Intel's Low Chip Costs Mean Big Profits

By continuously upgrading its production equipment to the latest technology, Intel maintains a low cost per chip of around $40, according to a report issued by industry researcher In-Stat.

Although Intel sells a variety of chips, including lower-cost NOR flash memory chips and computer chipsets, its lowest-priced desktop CPU, one of the Celeron D series, fetches $69 while its top PC chip, the 3.73GHz Pentium Extreme Edition, sells for $999, according to Intel's latest price list, released on Sunday. The most expensive chip on the list is its premium server chip, the 3.33GHz Xeon, at $3692 each.

Budget Manufacturing

The world's largest chipmaker is able to keep costs low by continually using more advanced production technology, the In-Stat report concludes. Semiconductors are carved out of large silicon wafers, thousands at a time, and better technology means more chips can be made on each wafer.

Intel has three factories using advanced 90-nanometer technology to make chips, and it will bring four factories using even smaller 65-nanometer technology on line in 2006, according to In-Stat. A nanometer is a measurement of the size of transistors and other parts that are etched onto chips. The more transistors on a chip, and the closer they are together, the faster the chip can perform tasks.

By making the swift transition to 90-nanometer etching technology, Intel saved about $1 billion in manufacturing costs last year, according to In-Stat.

Intel declined to comment on In-Stat's conclusions. The company collects cost-per-chip information for internal use but does not make that information public, said Laura Anderson, an Intel representative in Hong Kong.

In-Stat representatives say the analyst firm's figures were based on its own research estimates and did not come from Intel.