[photopress:intl_v_amd.jpg,full,alignright]Intel’s announcement that it will spend US$2.5 billion to build a new chip fabrication plant in the northeastern Chinese city of Dalian is but another bout in the fight that Intel has been having over the past few years with Advanced Micro Devices (AMD).
Intel has long dominated the Chinese market, but AMD is working hard to narrow the gap.
China is the second-largest PC market in the world and is likely to pass the United States early in the next decade. Intel still enjoys a considerable lead. According to market research group International Data Corp., Intel has a commanding 92% market share in laptops, vs. just 7.5% for AMD.
In desktops it is a bit different. AMD has 30% market share in desktops with Intel a little under the 70% mark. AMD is pushing very hard to become the definitive supplier for desktop machines made and sold in China. This is a very risky business.
Profits are slim to non-existent and price conquers all. AMD cannot hope for loyalty. Intel scores several points with its fab manufacturing announcement. The Chinese government has made building a chip industry one of its top high-tech priorities. Intel is working with the Chinese government in other ways.
Last year it signed an agreement with China’s Ministry of Information Industry to lead the development of a new computer designed specifically for use in the Chinese countryside.
Shane Rau, an IDC analyst who follows the semiconductor industry said Chinese may be buying more computers, but they’re also very price-conscious, and that’s putting downward pressure on prices for both Intel and AMD.
He said, ‘We are experiencing price erosion. A unit out of China is the same as out of the U.S. But if you look at the value of the chips inside the units being sold, it’s not proportional. The value of the chips inside a Chinese PC is less.’ As in a quarter less. And that is where the profit lies.
Source: Business Week
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