Intel builds Atom CPU for $8, sells it for up to $135

Santa Clara (CA) – We were able to digest Intel’s Atom announcement this week, but for some reason, much of the focus on this new CPU remains on its price. Last week, TG Daily received first information for how little money Intel is apparently able to produce this processor. Now there is an official pricelist that is separating the cost of the CPU and chipset and we can pull out our calculators and figure out just how big of a goldmine the Atom processor will be.

If you have followed our coverage of Atom, especially our in-depth article “Intel fires up Atom processor”, then you already know all the details and specs of this processor. The company is currently offering these models :

- Atom Z500, 800 MHz clock speed, 512 KB L2 cache, FSB400, 0.65 watt TDP, $45 (including chipset)
- Atom Z510, 1.1 GHz, 512 KB, FSB400, 2 watt, $45 (including chipset)
- Atom Z520, 1.33 GHz, 512 KB, FSB533, Hyperthreading, 2 watt, $65 (including chipset)
- Atom Z530, 1.60 GHz, 512 KB, FSB533, Hyperthreading, 2 watt, $95 (including chipset)
- Atom Z540, 1.86 GHz, 512 KB, FSB533, Hyperthreading, 2.4 watt, $160 (including chipset)

Preceding the official unveiling at IDF Shanghai, we were told my industry sources that the production cost of one 300 mm wafer with Silverthorne dies is about $10,000. Considering the fact that there are 2500 processors on one wafer, the yield rate as well as packaging, the cost of one Atom processor is apparently calculated by Intel somewhere between $6 and $8, according to our sources. This number provided some indication on Intel’s profit margin, but no clear data - as the initially announced product pricing only mirrored the package of the CPU+chipset.

However, Intel recently updated in processor pricing sheet and we now have a much better idea about the profit margin of the tiny chip : Intel is selling the processor for $20 (Z500, Z510), $40 (Z520), $70 (Z530) and $135 (Z540). Aside the fact that this pricing puts the cost of the SCH chipset in the processor package at a consistent $25 (which makes it more expensive than the two entry-level SKUs), these numbers are sure to delight financial analysts. In a worst case scenario, Atom could yield a profit margin of 150% (Z500, Z510), and in a best case scenario 1588%.

Intel mentioned to us that Atom’s selling price is not tied to its production cost, but indicated that it is priced at a level which is generally described as “competitive.” We are still wondering if it is a smart strategy to price Atom in these lofty areas and whether Intel may be compromising its market opportunity.

Create a new thread in the UK News comments forum about this subject
This thread is closed for comments
    Your comment
  • I wonder what the margin on cpu's usually is?
  • In my opinion saying "a CPU costs $8 to make, why are we paying £135?" is like saying "a windows 7 disk cost $2 to burn, why are we paying $80+" (not sure what the prices are in the US). I wouldn't be surprised if the I7 cost $20-$50 to make, in the end what you are really paying for is Intels research and design. I mean imagine how much an I7 would of cost to develop and mass produce 5 years ago.. even now it still cost allot moving from 45nm architecture. I'm pretty sure intel would of been bankrupt if they attempted that 5 years ago without any long term research or knowledge on 32nm architecture. Intel even have to create new ways of building chips at these sizes with a large success rate... it's no good having a process with only a 30% success rate.