Over the course of the summer, the world's largest semiconductor firm, Intel Corp., updated its whole line of computer processors, brining new technologies, and using new manufacturing techniques. The firm can now produce parts for several markets on a single process, cutting costs and raising margins, however some experts believe the move could potentially be dangerous.
Intel revealed to industry observers in recent days that the company is now able to make processors featuring two and four cores from a single silicon die. Additionally, the company can also use the same die for notebook, desktop, and server computers.
Experts hail the developments, citing that volume of production should increase given the simpler process as well as faster roll out and reduced operating costs. On top of lower research costs, the firm will be able to generate more returns per chip.
We would expect Intel to continue to be price aggressive in high ASP (average selling price)
markets as it likely has die yields to premium grade server and desktop products that are above market demands, comments Doug Freedman, chip analyst at American Technology Research.
Freedman notes however that by basing all of its products on a single manufacturing process, the company is prone to major setbacks if that foundation encounters problems.
The base die better be good, Freedman continues, or many products will suffer as a result. The single die approach comes with high risk from technical compromises that will impact the company's complete product line.
Customers may also realize the price savings that Intel is experiencing and demand lower prices in the long term, Freedman believes.
Despite the potential risks, however, the firm maintained a buy rating as the 2007 personal computer outlook improves with firming pricing, and new products being delivered on schedule.
Freedman sets a $26 price target for Intel.