The Intel capital budget is expected to be $5.6 billion this year, while AMD will invest $1.5 billion.
Dual-core processing, 64-bit computing, embedded virtualization, large silicon wafers, and ever-shrinking manufacturing processes are all advancing microprocessor technology, and they all come with a big price tag for development. Intel and Advanced Micro Devices Inc. are both expected to be among the top 10 semiconductor companies in the world in terms of capital spending in 2005, according to a recent study by IC Insights.
While AMD has pushed steadily over the past years to keep up with or even gain a lead on Intel in the latest microprocessor designs, it has had to do so while spending considerably less overall on capital budgets, but considerably more as a percentage of total revenue.
The Intel capital budget is expected to be $5.6 billion this year, according to the study, which represents a 46% increase from the $3.8 billion the company spent in 2004. That spending represents about 15% of Intel's revenue last year.
AMD is expected to have a capital budget of $1.5 billion, up 4% from the $1.44 billion spent in 2004. The capital spending this year would be nearly 30% of the company's revenue from last year.
Overall, capital spending in the semiconductor industry is around 23% of revenue, says Bill McClean, an analyst with IC Insights.
About 98% of capital budgets are directed toward building or expanding semiconductor manufacturing plants and purchasing manufacturing equipment used in the plants, McClean says. Spending by Intel and AMD this year is being led by the conversion from 200-mm semiconductor wafers to 300-mm wafers, and the move from 90-nanometer manufacturing processes to 65-nanometer processes.
Intel's ability to budget three to four times the capital spending than its competitors has helped it continue to dominate the microprocessor market, McClean says, even as competitors at times have had more innovative products. An example is Transmeta Corp., which entered the market with plans to specialize in producing low-power microprocessors and earlier this year decided to transition out of providing chips and concentrate solely being a provider of intellectual property, McClean says.
Despite gains, AMD continues to struggle financially, most recently disclosing a $17 million loss in the first quarter on revenue of $1.2 billion. The company said it plans to spin-off its flash memory business.
"When you're trying to keep up with Intel in the microprocessor area, you just can't have anything that diverts your focus," he says.
To lessen the capital-expense burden, companies such as AMD are increasingly turning to foundries for manufacturing capacity and forming relationships with other companies, such as AMD's work with IBM on 65-nanometer technology, McClean says.
Intel is a position where it can at times allow smaller companies to define new market directions and product demands and keep its dominance in the market long term, he says.
"Intel isn't looking to be a follower in any technology but in some cases, they are not as interested in being first as being right," McClean says. "It can make competing against them very difficult. The elephant may move a little slow, but once it gets you in its sights, you're just smashed."
We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
2018 State of the CloudCloud adoption is growing, but how are organizations taking advantage of it? Interop ITX and InformationWeek surveyed technology decision-makers to find out, read this report to discover what they had to say!
Infographic: The State of DevOps in 2017Is DevOps helping organizations reduce costs and time-to-market for software releases? What's getting in the way of DevOps adoption? Find out in this InformationWeek and Interop ITX infographic on the state of DevOps in 2017.
The Next Generation of IT SupportThe workforce is changing as businesses become global and technology erodes geographical and physical barriers.IT organizations are critical to enabling this transition and can utilize next-generation tools and strategies to provide world-class support regardless of location, platform or device