyway, since INTC will most likely be the first out of the gate with 65nm I suspect INTC will make the most of its' dual advantages (65nm, 300mm) and attempt to take market share before AMD replies with fab36. Since INTC will still have inferior products in everything but the laptop market they will have to resort to lowering prices. I'm not sure how well this will work given the changes in market strategy AMD has implemented over the last couple of years. For the higher priced products AMD now favors the effects will probably be minimal. In the low-end stuff where price is much more important it could mean AMD having to pull back some. All in all though I expect the price war changes to have a limited effect, as the new relationships AMD has been fostering will only come to bloom next year.
Certainly AMD will continue to take market share in the server, high-end desktop/gamer and workstation areas where production costs are just a gnat. I would also expect AMD to continue making inroads into the laptop area which is fairly insensitive to price. Though in laptops growth will be slower as this is probably where INTC will draw the line.
How well INTC's price war works is going to depend on how long it takes AMD to bring fab36 online at 65nm. Once that happens then INTC loses its' dual advantages and AMD is at parity or better cost-wise once again. I say parity, but I suspect better than that given AMD's lead in SOI/DSL and the problems INTC had with 90nm production. But that's just a guess.
There could be a transition period in which AMD has 90nm and 300mm working. I suspect this period will be relatively short and of not much consequence in the price war.
Anyway, with production process parity AMD is then free to extend INTC's price war. This is sort of inevitable given the huge amount of extra capacity AMD will then have.
OK, so how does this affect INTC's and AMD's bottom lines. Well the price war is going to lower revenues as ASPs get lowered and volume doesn't increase to compensate. Even though growth in h106 will probably be decent, this will probably not be enough to offset the decline in revenues due to lower ASPs at INTC. This at a time when AMD is at its' most vulnerable. From AMD's point of view they will probably see stagnant to slightly lower revenues in h1. However, as the year progresses and AMD brings on more 65nm capacity the price war will shift to AMD as the initiator.
At that time AMD will still have the best designs, probably the best production processes, and capacity issues will be a thing of the past. Combine this with the new relation ships AMD is developing and it will be high time to stick the INTC pig in the jugular and hang it up to bleed.
