5.16.2007

Making Sense of Intel's July Price Drop


Intel’s recent announcement of another round of price drop in July must feel like another stake through the heart of AMD’s struggling business. If AMD lost a massive amount of market share last quarter due to Intel’s dominant product portfolio, for example a C2 Quad Core at $500, one can easily expect the hurt it will do to AMD’s if that same product drops half price. Without an existing competitive product when Intel’s price cut arrive, it’s easy to predict another decline in revenue and ASPs for AMD for the 2nd half of the year.

Without decent competition and a healthy demand for C2’s, Intel’s change in pricing can only be due to a healthy process resulting to an increased supply of top-end CPUs. Always remember that Intel prices it products at the point of ‘maximum revenue potential’. It is ridiculous to even consider that Intel is reducing prices across the board in response to a low-volume competing product that is only going to ship at the late end of the year. This reasoning would only be valid if, 1) Intel reduced prices only on directly competing products, 2) if Intel is dumb enough to reduce prices months in advance of competition and lose revenue.

There is also an increased chatter of a possible 45nm ramp pull-in from Intel. 45nm material suppliers have already increased guidance for Q2 based on orders from an ‘undisclosed’ customer. It doesn’t require a lot of thought who’s the only Fab running 45nm this year. Pulling in the price drop from the original schedule of October to July further reinforces that Intel is executing well ahead of schedule. If Intel has started loading 45nm this quarter, counting 15 weeks from wafer starts to customer built, I’ll leave it to your imagination what can be done at the start of Q4’07.

12 comments:

Anonymous said...

In other news, Digitimes reports that initial Barcelona launch frequency will be 2.3GHz. Ouch!

http://www.digitimes.com/mobos/a20070516PD210.html

As Dr. Phil would say: "how's that working for ya?"

Anonymous said...

you mean this one?

Doug Neugold, CEO of ATMI commented, "We are seeing a very high interest level in our new product offerings, and are also encouraged by the improving near-term wafer start growth expectations of many of our larger customers. - Q1'07 report

Anonymous said...

I do think part of the pricing is that Intel wants to prevent any substantial market acceptance/momentum of Barcelona.

Even if 45nm comes out 3-6 months or so after Barcelona, if K10 gains momentum early on, then Intel will still have a battle trying to recapture share. This also prevents AMD from banking a quarter or two of revenue from early adopters who are always willing to pay 2X the price (you know the people who buy the FX's...) This will slow down AMD's cash flow and word of mouth advertising (which is AMD's best form of advertising due to the abomination they call a marketing department).

Also if people starting buying $266 quad cores, what is the chance of them upgrading to a Barcelona in Q4 EVEN if Barcelon turns out to be vastly superior. This pricing gives the AVERAGE user no reason to wait for K10.

2.3 Ghz? What happened to the miraculous "dancing in the aisles" B0 stepping which was supposed to be near 3 GHz?

Axel said...

I believe that Intel's main intent with this move is to force AMD into a serious capacity crunch in 2008 by pushing quad core into the mainstream. With a 283 mm2 quad core, AMD cannot afford to have a significant bias towards quads in their product mix.

But to compete with Intel they will be forced to produce more quad and less dual, hence fewer overall CPUs sold due to capacity limits. And since many of the quads will be sold at mainstream prices, AMD will not be able to realize the margins they so desperately need. Intel, on the other hand, will make up for the lower margins with revenue through the ability to fill the quad core supply hole that AMD opens up.

Heat said...

if K10 gains momentum early on, then Intel will still have a battle trying to recapture share. This also prevents AMD from banking a quarter or two of revenue from early adopters who are always willing to pay 2X the price (you know the people who buy the FX's...) This will slow down AMD's cash flow and word of mouth advertising (which is AMD's best form of advertising due to the abomination they call a marketing department).

Very true...hard to gain market share and cash flow when their own people are saying it will be a paper launch.

2.3 Ghz? What happened to the miraculous "dancing in the aisles" B0 stepping which was supposed to be near 3 GHz?

Obvious fanboi delusions and fud....kinda like reverse hyperthreading.......

Anonymous said...

"AMD cannot afford to have a significant bias towards quads in their product mix."

What's scary is that they are somewhere near ~50% dual core right now... it's not only what happens when quad core starts creeping into the mix but also what happens to AMD's capacity when single cores are few and far between...


Unfortunately for AMD they clearly don't have a choice in server space as that space can and currently does take advantage of quad cores...Intel's quad mix TODAY in server space is rather surprising (I forget the exact percentage).

It is debatable how needed it is in desktop space, but clearly the PR alone will push this (keeping in mind not all computer purchasers will understand a faster dual core may actually be better overall than a quad core)

Compounding all of this is Intel's MCM quad is cheaper and easier to produce than native quad (both yield and speed/power bin splits) so even for a given dies size Intel is in better position from capacity situation... now throw in 45nm... a cheaper manufacturing process... no interest payments on debt...

AMD likes to state now that it is not only process technology that is needed to be successful (this is an attempt to blunt Intel's manufacturing lead). What AMD fails to understand, a "theoretically" superior design is not the only thing need to be successful... IMC/HT is great technology but does it dramatically impact mobile and desktop performance?

Anonymous said...

As a follow-up to the earlier Digitimes report, now the Taiwan MOBO makers are spilling secrets

http://www.digitimes.com/systems/a20070516PD217.html

AMD BK Q2'08

"How's that working for ya?"
- Dr. Phil (Sharikou - ya reading this?)

Anonymous said...

It would seem there's no need to rush the price cuts...

http://www.digitimes.com/systems/a20070516PD217.html

"The sources noted that AMD has informed them that the introduction of Barcelona will be delayed until August or September, instead of the originally planned June. However, the sources also noted that this schedule is still subject to change. The Barcelona CPU samples they have currently are not the final versions and bugs are still being discovered, they added."

Wonder what "demos" will be shown at computex... maybe they can figure out a way to get task manager to run at 150% on all cores?

Anonymous said...

When is a price cut not a price cut?

Answer - when your name is Scientia and you have apparently gone off the deepend in backing AMD...

"I've finally gotten a handle on those July price cuts for Intel. They are not real price cuts. The HKEPC article left out the new top speeds.

Apparently, Intel is rippling its prices down a notch on quad decktop with the intoduction of the 2.93Ghz QX6800."

When a specific chip goes down in price, that is generally considered a price cut! Apparently by introducing new model chips this invalidates the price cut in the mind of Dementia, uh, I mean Scientia...

You know it's like if you bought a 55" Sony TV for $3500 last year, and it's price is now $2500, but there is a 60" introduced at $3500, the price of that 55" TV hasn't REALLY been cut...and the consumer really gets no benefit when buying a 55" TV...

Man - has he really gone that far off the deepend? Or is he trying the Sharikou strategy: absurdity = increased hits to his site... he is quickly becoming Sharikou, jr....

Roborat, Ph. D. said...

usually when taiwanese mobo makers makes noise, they're already past pissed.

loading your production line with mobo's that won't have CPU's ready for them is a very memorable dejavu of just last quarter.

And when it comes to the Barcelona delay, i can say i'm not at all surprise. No public benchmark means not anywhere near ready. Intel's Penryn was benchmarked, now we'll see Harpertown soon.
I'd make my MOBO for that product now if i was a mobo maker.

InTheKnow said...

loading your production line with mobo's that won't have CPU's ready for them is a very memorable dejavu of just last quarter.

You are right, nobody wants to make boards that aren't going to sell. But I don't know that "loading up your production line" is quite the right way to put it.

Any shop bigger than a mom and pop operation is going to have multiple products from multiple customers running on the floor at the same time. And it doesn't take nearly as long to manufacture a PC board as it does to manufacture a microprocessor. It will take 6-8 weeks to get a processor through the FAB (exclusive of test and packaging). You can punch out an 18 layer PC board in 2 weeks (8-10 days for a premium).

So while nobody is going to be happy making boards that don't sell, it isn't quite as big a commitment of resources as making the wrong processor or chip set. You can shift your process line to making other products much more quickly.

On the other hand margins are much thinner, so every little bit hurts.

roborat, ph.d said...

Hey, that doesn't apply to me. I've got a lot and I know it hurts. Just ask lex and sparks. He he.