Intel, AMD to trim chip prices
Published: 29 Oct 2001 09:43 GMT
The processor skirmishes will start again this week as Intel and AMD cut prices on their desktop chips.
According to sources, Intel is due to trim the prices on select Pentium 4 and Pentium III chips by up to nearly 30 percent. The 2GHz Pentium 4, for instance, will drop from an official wholesale price of $562 to close to an estimated $400 -- a decrease of 29 percent. The 1GHz Pentium III, meanwhile, will drop from $193 to an estimated $163, sources said.
Rival chipmaker AMD is expected to follow with price cuts of its own on the Athlon XP family, which debuted earlier this month. The 1800+ Athlon XP's price will drop 15 percent, from an official wholesale price of $252 to an estimated $215. Meanwhile, the $190 1700+ Athlon XP and the $160 1600+ Athlon XP will drop to an estimated $160 and $130, respectively. The 1500+ Athlon XP will also dip from $130 to $120.
Shoppers, though, won't have to wait to take advantage of many of the upcoming discounts. Because of an excess supply of most processors, both distributors and dealers have been cutting their prices in advance of the official price cuts. In addition, AMD sells its chips to large distributors and PC makers at discounts well below the "official" price. As a result, AMD chips typically sell for less than the posted price.
Several computer dealers, for instance, sell the 1800+ Athlon XP for between $205 and $219, and the 1700+ for $149. The 2GHz Pentium 4 already sells for $514 to $552 -- higher than the upcoming price but lower than the official price. The 1.9GHz Pentium 4, which officially sells for a wholesale price of $375 in 1,000 unit quantities, can already be picked up for $358.
The upcoming price cuts aren't as steep as the discounts that occurred in August. Instead, the cuts may be calculated to create room on the price lists of both companies for upcoming products. AMD, for example, plans to introduce a 1900+ Athlon during the quarter. The chip will run at 1.6GHz and likely outperform the 2GHz Pentium 4.
For its part, Intel plans to come out with a 2.2GHz Pentium 4 in early January, code-named Northwood, that will contain a performance-enhancing secondary cache with 512KB of memory. Currently, the Pentium 4 comes with a 256KB secondary cache.
More price cuts will likely follow the introduction of Northwood because the chip is smaller than current Pentium 4s, a factor that lowers manufacturing costs.
Analysts say that lower prices could help out the limping PC market. "People aren't feeling as rich as before," said Dan Niles, an analyst at Lehman Brothers.
AMD and Intel have been dueling over prices throughout 2001. AMD's market share jumped to 21 percent in the first quarter from 17 percent in the previous quarter -- its quickest acceleration since 1999.
In April, Intel retaliated with scorched earth prices on the Pentium 4. Besides helping the company gain market share back from AMD, Intel said in March that price cuts would also allow the Pentium 4 to replace the Pentium III inside desktops by the end of the year.
Although the chip reductions have led to cheaper prices on performance PCs, both companies have felt an effect on the bottom line. AMD enjoyed profits in the first half but reported a net loss of $190m in the third quarter and is in danger of ending up in the red for the entire year. AMD achieved an annual profit in 2000. Before that, its last annual profit came in 1995.
Similarly, Intel has seen its revenue and profits slide. In the third quarter, earnings dropped from $2.89bn to $655m in the same period a year ago -- a whopping 77 percent decline. Meanwhile, revenue in the quarter declined 25 percent to $6.5bn, compared with the year-ago quarter.
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