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Intel's Per-Chip Cost Averages $40
Fedorpheux writes "According to a report by the analysts at In-Stat, Intel's average cost per chip is about $40. These same chips, such as the Pentium 4s, can cost consumers up to $637. This $40 average cost has remained rather steady since 2003. This cost does not include money spent on marketing or development, but it does explain how Intel can continue its profits even in this era of quickly dropping prices in computer hardware."
Calculating the chip cost this way but leaving out "marketing and development" is like saying that your car's cost is simply the cost of the fuel to run the engine, about 15 cents per mile. Neglecting the fact that you had to spend many thousands of dollars to buy the car in the first place, and continue to spend hundreds of dollars to maintain it, et cetera. Do we have to endure trolling on the front page posts now?
One simple rule for its versus it's
First, average cost does not really tell us what the cost of a particular chip is. Does one chip set cost $200, one cost $100, another cost $50, and all the legacy costs $10? I mean a low end computer can be had for a few hundred dollars, and the chip itself can be had for mere dollars in quantity, so the cost to produce has to be a few dollars. This would mean the top end chip might costs a few hundred, or more, to produce.
Second, comparing an average to a maximum is about the most devious thing a person can do. Again, the top product might cost a few hundred dollars. The average offer taken price of a chip might be under a hundred dollars, again noticing that a computer can be had for a few hundred dollars.
Finally is this number fixed, variable, or simple material cost? Does it take into account the higher rate of defects on new products, and higher risk of returns? Is this a number with any credibility whatsoever?
This is what we do know. For the fourth quarter of last year Intel earned about 2 billion on sales of about 9 billion. That is about 20% profit. Because these are intel numbers we can assume the sales are inflated and the profit fudged. However, if even 10% of this revenue went to chip production, at $40 per chip we are looking at 90 million chips, give or take. Did they ship this many? Perhaps. And they did sell them for $80, would that leave any money to pay the fancy salaries and benifits that the average worker, quite greedily, expects.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
Not to mention the costs of employee healthcare. This is by no means meant to be a boo-hoo for them or others but if $1500 of the cost for every car GM makes is employee/former employee healthcare, it's pretty reasonable that those costs contribute a significant amount to what it really costs Intel to make their products as well.
Vote Quimby.
Yeah... no.
Intel has and always will gouge people if they can get away with it. Explanations of "but it goes to cover ops and R&D" don't cut it with me any more. Maybe back in the heady days of the 386s and 486s I bought that, but there was one thing Intel pulled that made it abundantly clear that they're just raking it in hand over fist as much as the market will bear, not recouping dev costs.
That thing was the Mendoceno Celeron 300A. I recall buying one for $135 CDN when the Pentium II 450 was being sold for $650 CDN or more. But they're different parts, what the hell are you babbling about, you say? No they were not. In fact, a lot of the Malaysian 300As were perfectly functional PII 450s that had a bunch of their cache burned out and their clock dropped to 66MHz instead of 100, as mine was, and as a result would run perfectly fine when clocked up to 450 MHz without even needing to change the heatsink and fan from the stock one.
So if Intel could afford to sell a chip that they had to do MORE work on (burning out the cache) for $500 less, what did that say for their profit margins on the PII 450?
Bottom line. Intel is not your friend. They're a business. If they think they can get a $300 profit on a part even after their R&D costs, they'll do it in a heartbeat. And moreover, their shareholders would be howling for their blood if they had the opportunity and didn't.
when I worked at intel I was told that the per chip cost was $48.00 - this was in '99..
Go you one more point as well.
It's the old consumer theory of "You get what you pay for". In the networking market, Juniper (I think?) had a VERY hard time selling their product against Cisco. To the extent that they were selling their product at half the price of what the Cisco stuff was selling for. Nevermind the fact that the Juniper equipment in question had the ability to push twice the amount of traffic as the Cisco equivilant.
Someone in the marketing dept turned around and said "We are selling our stuff too cheap, people think we are full of shit and that our product isn't as good as Cisco's" So they doubled the price of the Cisco hardware and started selling their own kit at that price. Sales apparently took off.
If Intel dropped the price on their stuff that far then people would turn around and start buying AMD for the same reason. AMD already did this on their Opteron processors as they didn't want to drop them below the retail price of the Xeons for the same fear.
Curiosity was framed; ignorance killed the cat. -- Author unknown
First of all, it's hard to take you seriously when you call it "Nutscrape." It's not funny. Get over it.
Intel didn't "give away patents." This ignorance shows how many years of experience you apparently don't have in the industry. The x86 line became very, very popular and the only player was Intel, whom had invented the 8086 in the first place.
AMD was making clones of the x86 chips (80286, 80386) from reverse-engineering Intel's chips. They weren't alone; there were others doing the same thing. Intel tried to stop them - and they even tried to trademark a number! Eventually the courts ruled that you couldn't trademark a number, and ruled that AMD had done nothing illegal in reverse-engineering the 386.
Since then, Intel developed the Pentium (aptly named because they couldn't trademark the number 586) and AMD launched it's K5 line. Eventually, after many development efforts on the side of AMD and the hiring of quite a bit of the DEC Alpha team, they produced the Athlon. AMD finally had a chip that could compete directly with Intel in the performance space.
Alledgedly, once AMD had some products that could compete, Intel started pulling some of the crap in this lawsuit.
AMD has long stood on their own feet, and they took the company from a small chip manufacturer to one of the largest CPU manufacturers in the world. They compete head-to-head with Intel, *the* largest chip maker, every day. And they've been winning. Better chips, faster, cooler, better features, and cheaper. They've forced Intel to get it's head out of it's ass and make better products.
x86-64 was AMD's baby, and because of it's popularity, Intel was FORCED to adopt it, too. And guess what? They reverse-engineered it from AMD. This stuff works both ways, you know.
I have a lot of respect for AMD. The management for that company has done a great job against all odds.
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