They have 95%+ marketshare in server chips. They have an enormous manufacturing advantage. Even though they charge so much for their chips if they feel threatened by Ryzen they can just lower the price of their chips to Ryzen prices because they have a manufacturing advantage. It will just hurt their margins. 40-50% margins forever seem pretty absurd from a pure economics perspective.

> if they feel threatened by Ryzen they can just lower the price of their chips to Ryzen prices because they have a manufacturing advantage.

If it would've been so easy, they would've done it with Atom in the mobile market. But it wasn't. Intel was losing $1 billion a quarter in mobile just to be competitive on price.

Intel absolutely lacks the cost structure to compete with Qualcomm's ARM chips, and that has already been proven. It's not a theory.

As for Ryzen, they can lower prices, but not by as much as you may think. Lowering prices is directly proportional with how many people Intel will have to fire to accommodate for a slightly lower cost structure that's more competitive with AMD.

For every 10% average reduction in price, Intel may have to fire at least a few thousand employees (across divisions, but more likely by gutting some non-profitable research projects, in the beginning).

However, those layoffs will also look bad on Intel's public image, so don't expect Intel to lower prices strategically across product lines to compete against AMD without serious consideration. But I really don't expect them to lower their average price point by more than 10% for the next few years, until Intel comes out with a more "streamlined" (fewer features) microarchitecture, that's more cost-effective to build.

Currently it looks like the manufacturing advantage will run out in the next ten to twenty years. There isn't very much innovation in the chip manufacturing business. Intel managed to stay ahead of the curve with their massive R&D budget, but we're well into the diminishing returns territory. Eventually all other players will catch up, unless some breakthrough technology enters the market first.

But they missed mobile, and PC sales will go down (at some point). Also, ARM on the server?

Based on Microsoft's recent decision and some other rumors ARM on server might reduce Intel to only 90+% over the next few years but that's nearly the same cashflow.

They didn't miss mobile. Mobile makes poor margins at least for intel so they are not in it. PC sales are already down. Where they make a ton of their money is data centers.

They did. They invested a lot in R+D on mobile processors.

Mobile chips is low margin, there is hardly any money in it anyway.

That's right, but then when did they spent so much on mobile R+D?

Partially because they felt they could gain some advantage by owning the client side of what is powering a lot of their data center chips. Investing in modem tech and trying to get into mobile phones, they could have a completely integrated story from the phone, modem, cell tower (see Axxia acquisition), to the data center. I think they also were hoping the Intel Security story would be compelling from an end-2-end perspective.

Mobile really means lower power and more integrated functions. Those aspects are becoming more important for all applications.

Their gross margin should be much higher than 40-50