Intel, AMD in a dead heat for cheap chips

Both AMD and Intel proudly claim they can make chips cheaper than the other guy, but after going through the math and examining the two companies' divergent strategies, analysts conclude it's a dead heat.

It probably costs Intel $21 or less to pop out the silicon inside a Pentium 4 on its most advanced manufacturing lines, while AMD shells out $22 or less on its best Athlon chip, according to analysts' estimates. Eventually, after several more manufacturing steps, these turn into processors that sell for between $130 and $637.

Intel and AMD, however, tell a different story. For the past year, AMD has said the smaller size of its Athlon and of its upcoming Hammer chips give the company a physically intractable advantage.

Intel Chief Financial Officer Andy Bryant threw gas on the fire at the company's analyst meeting in April by declaring that Intel's new factories, which process larger wafers, with 300-millimeter diameters, make it the low-cost leader. He added that Intel's yield, or number of good chips per wafer, was 50 percent higher than that of an unnamed competitor.

"Through these investments we have cost leadership," Bryant said. "Don't buy a story that says Intel has a cost problem."

Days later, AMD Chairman Jerry Sanders gleefully responded to Intel's claim of superior yields.

"How do you spell 'bullshit'?" Sanders asked investors and analysts at Merrill Lynch's Hardware Heaven conference in San Francisco in late April. "The only way they could do that would be to invent a perpetual-motion machine...We will put our yields up against anybody's."

News source: ZDNet

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