Crossroads for Intel

pillageplunder writes "Businessweek offers a pretty balanced read on what challenges Intel faces in the upcoming year. Rivals Samsung and AMD are making inroads on Intels core businesses, an expected cyclical industry downturn looms next year, and with several critical delays in new (for Intel) markets puts its strategy at risk. A neat read."

Comments

Re:Cyclical downturn?

[Anonymous Coward]

Most businesses are considered "cyclical". Basically, this means they do better whent he economy is better, worse when the economy is worse. i.e. they do better when people and businesses have more money to spend. People hold off buying when they don't have the money, because these are discretionary expenses.

This is in contrast to some businesses which are fairly "noncyclical"--demand is relatively constant over time, regardless of ability to paty. Medical care is a classic example here--people don't decide to hold off on having tha heart attack until they have a better job.

Then, there are some "countercyclical" industries--ones that do BETTER when people have less money to spend. Examples here are businesses that make "inferior" goods--cheaper substitues for more expensive products. They do better when people have less money, because in good economic times, their products are more attractive.

To an extent, there's an aspect of being "cylical" to most businesses, but some are more tied to economic cycles than others. Intel makes a good case for being a very cyclical business--computing upgrades are a fairly discretionary expense, and delaying upgrades is a fairly common response to bad business climates. On the other hand, when the economy picks up, and people have money to spend, getting those computer upgrades they've been meaning to get for awhile becomes more attractive.

AMD dualcore Opteron

[geeveees]

In other news, there are some benchmarks on AMD's dualcore Opteron: http://episteme.arstechnica.com/eve/ubb.x?a=dl&s=5 0009562&f=174096756&x_id=1097194717&x_subject=Opte ron+dual-core+details+emerge&x_link=http://arstech nica.com&x_ddp=Y/

It appears AMD designed the Opteron from ground up to be dualcore.

Re:Cyclical downturn?

[nelsonal]

Normally a cyclical industry is one that involves large capacity additions which make up both a signficant amount of the productive capacity and a signficant portion of the cost of each unit. Semiconductors and tankers are both classically cyclical industries. In real terms let us imagine that you and I have built a brand new fab, we perhaps raised $500 million in equity, got grants of $500 million and borrowed $2 billion. Perhaps we decide to compete in memory manufacture. Prior to our fab going on line let us say that capacity was 100/k 8" wafers per month. Following our fab now capacity is 140k 8" wafers per month. Each month to pay for our fab we need to generate sales of about $1600 per wafer to cover our fabs cost. If we did our market research well we should be able to cover that cost if we didn't (perhaps price declines signficantly at 145k wafers and one of our competitors increased their capacity by 20k wafers while we built our fab. Now everyone is producing to shut someone down (or waiting for demand to grow so that we can produce 160k wafers profitably (which could take several years). Upturns are caused by longer waiting by all competitors downturns are caused by capacity being added more quickly than demand, and the most money to be made is accomplished by being the only one to build before an upturn. Under those three rules (with no collusion) you will always have big upturns then overbuilding then downturns then upturns and you have a nice sine wave cycle. The overall trend of the sine wave is up, but the sinewave has a big amplitude.
In processors and other high value chips this is less true (as engineering and design talent reduces the number of competitors you are dealing with allowing more normal capacity increases to take place. Over the last thirty years only three big semiconductor companies have reliably generated more cash than is required to build for the next cycle (Intel, Analog Devices, and Linear Technologies) all three compete with very few competitors and their products require a considerable amount of design before manufacture can take place.