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Is Qualcomm the New AMD?
colinneagle writes "It's a darned shame, but the writing is on the wall for AMD. The ATI graphics business is the only thing keeping it afloat right now as sales shrivel up and the company faces yet another round of staffing cuts. You can only cut so many times before there's no one left to innovate you out of the mess you're in. Qualcomm, on the other hand, dominates this space, and it has the chips to back it up. The Snapdragon line of ARM-based processors alone is found in a ridiculous number of prominent devices, including Samsung Galaxy S II and S III, Nokia Lumia 900 and 920, Asus Transformer Pad Infinity and the Samsung Galaxy Note. Mind you, Samsung is also in the ARM processor business, yet it is licensing Qualcomm's parts. That's quite a statement."
Samsung is licensing the SoCs for the US market only. The flagship products (Galaxy S II,III and Note) are all using Exynos for every other market.
Have you looked at Intel CPU prices lately?
Yes. A high-end i7 costs less than my Pentium-4 did last time I built a Windows PC.
Superior now. But when amd were ahead intel bribed the major pc makers not to use amd chips. During that time most of dell's income came from intel payments, for example. This is what destroyed amd since they could and can no longer afford r&d.
http://www.businessweek.com/technology/content/nov2009/tc2009114_975298.htm
The solution would have been for them to pay amd at least 10 billion in damages instead of 1, but that ship has sailed.
I can't speak for other industries, but for the semiconductor industry gross margin is measured as revenue from a chip minus the immediate production costs. For AMD this would be how much they paid GloFo for the chip (or rather averaged across the wafer), plus the costs of testing, assembly/packaging, boxing, and shipping. It does not include advertising, R&D, taxes, etc. And as I stated earlier, R&D is a massive expense. All of those engineers designing the next chip are a huge cost that have to be paid.
You can take a look at AMD's finances first-hand and see how this plays out; AMD has never made a profit with gross margins below 44% or so. Intel would be an even better example: 13.5B in revenue, 3B in net income, and a gross margin of 63.3%. That would put Intel's profit margin at 22% versus their gross margin of 63.3%. Where did all the money go? R&D and fab upgrades. Gross margin only covers your immediate expenses in the semiconductor industry.