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Technology Stocks : SI : microprocessor companies

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To: Tomcat who wrote (8)5/1/2001 11:27:39 AM
From: Road Walker   of 9
 
TC,

re: "It takes time but it seems almost inevitable. So my point is, can we draw the same conclusion with processors? If processors are a commodity and there really isn't much difference in performance, will price win out."

There are only two manufacturers, the business is cylical, and there is some significant brand identity that keeps microprocessors slightly above the commodity (price only)level.

Microprocessors have a pretty important barrier to entry, so there are very few players, and less competition than PC's. The cyclical nature of the business, and the lead time to build capacity, will always create some price competition when supply is abundant, and higher prices when supply is constrained.

Branding is important to keep any product above the commodity level. Some folks prefer AMD, some Intel, and as long as that preference exists there will be an automatic premium to a generic product.

Take a look at the GM's of AMD and Intel. Pretty healthy in bad times, obscene in good times. I believe as long as the companies keep pushing the technology, and the applications side continues to figure ways to use the additional power, microprocessors will stay out of the commodity basement.

John
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