Intel to Slash Pentium Chip Prices by 60%, Dual-Core Chips by 15%

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Intel to Slash Processor Prices this July

According to a report from Bloomberg news, in meetings Intel has told its customers it will cut Pentium chip prices 61% and faster dual-core chips by about 15% in order to reclaim market share from AMD.

According to executives at MSI and Gigabyte Technology, two major manufacturers of notebooks in Taiwan, officials from Intel notified them price cuts on processors will kick-in on July 23.  When Intel was asked about these major pricing adjustments, Intel declined to comment.

AMD last quarter was able to capture 20% of the worldwide chip market sales for the first time in over 4-years.  Then Dell announced they would be offering AMD chips in high-end servers.  To add insult to injury, Intel recently announced they expect 2006 to be the first year in which they actually see a decline in annual sales.

The aggressive price cuts Intel will supposedly be enacting in July is an obvious direct attack on AMD and effort to hurt that company’s sales and boost Intel market share at the cost of losing money.  According to MSI product marketing manager Alex Lin “They want to kill AMD market share.  I believe Intel will steal at least 3 percent because of the price cuts.”

Will the Price Cuts be Passed to Consumers?

Compal Electronics Inc. is the world’s second biggest maker of notebook computers, they make laptops for companies such as Dell and HP.  According to Ray Chen of Compal Electronics the price drop by Intel “means the consumer will get the benefit and the unit price will get lower so we can stimulate demand.”

Asustek Computer Inc., another major manufacturer of notebooks in Taiwan, indicated that due to price cuts “from the second half, we believe Intel’s product can stimulate the market demand, and will have pretty good performance.”

Expect to see cheap Pentium processor notebooks and desktop computers in the second half of 2006 and a slight drop in the prices of Core Duo processor based machines.  LCDs and not processors are the most expensive part of a notebook, a processor usually makes up about 15% – 25% the cost of a notebook so a 15% drop in Core Duo processor price would only drop the overall cost of a notebook about 3% – 4%.  Pentium machines might see a 10% – 15% drop in price.

AMD Response

Although manufacturers in Taiwan indicated they do not think AMD is ready for a price war and that it would hurt the company, AMD’s President Dirk Meyer said  The idea of price competition or competition in general is new to the other guy.  Price competition doesn’t scare us.”


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