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AMD vs Intel – The Battle For Economy of Scale

by CFD Guru Team   ·   

Dose AMD stand a a chance in this competition? 

Let’s start from the bottom line.

$AMD cannot compete and win the CPU market against a company like $INTC .

The economy of scale that Intel has in this industry is massive and overwhelming.

And why it’s important?
Say a new generation of CPUs is developed, it’s cost a lot of money but it’s a fixed cost, once you developed the new generation you can potentially sell unlimited units, it will not cost you more if you sell more.

Now because Intel sells many more units than AMD, the cost per unit is massively in the favor of Intel.

AMD with basically almost flat revenues since 2014 are investing about $1.5b on R&D a year (2018) which is 25% of the revenue ($5.9b).

Intel, on the other hand, increased the revenue from 2014-2018 by almost 27% to $70.3b and they are investing a whopping $13.5b on R&D, 19% of the revenue.

So Intel spends much more than AMD on R&D but the ratios are in their favor because they are also selling many more units then AMD.

All in all, there is no competition here, and frankly, most likely will never be, if you have to choose between the two, Intel is a much better company to invest in.