05:25 AM

Intel Manufacturing Expertise Propels Profit Margins

The secret to understanding Intel [INTC] is not to think of it as a microprocessor company but as a chip maker. Intel is extremely good at making chips, in large amounts, and as cheaply as possible. It makes microprocessors only because it's the best use of its manufacturing prowess.

Intel can regularly make 60 percent plus profit margins on its chips--similar profit margins that software companies make--yet Intel has to build multi-billion chip factories that represent the apex of our industrial world (while software companies don't.)

Earlier today Paul Otellini, CEO of Intel, told Wall Street analysts that Intel is getting faster at ramping up new generations of chips.

Mike Magee at TechEye reports:

He said that when Intel moved to 90 nanometre technology in 2003, and shipped the Pentium 4 with one core and 170 million transistors, it took 50 weeks to move to that process. He claimed that Intel takes half the time with its 32 nanometre technology, and for multicore devices for chips that over a billion transistors.

He said the advantage for that is that Intel can get to market very fast and manage inventory and overhang. "The faster you can ramp the new stuff the less of a problem that is," he said.

He said that Intel has shipped 3.3 billion processor cores in Q1 2010. By the end of this year that number will be closer to four billion cores.

As Intel moves to ever tighter geometries, it can cram more chips per wafer and dramatically reduce its cost of manufacturing since each wafer costs the same to produce but now carries more chips.

Intel is trying to break into smart phones with its Atom product line, a market dominated by ARM Holdings, a UK chip company. Mr Otellini told analysts said he is not worried about competition from ARM.

Please see:

Intel CEO says revenue, EPS to grow double digits - Yahoo! Finance