Spin-Off: AMD & Intel Business Practices

[mrmt]

Well that's patently untrue. Intel lost ~$1bn in mobile in the last quarter- that's not "a reasonable profit", that's pouring money into the segment to buy design wins and mind share. The only reason it is possible is because Intel is flush with cash from their other, very successful business units.

And since when marketing funds = contra revenue?

 

[Abwx]

Marketing is neither giving chips for free at the industrial scale neither to pay for BOM of items using thoses devices.

 

[davie jambo]

And that, my friends, is the PC OEM market in a nutshell.

Standard business tactics for every industry tbf

Get money out of another part of your business to buy an order

 

[Vesku]

Intel's tablet focused "contra-revenue" is clearly not just marketing dollars but money to offset partner design costs and high BoM. Instead of directly selling Bay Trail at near 0 or negative Gross Margin they are sending cash through what I assume are several methods tied to a partners design and shipment of Bay Trail tablet products.

I'm sure AMD would love to do that, since even when they've had decent performing and lower cost products OEMs aren't tripping over themselves to put out quality devices. Unfortunately they've been cash starved thanks to several factors. Imo, AMD has yet to overcome the missteps by Ruiz and outrageous exclusionary Intel contracts during the Athlon->Athlon 64 heydays. If not for Ruiz' ego AMD could have merged with Nvidia and that in my opinion would have created a pretty fearsome competitor to Intel, much more so than the AMD post P4 era having cut off its Fab arm to gain ATI.

 

[Abwx]

Intel's tablet focused "contra-revenue" is clearly not just marketing dollars but money to offset partner design costs and high BoM. Instead of directly selling Bay Trail at near 0 or negative Gross Margin they are sending cash through what I assume are several methods tied to a partners design and shipment of Bay Trail tablet products.

I'm sure AMD would love to do that, since even when they've had decent performing and lower cost products OEMs aren't tripping over themselves to put out quality devices.

If the cost of the expected shipped 40 millions chips is 4bn then Intel subsides will amount to 100$ per chip including the chip cost of course, given the amounts it s 4bn net profits that are distributed whatever the means they use to diffuse this hot money.

 

[Vesku]

If the cost of the expected shipped 40 millions chips is 4bn then Intel subsides will amount to 100$ per chip including the chip cost of course, given the amounts it s 4bn net profits that are distributed whatever the means they use to diffuse this hot money.

Some of that loss in mobile is R&D, developing LTE modems is especially expensive. Still it does seem they are handing out double digit dollars for every Bay Trail tablet they plan to ship this year.

 

[Phynaz]

Actually most of Intel's loss in mobile was R&D expense. People are underestimating what it costs to design a solution now days.

 

[Vesku]

Actually most of Intel's loss in mobile was R&D expense. People are underestimating what it costs to design a solution now days.

Just have to compare to last year though, they didn't just start working on LTE this quarter. Very high probability they are paying out $10+ per Bay Trail tablet shipped this year.

 

[bullzz]

@Abwx - "If the cost of the expected shipped 40 millions chips is 4bn then Intel subsides will amount to 100$ per chip including the chip cost of course, given the amounts it s 4bn net profits that are distributed whatever the means they use to diffuse this hot money"

sorry this is wrong on various levels. where did u get the info on intel is giving out 4b in subsidies. 4b money put into mobile could be for R&D, marketing etc.
and why wud they spend $100 for each chip when competitors are selling it for $25? intel cant magically bring down soc cost by 1/10. it must be more towards $10/chip

 

[ams23]

Let's see AMD win some designs in notebooks/tablets that matter, and I'll happily believe AMD's continued claims of technological superiority and business viability.

How many Temash tablets made it to market? How many "Hondo" tablets made it to market? How many of these were any good?

Mock Bay Trail all you'd like, but I have a strong suspicion that it will be in much more desirable devices this year than any AMD part will be. Qualcomm and Samsung are Intel's problem...not AMD.

What is unbelievable to me is that some people here are talking about perf. per watt superiority when there was not a single real world app-specific power consumption measurement to be found for CPU or GPU! Using turbo to crank up frequencies will cause peak power consumption to jump up while the app is run. That is a tradeoff and there is no way to avoid that.

 

[Abwx]

@Abwx - "If the cost of the expected shipped 40 millions chips is 4bn then Intel subsides will amount to 100$ per chip including the chip cost of course, given the amounts it s 4bn net profits that are distributed whatever the means they use to diffuse this hot money"

sorry this is wrong on various levels. where did u get the info on intel is giving out 4b in subsidies. 4b money put into mobile could be for R&D, marketing etc.
and why wud they spend $100 for each chip when competitors are selling it for $25? intel cant magically bring down soc cost by 1/10. it must be more towards $10/chip

929m losses for Q1 2014 and 5 millions chips where shipped, that s what, 185$ per chip, i guess that they re actualy paying for most of the BOM.

Of course some members here like Phynaz can rightly point that :

Actually most of Intel's loss in mobile was R&D expense. People are underestimating what it costs to design a solution now days.

Seriously , 1bn/quarter currently in RD for a product released 9 months ago and when the develloppement cost of such a processor is about 300m.??

Just imagine how AMD is spending each quarter, 200m, in RD and tell me how Bay Trail need a constant 1bn/quarter infusion in RD, this is total non sense, truth is in the first part of my post...

 

[AtenRa]

929m is R&D and MG&A. The more Intel is trying to sell the more MG&A they spend.

Add to that approximately 200m for Contra-Revenue in Q1 2014 and the Total losses of Mobile group is closer to 1.1B.

Also, 14nm capital spending is higher than 22nm and that will affect 14nm product prices.

 

[Abwx]

929m is R&D and MG&A. The more Intel is trying to sell the more MG&A they spend.

What means MG&A.?

 

[AtenRa]

Edit: Sorry marketing, general, and administrative

 

[AtenRa]

Ahh yes one more thing,

Intel spends more in R&D for ATOMs than AMD because they started to design two different dies, one for Tablets (BayTrail-T) and one for all the other segments. That adds to R&D (different designs, different masks etc).

 

[Abwx]

Edit: Sorry marketing, general, and administrative

Thank you, then out of theses departments marketing is the main culprit for thoses 929m, RD is about 0 as it has already been spent so the bulk of this money is shared between the intrinsical costs of the chips , about 15$ per chip , that s 75m for the 5m chips, the rest, 90% or so, has been given to OEMs to pay for the BOMs.

Ahh yes one more thing,

Intel spends more in R&D for ATOMs than AMD because they started to design two different dies, one for Tablets (BayTrail-T) and one for all the other segments. That adds to R&D (different designs, different masks etc).

As pointed it is past expenses and the cost is 300m per design.

 

[AtenRa]

Thank you, then out of theses departments marketing is the main culprit for thoses 929m, RD is about 0 as it has already been spent so the bulk of this money is shared between the intrinsical costs of the chips , about 15$ per chip , that s 75m for the 5m chips, the rest, 90% or so, has been given to OEMs to pay for the BOMs.



As pointed it is past expenses and the cost is 300m per design.

Well, Q1 2014 R&D is not about BayTrail but most probably a 14nm and/or even 10nm designs. The MG&A cost expenses is about BayTrail.

 

[Erenhardt]

To me, it looks like intel knew what amd is preparing. They want to deny AMD the possible market by throwing money at OEMs.

I have a strange Déjà vu....

 

[witeken]

Intel is in a similar mess today with its mobile parts, except the CPU isn't the problem - it's the total SoC package. If Intel can put out an unequivocally leadership product and continue to extend this lead, then it will be fine. If it can't ever do that, then I would think the company's long-term viability would be in very serious question as the world is going mobile whether Intel wants to admit it or not.

Their biggest problem isn't the SoC, it's releasing the products not too late. They have 22nm since H1 2012 (I know Silvermont uses a mobile optimized process) and they had their initial Atom architecture since 2004, yet Silvermont didn't release until Q4 2013. For phones and Android, it's even worse. Cherry Trail should finally fully utilize Intel's manufacturing lead, and Broxton should fix the architecture and SoC. Not that Silvermont is a bad mobile microarchitecture, but it's simply too slow if you need to clock it at 2.7GHz and you can put 4 cores of them in a ~4W TDP SoC.

 

[witeken]

Their product is so uncompetitive that giving it for free is not enough to convince OEM to produce Intel based items, hence Intel is subsiding part of the BOM, wouldnt you call that paying OEMs since Intel get massive losses to grant such subsides.?..

Do you still don't know why Intel is using contra-revenue? Bay Trail didn't have competitive BOM because it wasn't initially meant for low-end tablets. So that's what Intel is subsidizing, not the SoC itself.

 

[PPB]

Do you still don't know why Intel is using contra-revenue? Bay Trail didn't have competitive BOM because it wasn't initially meant for low-end tablets. So that's what Intel is subsidizing, not the SoC itself.

So Bay Trail is actually interesting but that pesky high platform BOM is ruining the triumphant conquest into ARM territory....

But wait, doesnt Intel also design the platform and has to have a vague idea this would happen? In any case, BT is not impressive enough to make the OEMs pay up for the bloated platform BOM. Not quite the same type of failure the other poster implied, but a failure still.

 

[Dribble]

So since for ever AMD basically picks up Intels scraps, Intel gets a market and AMD get X% of it where X is dependent on how good the AMD chip is, but is always a pretty small %. This is just the way it is.

The problem here is that Intel's tablet market isn't very big because unlike x86 Intel has to compete with all the ARM vendors and they dominate the market, even with Intel's deep pockets, manufacturing advantages and all the rest. Hence realistically all AMD is going to get is a small % of what Intel gets, which isn't very much, so it is highly likely AMD will make very few sales.

What AMD need to do is find something specialist like the console market where other vendors have trouble going - a competitor to nvidia's grid for remote gaming and rendering might be good. That said the online server market is being infiltrated by ARM and power pc variants - the big vendors (amazon, google, etc) are seriously considering making their own hardware, and they could also make grid like solutions. Even in comparison to a few years ago when AMD won console bids, ARM based cpu + gpu capabilities have come along way - no guarantees AMD could even win that today, it's just a highly competitive place to be.

 

[Phynaz]

Seriously , 1bn/quarter currently in RD for a product released 9 months ago and when the develloppement cost of such a processor is about 300m.??

Just imagine how AMD is spending each quarter, 200m, in RD and tell me how Bay Trail need a constant 1bn/quarter infusion in RD, this is total non sense, truth is in the first part of my post...

By definition R&D isn't being spent on a product that was released 9 months ago. It's being spent on a product that will be released 3 years from now.

 

[Abwx]

AMD s entire RD is at most 300m/quarter , how much do you think BT current RD need considering this number.?..

 

[AtenRa]

By definition R&D isn't being spent on a product that was released 9 months ago. It's being spent on a product that will be released 3 years from now.

The big problem is that if Intel needs to spend 1B every Quarter or approximately 4B per year for R&D and MG&A in the mobile segment, they will have to generate more than double the amount in Revenue from that group alone in order to make a profit.

That means that, if they will sell each SoC at $25 and earn $10, then they will need to sell 400 million SoCs per year just to get even. And that is with 40% margins, they will need to lower that in order to sell that high Volume. So you see that seams far too fetched to become real even with Intel's deep pockets.
They really need to change their business plan and how they operate in order to be competitive in the Mobile market.