1.22.2007

Why start a war when you don’t need to?



In early 2006 when Intel announced their new architecture there was wide expectation that prices would stay constant at launch – Intel was expected to drop pricing only on the Pentium 4 architecture to clear out excess “sell-proof” inventory. In the meantime AMD already won a number of design wins throughout the industry, and they also had plans to finally tip the scales within Dell who, at the time, was 100% Intel. Other than potentially losing the performance crown in the high end sliver, things were looking quite good for them.

So, imagine if you will the scenario where AMD and Intel both have equally compelling “good enough” products for the mainstream, and Intel is winning the performance game – this, in a nutshell, is where we sit today.

You would never see me discount the value of the high end. It is very important to both Intel and AMD to maintain the performance lead because it tends to have a profound halo effect. That said, it took AMD many months of holding the performance crown in order to crack the mainstream - and with the help of a great management team (and equally great products) they finally wedged their way in. This is not something that will be easily lost, even if AMD lost the performance crown - which ultimately, they did.

One must understand that the high-end is a very tiny part of the market, and mainstream is where most of the volume is. Both AMD and Intel are recognized mainstream CPUs, so there’s no reason to doubt that this trend will continue for some time to come. Although winning in the high end is sweet, because in that particular space any company can charge premiums for their product, and it's probably the one place in the market that price discounting is the only way for the challenger to win business.

Knowing the above, AMD should have kept pricing constant on their mainstream products because they were already sold – and there’s no point in starting a price war when you don’t need to right? Intel didn’t have room to start a price war – instead they should really milk it for all its worth. Ferrari would never discount their cars, so why discount your part when you know it’s good? Furthermore, in the CPU business "good enough" is more than enough for the mainstream - and if you can value in other areas, such as software bundles, then why drop your pants at the same time?

Both Intel and AMD need to take a page from Nvidia’s book and post it in their cubes (perhaps a picture of Jen-Hsun Huang holding a baseball bat might help). They might also want to read some of my old blogs about price wars. The bottom line is if you have the best component, people will buy it as long as the price is reasonable. There’s no need to drop the price below “reasonable” levels unless there is a valid business reason to do so.

So why the heck are Intel and AMD eating margin when they don’t need to?

Many of you are probably wondering why I’m even writing this. Well, first it’s not really a secret. Anyone with a brain can figure out that price wars for the sake of saving market share are highly unproductive. It’s not like either company wins because the other one will quickly follow.

That said, you’re better off to innovate to win market share rather than sell junk in a box. When you strip costs to the bone you have nowhere left to go but down – and this is an extremely unhealthy position to be in.

Technologies like AMD Fusion hold huge promise for the industry – and if managed effectively AMD will pull it off (and pay down that massive debt). At the same time Intel is making some awesome moves to clean house – so it might be a good plan to keep margins strong rather than devaluing the entire tech industry.

I’m just a simple guy, but this isn’t rocket science man. There’s no strategy in “eye for an eye” chess games. I would rather see AMD and Intel make a fair margin so they can continue to put more resources back into R&D to design more innovative products. This goes out to your product marketing people - wake up guys, don't make reactionary decisions.

35 comments:

Anonymous said...

One word answer "ego"

Deep Thought 86 said...

Intel's response seems to have as much to do with pride as business logic. With Pat Gelsinger's public "I hate AMD" moment and Otellini proclaiming "I continue to believe that our shareholders are best served by Intel using its capacity to retake market share that we lost this (past) year," (see here) it looks like Intel is out to salvage wounded pride. They probably figure they have the cash reserves and manufacturing capacity to hit and hurt AMD while they're struggling with massive debt and limited resources.

Great for consumers, not so great for Intel/AMD. The days of overwhelming marketshare dominance are gone I think, and with AMD ramping up production and Intel building 3 45nm plants there's basically going to be a major glut of capacity in 12 months.

Intel is cutting off their nose to spite their face, and far from being seen as saviors Otellini and Gelsinger will go down in history as the executives who presided over Intel's decline into a manufacturer of a commodity item.

Anonymous said...

It's always great to see you post, Rahul. I don't have much problems with price wars. After all, it means cheaper stuff for me. But really, what I believe in, is competition. AMD did make Intel wake up, so whatever they are doing now, it appears to be all part of that and I have no qualms about it.

I just hope AMD can bring on something that can, if not crush Core, at least make it even with Core. :)

Anonymous said...

Hi Rahul,

Great blog and industry update! However, there's one thing I'd like to know...What is up with AMD's upcoming products? They have been stunningly quiet, and with all the negative news recently (Sun, AMD's lower margins, etc) it's uncomforting to see AMD continue to stay quiet. We all want AMD to survive (and they will!) but we also want them to thrive to keep CPU prices low and innovation strong. what's up???

CL

Anonymous said...

Please. As if CPUs don't cost enough. A high CPU about 4 times the cost of a high-end GPU - memory and board prices excluded. Or as if these companies can't shift resources around to fund R&D if they are in a pinch. Or here an idea - they can go fabless if they don't have sufficeint capital recources. Since when is being innovative being about pouring money into R&D? The Inquier has it right - come off it Rahul.

Anonymous said...

You are aware that if they went along and said to each other "We'll raise our prices if you raise yours" then this would be illegal.

Having your execs sent to prison and massive fines imposed on you tends to have a negative effect on R&D budgets too.

TheKhalif said...

I'm really glad that someone respected in the industry has finally said this. It figures it would be you. I have gotten into serious flame wars about this since it started.

All I can say is,

ALL HAIL THE DUOPOLY!!!!

Anonymous said...

Price fixing in a duopoly is also illegal in most parts of the world.

Anonymous said...

This is a rather weak and self serving column. Truth is, with the reduction to 65 and 45nm processes, and with AMD aiming to increase its market share at Intel's expense, even with addition of more cores, there will be too many chips chasing too few buyers. Intel has decided that its in their best business interests not to cede additional market share and feels a need to recoup the market share they recently lost. With cheaper production and a better product, they may very well succeed. Accepting some near term pain to regain their dominant position makes good business sense and as an Intel shareholder I agree with the decision. Furthermore, there is no evidence that this battle for market share is hurting the speed of processor development. In fact, if anything, the need to stay ahead in this competitive market has made it even more imperitive to get new designs out more quickly.

I hope Rahul's future columns return to the quality of his previous ones. This one is for the birds...

Regards,
Alan

Anonymous said...

A quick check of Voodoo's site only shows top end CPUs in their rigs which means that Voodoo would not benifit from price cuts on "mainstream" CPUs, but of course most of their competitors would, could that have something to do with your feelings toward these cuts?

Anonymous said...

Hmm it seems like you dont see that full scope here. Its sad to see someone advocating higher prices. Very sad. So ppl like you and others with fat poctets can get ritcher since thats were the money always goes. --> The allmighty shareholders. Last time I visited this site.

Rahul Sood said...

Anonymous said...
Hi Rahul,

Great blog and industry update! However, there's one thing I'd like to know...What is up with AMD's upcoming products? They have been stunningly quiet, and with all the negative news recently (Sun, AMD's lower margins, etc) it's uncomforting to see AMD continue to stay quiet. We all want AMD to survive (and they will!) but we also want them to thrive to keep CPU prices low and innovation strong. what's up???


I think AMD knows what their current limitations are. They aren't blind to the fact that power is important. I believe they were caught with their pants down, and they probably took too long to finish the acquisition with ATI. That said, the quickest way to recovery is admitting you have a problem, and AMD management is all about being overly critical of themselves.


Anonymous said...
Please. As if CPUs don't cost enough. A high CPU about 4 times the cost of a high-end GPU - memory and board prices excluded. Or as if these companies can't shift resources around to fund R&D if they are in a pinch. Or here an idea - they can go fabless if they don't have sufficeint capital recources. Since when is being innovative being about pouring money into R&D? The Inquier has it right - come off it Rahul.


I disagree. Mainstream CPUS are dirt cheap, and CPUs cost much more to produce (try owning a fab and you'll see what I mean).

Anonymous said...
You are aware that if they went along and said to each other "We'll raise our prices if you raise yours" then this would be illegal.


Yes, and I'm not suggesting they do that. I'm suggesting that they don't start a price war when it's not strategicly a good move.

Having your execs sent to prison and massive fines imposed on you tends to have a negative effect on R&D budgets too.

Having words put in your mouth is also pretty crappy too.

TheKhalif said...
I'm really glad that someone respected in the industry has finally said this. It figures it would be you. I have gotten into serious flame wars about this since it started.


I am starting to see that here :)


Anonymous said...
Price fixing in a duopoly is also illegal in most parts of the world.


Yes, yes it is. ..and I don't advocate it either.


Anonymous said...
This is a rather weak and self serving column.


How? The high end is the only place that price wars don't really hurt - in fact the high end is where most price wars should remain.

Truth is, with the reduction to 65 and 45nm processes, and with AMD aiming to increase its market share at Intel's expense, even with addition of more cores, there will be too many chips chasing too few buyers. Intel has decided that its in their best business interests not to cede additional market share and feels a need to recoup the market share they recently lost. With cheaper production and a better product, they may very well succeed. Accepting some near term pain to regain their dominant position makes good business sense and as an Intel shareholder I agree with the decision. Furthermore, there is no evidence that this battle for market share is hurting the speed of processor development. In fact, if anything, the need to stay ahead in this competitive market has made it even more imperitive to get new designs out more quickly.

Agreed, however AMD won't increase their market share by dropping their price and degrading their brand. They need to innovate, like they did before, in order to win market share. Look what Intel is doing now.

Anonymous said...
A quick check of Voodoo's site only shows top end CPUs in their rigs which means that Voodoo would not benifit from price cuts on "mainstream" CPUs, but of course most of their competitors would, could that have something to do with your feelings toward these cuts?


No, just the thought of a cut throat commoditized market with little innovation bothers me a tad.

Anonymous said...
Hmm it seems like you dont see that full scope here. Its sad to see someone advocating higher prices. Very sad. So ppl like you and others with fat poctets can get ritcher since thats were the money always goes. --> The allmighty shareholders.


Sad to see that you haven't looked at the full scope actually - because believe me, I have.

Last time I visited this site.

Now you know that's not true ;)

Rahul Sood said...

Anonymous said...
Hi Rahul,

Great blog and industry update! However, there's one thing I'd like to know...What is up with AMD's upcoming products? They have been stunningly quiet, and with all the negative news recently (Sun, AMD's lower margins, etc) it's uncomforting to see AMD continue to stay quiet. We all want AMD to survive (and they will!) but we also want them to thrive to keep CPU prices low and innovation strong. what's up???


I think AMD knows what their current limitations are. They aren't blind to the fact that power is important. I believe they were caught with their pants down, and they probably took too long to finish the acquisition with ATI. That said, the quickest way to recovery is admitting you have a problem, and AMD management is all about being overly critical of themselves.


Anonymous said...
Please. As if CPUs don't cost enough. A high CPU about 4 times the cost of a high-end GPU - memory and board prices excluded. Or as if these companies can't shift resources around to fund R&D if they are in a pinch. Or here an idea - they can go fabless if they don't have sufficeint capital recources. Since when is being innovative being about pouring money into R&D? The Inquier has it right - come off it Rahul.


I disagree. Mainstream CPUS are dirt cheap, and CPUs cost much more to produce (try owning a fab and you'll see what I mean).

Anonymous said...
You are aware that if they went along and said to each other "We'll raise our prices if you raise yours" then this would be illegal.


Yes, and I'm not suggesting they do that. I'm suggesting that they don't start a price war when it's not strategicly a good move.

Having your execs sent to prison and massive fines imposed on you tends to have a negative effect on R&D budgets too.

Having words put in your mouth is also pretty crappy too.

TheKhalif said...
I'm really glad that someone respected in the industry has finally said this. It figures it would be you. I have gotten into serious flame wars about this since it started.


I am starting to see that here :)


Anonymous said...
Price fixing in a duopoly is also illegal in most parts of the world.


Yes, yes it is. ..and I don't advocate it either.


Anonymous said...
This is a rather weak and self serving column.


How? The high end is the only place that price wars don't really hurt - in fact the high end is where most price wars should remain.

Truth is, with the reduction to 65 and 45nm processes, and with AMD aiming to increase its market share at Intel's expense, even with addition of more cores, there will be too many chips chasing too few buyers. Intel has decided that its in their best business interests not to cede additional market share and feels a need to recoup the market share they recently lost. With cheaper production and a better product, they may very well succeed. Accepting some near term pain to regain their dominant position makes good business sense and as an Intel shareholder I agree with the decision. Furthermore, there is no evidence that this battle for market share is hurting the speed of processor development. In fact, if anything, the need to stay ahead in this competitive market has made it even more imperitive to get new designs out more quickly.

Agreed, however AMD won't increase their market share by dropping their price and degrading their brand. They need to innovate, like they did before, in order to win market share. Look what Intel is doing now.

Anonymous said...
A quick check of Voodoo's site only shows top end CPUs in their rigs which means that Voodoo would not benifit from price cuts on "mainstream" CPUs, but of course most of their competitors would, could that have something to do with your feelings toward these cuts?


No, just the thought of a cut throat commoditized market with little innovation bothers me a tad.

Anonymous said...
Hmm it seems like you dont see that full scope here. Its sad to see someone advocating higher prices. Very sad. So ppl like you and others with fat poctets can get ritcher since thats were the money always goes. --> The allmighty shareholders.


Sad to see that you haven't looked at the full scope actually - because believe me, I have.

Last time I visited this site.

Now you know that's not true ;)

Anonymous said...

"I would rather see AMD and Intel make a fair margin so they can continue to put more resources back into R&D to design more innovative products."

Is a ~50% Gross margin (Intel) not a fair/healthy margin? People tend to think it's unhealthy s they are comparing it to historical ~60%, but factoring Intel is also selling flash, chipset and other lower margin parts, a 50% gross margin seems healthy to me.

Anonymous said...

Hi Rahul,

Sorry about my lead in and exit comments. I got carried away. Your column is always interesting and stimulating.

The self serving comment wasn't about Voodoo. It was a reference to the billions of people on this planet that can't afford any kind of computer. There's a lot to be said for cheaper CPUs. Its really important for everyone to keep this in mind, even guys building very high end processors.

You said:

"however AMD won't increase their market share by dropping their price and degrading their brand. They need to innovate, like they did before, in order to win market share. Look what Intel is doing now."

Hecter has expended a lot of effort building up the AMD brand and he can be expected to do whatever he can to maintain it. That said, Intel is driving the price war and AMD will have to remain price competitive to try to maintain market share, especially if Intel is perceived to have better products. Of course AMD needs to innovate but this takes time and a lots and lots of money that AMD may not have. It took a long time to develop the Hammer product line. It will probably take a long time to bring collaborative efforts with ATI to fruition too.

Another issue that doesn't get enough air play is that, as you know, AMD has been capacity constrained for a while now and this made the deal with Dell a two edged sword. While its great having the account, AMD is having to sell large quantities of low and mid level CPUs to Dell at very low margins rather than building and selling higher margin CPUs.

Anyway, I always enjoy reading your blog and wish you continuing success at HP.

Regards,
Alan

Anonymous said...

Rahul said: "So why the heck are Intel and AMD eating margin when they don’t need to?"

An interest word, "need." Perhaps Intel has a clearer sense of what it needs to do, long-term and/or short-term, than you?

Perhaps Intel would like to keep AMD's stock price in its usual home in the 10-20 range? This would keep yielding a nice long-term return to AMD shareholders of 0.0% since the mid-1980s. (Much nicer rewards for the guys running the show, but that's another story.)

As to fair "profit margin": well, perhaps Intel is shooting for improving its long-term (discounted) total profit, not its short-term profit or profit margin.

Duopoly may be pleasant, but monopoly would be sublime.

However, I did enjoy your temperance sermon. In fact, I think all the market should all drink to it.

Rahul Sood said...

Alan, you are a gentleman. There's no need to apologize - I respect anyone that can call me out on my blog while using their real name. That to me shows conviction, and I respect your opinion.

Anonymous said...

I guess this sums up Rahul's feelings about his own customers: charge them as much as you can possibly get away with.

I expect another blog tomorrow where he tries to justify his highly disturbing position that it's OK for a company to overcharge customers.

Ever heard of Moore's Law? I bet you have...

Anonymous said...

Screening your comments again?? Just because you know you don't have a leg to stand on when you post crap like that on your blog doesn't mean your readers should be missing out on intelligent discussion.

Anonymous said...

Rahul - Mainstream CPUs are dirt cheap relative to high-end CPUs, but not to mainstream GPUs, which are far cheaper. That's why the average price of CPUs is so much greater than GPUs. But obviously you know this.

If owning fabs isn't cheap, than why does Intel own them? Oh no, better question - why does AMD and their so critical and magnificent management team continue to pore billion upon billions of dollars into new ones. And simultaneously make an acquisition of another struggling company (which did not take long to close as you intimate. There is no law that says ATI couln; go fablous to save money and innovate. They obviously should have prior to buying AMD. Looks like the damage to the balance sheet is already done.

Jeach! said...

When it comes to peoples reasons as to 'why' Intel is challenging AMD on a price level... well, I don't agree!

Intel is NOT having a price war in order to regain market share! Nor is it for pride or ego. A lot less to do with bragging rights to the performance crown.

When you look at the situation at an altitude of 50 km, you see the big picture. Intel has engaged AMD in a price war at the cost of its own profits in order to deny AMD enough money to add on more capacity! CAPACITY is the long term objective for Intel.

You can have an amazing product, but if you can't build it, you won't sell any. It doesn't matter if AMD or Intel has the better processor because both companies will do well... so long as you have the capacity to build it.

In the past, Intel successfully denied AMD the luxury of adding extra capacity. But it is getting harder and harder for Intel to do this - regardless of its latest efforts (price war).

So in the end I believe AMD is the clear winner in the last few years.

Remember Rahul, the price war is only Intel's primary strategy in the CAPACITY WAR! It's second strategy is trying to create a race in the manufacturing technology (ex: 65nm to 45nm), which relates to capacity.

Anonymous said...

Stimulated by the growing number of observed instances of predatory pricing and the emergence of modern game theory which provided the tools to analyze complex strategic situations, economists developed new economic theories beginning in the early 1980's. This new body of research challenges the static framework of perfect information on which McGee had relied. The new analysis explains predatory pricing in a dynamic world of imperfect and asymmetric information in which strategic conduct can be profitable. Under this analysis the predator seeks to influence the expectations of an existing rival, a potential rival, or perhaps most striking of all, the prey’s creditors, to convince the rival that continued competition or future entry into the market will be unprofitable. As summarized by Paul Milgrom—

Thus, for example, a firm in an industry with rapid product change might cut prices sharply in answer to new entry in order to discourage the new entrant from continuing an active product development program. Whether the entrant attributes its lack of profitability to its high costs, to weak market demand, to over-capacity in the industry, or to aggressive behavior by its competitor, it will properly reduce its estimate of its future profits. If its capital has other good uses, this might lead it to withdraw from the industry. If not, it may nevertheless be dissuaded from making new investments in and developing new products for the industry. At the same time, other firms may be deterred from entering the industry. If any of these things happen, the predator benefits.

As this passage suggests, predatory pricing may pose a special threat in rapidly growing, high technology industries, which often involve intellectual property and continuing innovation.36 Developing the strategic approach to predatory pricing, economists have formulated several coherent theories. In these theories, which include financial market predation and various signaling strategies, predatory pricing is a rational, profit maximizing strategy.37 While the formal economic proof of the theories is complex, their intuitions can be simply described. The theory of financial market
predation challenges McGee’s assumption that the prey can readily obtain capital under predatory conditions, observing that the providers of capital use the threat of termination when profits are low as an incentive scheme to induce the firm to repay its debts. If predation causes the prey's profits to fall, the banks observe the decline, but cannot tell whether it is caused by predation or inefficient performance; and even if a bank could identify predation, it would be unable to write an enforceable lending contract contingent on its occurrence. Under these circumstances, lending to the prey becomes more risky, and banks or other investors reduce or withdraw their financial support.

http://www0.gsb.columbia.edu/faculty/pbolton/PDFS/BBRPrincetonDP.pdf

crystal clear said...

Quote-"that the high-end is a very tiny part of the market, and mainstream is where most of the volume is."

Response-Todays High-end is tomorrows mainstream & mainstream(of today) moves down to low end.

Intels ability to launch a line of CPUs is stunning & they come in quick successions.From R&D to manufacturing.From Core to Quad & then 8 cores up.
They have the financial/manpower/manufacturing power that moves at high speeds,that barely gives AMD the time to settle down.
Thats the stratergy,
beat them(AMD)
with technology & prices & flood the market.
If you have the "tit" I give the "TAT" & the ding & dong.

The time span between today to tomorrow is very short as technology races ahead at very high speeds.

Quote-
"in the CPU business "good enough" is more than enough for the mainstream -

Sorry-WRONG
good enough WAS more than enough (yesterday).
Good enough is not enough (today)
Good enough will be barely enough
(tomorrow)

Thats the CPU business today & tomorrow.
You have meet the buyers quest for
speed/power/price-SPP.
High computing speeds,high powered
components & cheap prices-CPUs,GPUs,Memory,Hard drives,Optical drives & the rest.
Thats the real buyer of today-they want the maximum JUICE OUT OF THEIR MONEY & THEIR COMPUTERS.

Sorry my friend you got it all wrong.

Rahul Sood said...

Anonymous said...
I guess this sums up Rahul's feelings about his own customers: charge them as much as you can possibly get away with.

I expect another blog tomorrow where he tries to justify his highly disturbing position that it's OK for a company to overcharge customers.


Sounds like my competition reads my blog as well.

Ever heard of Moore's Law? I bet you have...

..and your point is?

Anonymous said...
Screening your comments again?? Just because you know you don't have a leg to stand on when you post crap like that on your blog doesn't mean your readers should be missing out on intelligent discussion.


You again? :)

Anonymous said...

Hi Rahul, thanks for responding...

So another question, so do you think AMD has some goods up their sleeves in the coming months. It's been 3+ years since they last updated their core so their engineers must've come up with something fantastic, right??? Or do you think they totally underestimated Intel's ability to respond and they are back to the old drawing board trying to come up with a response?

Thanks again!
CL

Jeach! said...

[...] do you think AMD has some goods up their sleeves in the coming months. It's been 3+ years since they last updated their core [...]

Sometimes I have nightmares that AMD spent their time and money on consumer electronics like fancy PVR's and chips for phones and equipment for the living room, all the while neglecting their processor business... just to realize that I'm not dreaming! Wake up AMD!

Anonymous said...

AMD (2006) : “We do have multiple generations under design now,”
AMD Adds More Engineering Muscle

Anonymous said...

Rahul - what is a "fair margin"? Is 50% not a fair gross margin to support R&D?

And is the "extra margin" really feeding into R&D? It would be interesting to do a correlation between gross margin and R&D spending (perhaps normalized to either earnings or revenue).

I think one benefit of this "price war" is that it clearly has focused Intel (and I suspect AMD as well) on internal inefficiencies. This benefit will allow further price reductions or allow the money to be spent for R&D or actually given back to the company owners (the stockholders).

I really don't understand your "fair margin" belief without you explaining what fair margin is...

Anonymous said...

Rahul,

I noticed you are becoming snippy.. Please do not turn into a Sharikou!

TheKhalif said...

I think all of you are missing the point of not having a price war. A price war means DROPPING prices artificially (X2 is still worth what it was last year - Core 2 is just worth more).

A collusion case could be made for that also.

It looks like AMD has increased share but it's hard to say how much was from normal industry growth in the quarter.

It took a lot of balls for them to do this while they had to take the hit for ATi and it's impossible to know if any lack of growth would have been offset by the higher prices.

I sensed that they had a good grasp on Barcelona because of this move and if the 40% per core numbers they are stressing over X2 are true then they will be in a much better price position with Kuma.

The cutting back of SKUs will also make for a better cost structure especially for 65nm.

For this to work they have to move Chartered to Brisbane prod quickly since Barcelona needs new masks and Fab36 is not expected to go 50% until mid2007.

Those big Barcelona, Agena, Budapest dies are going to cut down on dies/wafer even at 300mm.

Again, AMD has to be the ballsiest company in the world.

Anyway hopefully at that point they will intro those at higher prices than the current gen.

I guess they'll be worth it then.

BTW, Rahul, when are those spanking new QFX Omen's going to appear, for Vista launch?

Anonymous said...

AMD:

2007 native quadcore "K8L" and "Griffin" (Mobile)

2008 New Core (codename Bulldozer, "K9")

Late 2008/early 2009 Fusion (Bulldozer + GPU)

2010 "K10" ?

Malsum said...

As and avid reader of this blog, and the comments that follow, I get a laugh out of all the people who do not have the guts or balls to leave their name to what they have to say (cowards).

Sure anyone can make a comment, but with out a name to it, it's just as credible as the National Inquirer (full of shit).

I find Rahul's comments and observations of our industry insightful, I put more credibility to what he has to say, than all the anonymous haters out there. I do not always agree with what he has to say, but I do respect his views.

howling2929 said...

Rahul:

Maybe it makes perfect strategic sense for Intel to initiate a price war. As long as there is no dumping, is legal, and by keeping the ASPs low enough, they deny AMD the posibility of increasing FAB Capacity.

This hurts particularly bad AMD+ATi because every chip that is produced off house (that means all of ATi´s production and each AMD chip that has to be produced by Chartered or IBM) is more expensive (AMD´s markup+Maker Markup).

By keeping prices low when AMD is in a bad financial shape, Intel can keep AMD capacity constrained. Also, look at how Intel is sellin Non-"CopyExactly!" fabs to finance the "CopyExactly!" Fab construction in China (before the Chinese Govt. eliminates subsidies to Foreign companies) and you will see where the prices are headed for a few years.

Also, each new architectural node or core count jump is an opportunity to stop the price war, so, in the Microprocessor industry this may not be such a bad think.

Keep up your good blog!

Anonymous said...

The price war is to erase AMD's market share, pure and simple.

Intel needs to pin them to 8-10% of the processor market. It's that simple. The means, methods, and execution are irrelevant.

In the 90's it was tech. In the early 2000's it was marketing. In the later 2000's it will be manufacturing prowess that will turn back AMD.

AMD is starting to carve out a niche for themselves; they released a new form factor recently. They are starting to define themselves independently of Intel.

For there to be "stability" in the hardware world (similar to the Microsoft model in the OS world), this is unacceptable in Intel's view.

And, if given the choice, I think most consumers who bought Betamax would agree. Any time you have divergence in technology vehicles, a group of consumers loses.

No one loses as long as there is an open standard or an industry leader who sets the standards.

Could you trust AMD to not diverge and create an essentially incompatible architecture and force consumers to choose? Witness Athlon 64 and the 64-bit gambit. Thankfully AMD lost and we have 32-bit Vista as the dominant OS for the foreseeable future.

chrispycrunch said...

AMD's 4x4 will bring them back on par with Intel. Until then, Intel's e4300 value conroe might help the company regain some market share.

Intel now rules the high end with the extreme chip. It's quad core is nice too. If it benefits by supplying for apple, and dominates the laptop market, then I don't see why the two companies can't be friendly competitors.