Intel Gets Out of a Brutal Business

Chip giant Intel (NASDAQ: INTC), best known for its PC and data center processors that have long dominated both markets, is also one of the leading manufacturers of NAND memory chips, which are used in solid-state drives and smartphones for data storage.

While Intel's core business is extremely (and consistently) profitable, the memory chip business is a very different story. NAND chips are commodity products, meaning that chips from different manufacturers are largely the same. Most people have no idea what company manufactured the NAND chips in their smartphones. They don't know because it doesn't matter.

Prices for commodity products are dictated by supply and demand, and NAND chips are no different. Intel has no real pricing power in the NAND chip business. If there's an oversupply of chips, prices fall. If there's an undersupply, prices rise. This leads to sometimes brutal cycles where prices can fall off a cliff, making it next to impossible to turn a profit.

Source Fool.com