This Could Significantly Boost Intel's Profit Margin

ExtremeTech is reporting that Intel (NASDAQ: INTC  ) has broken ground on its first semiconductor foundry that will produce chips on a 450-millimeter semiconductor wafer. 

After the initial investments are made, the costs associated with running a 450-millimeter semiconductor foundry over a current 300-millimeter foundry are significantly less for the same output. In fact, GlobalFoundries estimates that the capital expenditures associated with running a 450-millimeter foundry will be 25% lower than its 300-millimeter counterpart.  

In the following video, Fool contributor Steve Heller explains the importance of this milestone and how it could ultimately help Intel improve its gross profitability longer term.

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  • Report this Comment On August 19, 2013, at 10:00 PM, techy46 wrote:

    Intel's going to have 50% more production of chips that are 33% smaller and 20% faster using 50% less wattage. That means they can afford to sell them for 30% less and still increase gross margins. I really want a W8 Ultrbook for $499 and a tablet for $299. That's $800 for both which is what the Ultrabook costs alone now.

  • Report this Comment On August 20, 2013, at 11:31 AM, stretcho44 wrote:

    Steve,

    At 1:50sec into your presentation, you seem to say that a 25% reduction in capital expenditures would lead to a 25% reduction in "operational" costs.

    Did you mean to imply that a 25% lower in capital expenditure cost would translate directly into cost savings? 25% sounds wrong. The 450mm wafer has 2.25x the surface area and with the same process steps, you can get double the die. Capital depreciation would probably be applied at the same rate on the chips until the factor was fully written off.

    For the very large die (server chips), you can probably get more than 2.25x more die sites on the larger wafer because you lose a lower percentage of die on the wafer edges. The value of a 450mm wafer for large die is even a larger % because there is less "edge" to cut through dies.

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