Is Intel Making Too Many Chips?

editingwhiz writes "IT Manager's Journal business columnist Melanie Hollands is confused about Intel's mid-quarter financial update. The world's leading chipmaker warns that it has a major overage in inventory resulting in a gross margin reduction because its fabrication process is too darn efficient."(The gross margin reduction) is due to better-than-expected manufacturing efficiencies ... which have, in turn, resulted in more chips than needed," the company said. Huh? (ITMJ is part of the OSTG network.)" Actually, it makes sense - if you make too many chips that you don't sell, you increase costs, but without any increase in revenue.

Comments

I'm confused about Hemo's analysis

[ComputerSlicer23]

Uhhh, if you make a run of parts and 300 good parts come off of it instead of 200. Just throw 100 of the good ones away, and the problem is solved. Sure it means you have more of them to put thru the rest of the processing, but I'm guessing increasing the number of good wafers is an easy problem to have.

This sounds a lot more like an accounting anomoly (failed manufacturing costs are probably an expense, where dumping good chips have to be accounted for as unsold inventory which should go into the "cost of sale" if my guess is correct). Expenses are excluded, but cost of sale is included in the gross margin calculation. If that's the case, it's a case of the weirdness of accounting rules. The only other thing I can think of is if they are lowering the price of the chips to move the supplies they have.

Kirby

Reduce the Price, obviously

[VernonNemitz]

Practically all the reviews show that AMD chips of comparable type defeat Intel's chips. And Intel's cost more. Duh! Perhaps Intel should consider a larger-quantity order-size than a mere 1000, or even 10,000 -- and reduce the price accordingly.