someone (someone.delete@this.somewhere.com) on February 3, 2013 1:44 pm wrote:

> ARM OEMs operate at lower ASP than Intel but still have to pay their share of
> all the wafer fab capital expenditure and process development costs of their
> foundry plus a healthy margin on top of that. When Intel sells an Atom ALL of
> the money stays in house, including gross margin on finished wafers.
>
> It is hilarious to hear folks claiming Intel and x86 are doomed because of its
> huge overhead of fabs etc. Apparently they think ARM silicon is made in fabs
> and processes subsidized by the tooth fairy or easter bunny or something.

Intel Q4 gross margin 58%, revenue $13.5B, operating income $3.2B
TSMC Q4 gross margin 47%

So Intel's production cost cost 0.42*$13.5B = $5.67B.
If they had the same costs, but only 47% gross margin, revenue would be $10.69B
If other expenses of $4.63B stay constant, that would reduce operating income
from $3.2B down to 10.69-5.67-4.63 = $0.39B, an 88% drop.

The difference between Intel's and TSMC's margins makes a vast difference to
profitability, and if Intel worked on a foundry business model it would
have to become a very different company, with a much reduced cost structure.

That might happen, but Intel's management and stockholders would probably
view it as a last resort.

[Of course, doing a small percentage of low-margin business has less impact]