AMD & Intel Price War -- Awwww, Yeah!

[Lemur]

This is the kind of news I love to hear.

Spoiler Alert, click show to read: 

Computer Hardware & Software
AMD, Intel Race to the Bottom

Chris Kraeuter, 06.28.06, 5:55 PM ET

Burlingame, Calif - Advanced Micro Devices and Intel both wrap up their fiscal quarters this week. It can't have come soon enough for either of them: The two chip giants have been engaged in a brutal price war that may force them to cut their financial forecasts.

The stocks of both companies are already in the doldrums, but more pain could be ahead if one or both have to issue financial warnings in the coming weeks. That scenario is plausible, given that both are looking at significant price cuts as the only way to boost sales.

The two companies are once again locked in a situation where pricing will help consumers but not themselves. The situation is especially acute now that Microsoft's Vista operating system won't be around during the holiday sales season to stoke demand.

Intel , the largest chipmaker in the world, has been fighting back with its scale and dropping prices on chips in an effort to throw off inventory and stem market share losses to AMD. AMD has responded by cutting prices on some products as well.

"Suppliers are not the winners in a price war," says analyst John Lau with Jefferies, who reduced his estimates already and expects more reductions ahead.

Intel cut prices in May on its dual-core Pentium D chips by up to 50% and on its lower-end Celeron D chips by up to 43%. Additional cuts of more than 40% for dual-core Pentium Ds and more than 50% on single-core Pentium IVs are slated for late July, according to reports from Merrill Lynch analyst Joe Osha.

AMD has been forced to respond, with analyst Hans Mosesmann of Moors & Cabot finding in early June 30% reductions by AMD for its low-end desktop chips and predicting possible cuts for high-end chips as well.

Executives at AMD have acknowledged the potential impact of Intel's price cuts on their business. But they argue that they offer value by providing better products that give them a degree of pricing power.

That may change in July, when Intel launches its Core 2 Duo desktop chip, which will replace its Pentium lineup. Even in the first quarter, ahead of last week's Xeon product launch from Intel, AMD cut prices on its server chips in order to gain market share.

Investors have already responded to the pricing war by selling both stocks. AMD's share have dropped 26%, to $24, in the last two months, while Intel shares are down 6%, to $18.36, in the same period.

Intel already lowered its full-year sales targets in April, to $37.6 billion, a 3% decline from 2005 (see: "Scorched Earth"). Some analysts say even those goals may be a stretch. Thomson Financial says analysts are projecting a full-year sales range of $34.4 billion and $40.4 billion, with the average settling around $36.5 billion.

Intel doesn't offer guidance on profits, but analysts have been cutting targets here too: The current consensus prediction for net income is $5.3 billion, or 91 cents per share, for the full year, down from $1.06 per share three months ago and 94 cents per share two months ago.

If Intel takes another whack at its targets, consensus estimates will have to fall again. Analysts are currently predicting sales of $8.3 billion in the second quarter, then a 10% jump, to $9.1 billion, in the third quarter, and another 12% jump, to $10.2 billion, in the fourth quarter.

Those would be remarkable leaps even in a blazing chip market, let alone one with inventory bloat and price pressures. Even during the boom of 1999 and the stellar year of 2004, Intel maxed out at sequential growth of 12% in the fourth quarter, while only managing 5% growth in the preceding quarter, notes Bill McClean of research firm IC Insights. Intel is slated to report financial results July 19.

AMD provides even less financial guidance than Intel, predicting general sales targets just one quarter in advance. For the current period, AMD predicted sales would be "flat to down slightly" from the last quarter.

Analysts currently have AMD's sales at $1.31 billion, down 1.5% from the previous quarter. For the rest of the year, AMD's sales are expected to increase 7.6% in the third quarter and 11% in the fourth quarter. For the full year, that would yield sales of $5.61 billion, up 42% from last year.

In April, executives acknowledged the potential for price cuts from Intel but maintained that their flat-to-down-slightly goal represented a cautious approach. The company reports results in mid-July. Only then will investors find out if it was cautious enough.

[tibilicus]

I don't care how cheap Intel will be im a AMD fan.

One of those crazy over the top ones.

[Lemur]

Hey, there's polenty of room in this world for die-hard AMD fans. But a price war between the two chipmakers benefits everybody. That's what has me grinning -- especially since I intend to replace my old PC sometime this summer.

[tibilicus]

How about a cheap AMD dule core with the price drops duel cores will drop alot. I have a 4200+ x2 and although I havn't really had to test it yet it seems to do the job very well.

And of course you wouldn't want an Intel chip would you Lemur?

;)

[Lemur]

I love AMD, but in a fickle way. If Intel releases the Conroe and it's all that and a bag of chips, and the price is right, I might jump into bed with them. We shall see.

Point of fact, I'm waiting to see how Conroe shakes out before I build my new machine. I want the new box to last as long as the last one, i.e., four years.

[DukeofSerbia]

I don't care how cheap Intel will be im a AMD fan.

Agree. AMD + nVidia cheapset are the best combination.

But the new Intel Dual Core are pretty good.

[tibilicus]

Im personly running my AMD 4200+ x2 with an Asus ATi EAX1600 Pro 512mb which does the job great. Although you are right seemign most AMD chipsets come with Nivida on bored grpahcis so that and Nividia grapahics card are more compatible in a way.

And yes new Intel duel core is good but AMD duel core is better.

And Lemur you can't get a conroe! It's an intel chip! The sort of chip that comes in horrible pre made pc!

;)

[tibilicus]

Also a more interesting topic conroe, the death pf the pentium 4 chip?

[naut]

Hey, there's polenty of room in this world for die-hard AMD fans. But a price war between the two chipmakers benefits everybody. That's what has me grinning -- especially since I intend to replace my old PC sometime this summer.

Same here.

One of my computer's CPU's melted , so this is definatly good news.

[hoom]

I'm a die hard AMD fan too but I gotta say that Conroe is very tempting on account of taking back the lower clock + more work per clock ethos that held AMD in good stead through the P4 years.
Yup, thats right, Conroe does more per clock than A64 & intel can pump them out on 4 fabs at 65nm with 300mm wafers while AMD doesn't yet have even one fab fully up at 65nm.

There are only 4 things I hold against Conroe:
Its an intel chip.
It doesn't have an onboard memory controller.
AMD anti hyperthreading if it turns out to provide a real boost & intel can't release its own version for conroe.
Its from intel.

Bring on the price war I say!

[Papewaio]

Apparently Conroe will not allow SLI on Nvidia cards as Intel has made a deal with ATI.

A quick look at the history of PCs and who does the best? The ones with the most open/adaptable set... in Nvidia suddenly drop their manufacturing costs and pass that onto customers it will drop the viability of getting Conroe chips... etc etc.

[edyzmedieval]

Apparently Conroe will not allow SLI on Nvidia cards as Intel has made a deal with ATI.

You have to be kidding.
If so, I'm switching to AMD FOREVER.

[Boohugh]

Apparently Conroe will not allow SLI on Nvidia cards as Intel has made a deal with ATI.

Surely that could be challenged in courts as anti-competitive as it involves two companies colluding to close off a large segment of a market...

On topic, although in the short term this may be good for consumers as it means lower prices, I'm concerned a price war could have a longer term negative impact. The price war will drive down profits, which means less investment into R&D, possibly causing CPU's to act as a bottleneck in computer systems as they won't be able to keep up technologically with other components.

[Lemur]

If the no-SLI rumor is true, I guess I will stay an AMD kinda guy. And why not, eh? My OC'd Barton-core Athlon has served me well ...

[hoom]

Meh, if I go conroe I won't be fussed about no SLI.

[Sir Robin]

The price war, in a way, has already begun.

Dell is starting to offer some major discounts on their systems in, probably, an attempt to clear out their old Intel chip inventories.

As a Dell EPP customer I normally get a twelve percent discount. Dell sent me a one time use coupon for 30, 50, or 75% percent off.

Used it to get a $3,600+ XPS 700 for $2,100. While it may not be conroe I figure I can live with an XE 965 for a couple of years, especially when it has a 7950 GX2.

So even if you don't plan to go Conroe and don't mind Intel you should start seeing major discounts in July even on the big PC builders' top systems.

Now if Dell can get that bloody Mobo configuration issue keeping the XPS 700's from shipping yet I will be a happy man.

[orangat]

Even if the rumour is true, there are always Via, Nvidia chipsets that will support Conroes and sli.

[edyzmedieval]

Yeah, but I think AMD is starting to build more efficient and more powerful processors.

I like the smaller companies.

[orangat]

The Conroe is the cooler running more efficient processor with higher ipc.

[hoom]

Ahh, its only the intel chipset that supports crossfire but not sli?
That makes much more sense.
If you want conroe + SLI buy a mobo with nvidia chipset.

[Papewaio]

The Inquirer

Intel is in the bed with ATI and signed a cross-licensing agreement quite some time ago, the upshot of which is that it officially supports ATI's Crossfire on Intel 975/965 boards. We hear that Intel doesn’t want to let Nvidia's SLI to run on its boards, at least not officially.

There will no-doubt be a leaked driver that will allow such a scenario, but even if the high-end tweakers society might be happy about it, none of the system integrators or OEMs will make such a machine as the driver would never be official and WHQL.

So it might be an undocumented feature that they 'accidentally' put in place. There is nothing stopping a manufacturer only making Mobos for certain hardware, that is fairly common. What isn't is making Mobos not work with a large slice of the market.

Still early days and it might be bypassed by Intel getting pressure to release a driver set, but it might also indicate poor support for the config in the future.

[edyzmedieval]

So, if we have an Intel Conroe and nVidia Chips in SLI, this means we're gonna get busted if someone finds out?

Stupid. I'm switching to AMD.

[shifty157]

So, if we have an Intel Conroe and nVidia Chips in SLI, this means we're gonna get busted if someone finds out?

Stupid. I'm switching to AMD.

No you wont get 'busted'. It just means that average Joe Idiot who wants to buy a computer wont be able to get Nvidia SLI with a Conroe CPU from the manufacturer. Customization is NOT illegal.

The reason a huge price war is starting up is because of Conroe. Conroe is supposed to come out late July (some sources say on the 27). Prelimerinary public benchmarking of Conroe has placed it well above pretty much anything else out on the market including anything AMD and Intel have out already. AMD wants to boost its market share beforehand because they know theyll be losing market share after the launch until they can come up with something to compete. Intel wants to get rid of its supply of P4 chips and other older chips before Conroe comes out because theyll be obselete and out of production when it does.

If you look at the sechduled price cuts youll find that the largest ones are coming around July 20 which is one week before Conroe launches. That doesnt seem like a very large window for selling off supply but you also have to figure that Conroe will be expensive when it comes out meaning alot of average people wont want to spend that kind of money. You also have to figure that the availability of Conroe CPUs wont be very good.

So yes the price war is good because it means lower prices but personally Ill be getting a Conroe when it comes out because even though the price will be hefty you just cant argue the performance figures.

And to whoever said that the price war will reduce R&D you couldnt be more wrong. Intel and AMD know that the only way to succeed in such a heated competition is to have the better chipset. They would never cut their R&D budget because that would mean losing technological ground to their opponent which could translate into a significant loss in market share if the opponent makes a significant breakthrough. No the R&D budget can never be cut. Itd be unthinkable for either of them. Intel can afford the price cuts because itll be cutting alot of chips from production resulting in lower overhead costs. Also the P4s are such a long running and successful line that theyve already more than paid for themselves. AMD may not be able to afford the price cuts (although they arent cutting their prices nearly as much as Intel is) but the short term gain is more desirable not to mention theyll be coming out with their new line of CPUs this winter.

[x-dANGEr]

Just one question.. Does a CPU matter that much?! I can't see a difference between a P4 and another, wheather one old or another new ?!

[shifty157]

Well CPU stands for Central Processing Unit and thats exactly what it is. Any information that your computer deals with goes through your CPU at least once. So yes your CPU is very important because it basically runs your computer.

So obviously a faster CPU can handle more things and faster. For the most part you can look at the GHz number for a relative indication of how fast a CPU is compared to others.

Obviously you wont notice a difference when youre running simple application like a word processor or simply surfing the internet. Its when you get into more demanding tasks that a fast CPU becomes more important. There are some very technologically advanced games out on the market now that require a very good CPU to handle everything thats going on at once. Or if youre like me and you have RTW, 3dsmax8, Photoshop 7, and a few other applications all running at once and youre switching back and forth between all of them then a fast CPU is necessary. Editting movies is another indication fo where a good CPU can really help out.

The other reason that you dont want a cheap CPU is because you dont want to push your CPU to its limits for long periods of time on a regular basis. Overclocking your CPU is almost always a bad idea. So much energy is going through so small space that your CPU can start to deteriorate and (if you dont have a good cooling system) it can even completely melt on you. So its better to have a very powerful CPU that handles everything you throw at it with an average effort than a lesser CPU that you overwork.

Theres alot more to consider when youre buying a CPU than just speed but yes this was a very long answer to say that your CPU matters alot if youre going to be using large applications.

[Phatose]

You know guys, AFAIK nVidia already has the rights to manufacture mobos for intel chips.


Unless I've missed something major, it's not that you won't be able to run Conroe and SLI, you just won't be able to to do so on an intel chipset mobo - but since nVidia is making their own intel chipsets, you will be able to do conroe/SLI on an nForce for intel mobo.

[edyzmedieval]

The price war is good for the whole market, and for the users.
More power, less price.

[orangat]

........
The other reason that you dont want a cheap CPU is because you dont want to push your CPU to its limits for long periods of time on a regular basis. Overclocking your CPU is almost always a bad idea. So much energy is going through so small space that your CPU can start to deteriorate and (if you dont have a good cooling system) it can even completely melt on you. So its better to have a very powerful CPU that handles everything you throw at it with an average effort than a lesser CPU that you overwork.

Theres alot more to consider when youre buying a CPU than just speed but yes this was a very long answer to say that your CPU matters alot if youre going to be using large applications.

This is so wrong, I'm simply shuddering in disbelief.

[Lemur]

Is Shifty talking about internal combusion engines or CPUs?

[x-dANGEr]

I think Shifty is right in someways..

I remember we ran a normal PC like a server that other day (No restarts, and with those monitoring programs and security thingies), and after around 6 months the CPU melted down.. (Not all of it, some sort of thick pins in it..).

Though, I think RAM matters more in the example you mentioned than the CPU. Maybe, the CPU speed helps making the Graphics effecting process faster, but it isn't that much except maybe in 3D Max and editing videos..

Though, I mean it isn't that important that you're going to buy a conroe as soon as it is out no matter what is its price..