A new goldmine for Intel: The $6 Atom processor

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A new goldmine for Intel: The $6 Atom processor

Mountain House (CA) – Intel is gearing up to launch what may be its most important product since the Pentium processor: The Atom CPU targets key growth markets and could ship hundreds of millions units within a few year. While much of the success will depend on unit numbers, sources told TG Daily that Atom will be big cash cow for Intel.

Price has been a key feature of Atom, previously code-named Silverthorne, since the very first time Intel talked about this product. Intel itself stated that the production cost of the tiny chip may be close to that of a 286 CPU, allowing the company to sell the processor for a low price to open a new market of Mobile Internet Devices (MIDs) and Nettop computers with prices well below the $200 range.

We don’t know the exact price of the Atom CPU yet and will have to wait until the official launch, which appears to be imminent, given the number of systems already being announced to include this processor. Rumors on the Internet currently put the cheapest Atom CPU in a price range between $29 and $49. We expect several SKUs, with the lower end targeting Silverthorne models and the MID/UMPC segment, while Diamondville (possibly dual-core) chips are rumored to go into cheap notebooks and desktops with prices of $500 and less.

Based on Intel’s marketing pitch, the burning question we have been working on for a while, of course, just how profitable this processor will be. We have talked to several sources and received feedback with initial estimates of $2 per CPU and studied reports that the chip may cost about $4. Today, we finally ended up with a source close to the matter and one we consider to be very credible. Industry sources put Atom into the range of “$6-$8”, which would be the production/packaging/shipping cost for the CPU, excluding the Poulsbo chipset. Let’s just assume that Intel will be able to squeeze $40 out of system vendors for Silverthorne and Diamondville – and you have one heck of a profit margin.

Our source was “skeptical” that Silverthorne will in fact be as successful as Intel claims the CPU will be, but noted that “it will be a good cash cow”. Intel is able to put 2500 Atom CPUs on one 300 mm wafer, which would put its production value at about $15,000 to $20,000. Intel should be able to easily hit a 90% yield, which would put the retail value of the CPUs on one wafer at about $100,000 or more. We’re currently digging for more details on the Diamondville and Poulsbo parts, to get a better idea of final bill of materials.

But if Silverthorne takes off in a spectacular manner and sparks a new generation of MIDs and UMPCs, the Atom lineup could end up earning more money than Core 2 does. And that really gives us some food for thought.