1 day ago
It's not a "win" of a slot, when Intel essentially gives the part away. "Win" implies competition on the merits. "Contra revenue" is a humorous marketing/accounting creation, synonymous with "unable to compete on the merits."So, this is a pretty common misconception that I feel needs to be better explained to the investment community.
Sure. This isn't a price reduction as normal price reduction would be; it's not where you are just simply reducing. It's truly a BOM cost equalizer and remember a lot of our 40 million tablets in '14 will be based on Bay Trail. Bay Trail was originally designed for Atom-based PC segments and the upper end tablet. And so it's what we are doing here is doing a BOM cast delta relative to the what the mid and lower end tablets require. And so those are things like Bay Trail may require more layers of a printed circuit board for the board itself, more components on the board and tighter power management controls and things like that. We have a whole program to reduce those throughout the year. So that gives us confidence that as we go through the year, the BOM cast [sic] delta will shrink, but if the volume didn't show up for some reason and I am not going to say that, that's what's going to happen, but I am confident it will, but if it didn't it's on a per unit basis. And so the spending on that contra would be reduced equivalently.Got it? Intel isn't selling its chips "below cost" or even "at cost" to try to gain share. Bay Trail was originally designed as a netbook chip and only mid-way through its development (probably iPad launch did the trick) did Intel decide to do a tablet-oriented SKU. It's obvious given the lack of integration in the SoC that this is the case, and it makes sense that the platform surrounding it would be pretty expensive and more notebook like.