AMD’s processor prices remain under severe pressure: Caught between Intel’s outgoing Pentium D series on the low end and the Core 2 Duo series on the high end, the X2 Athlons remain vulnerable to market shifts and Intel’s supply strategy. Anyone intending to build a Vista PC on a budget should begin having a closer look at AMD.
AMD has seen better time in the past 18 months as it enters a rough period of competition with Intel while having to swallow the cost of the ATI acquisition. The most recent quarter result revealed heavy losses, mainly related to the acquisition itself. But dig deeper and it is obvious that margins are declining and AMD isn’t quite earning as much per processor anymore as it did three, four quarters ago.
That trend apparently does not only apply to server CPUs, where system vendors will increasingly leverage the competitive landscape to negotiate better processor prices, but to the desktop as well. Intel recently reported that its average processor selling prices are increasing, while AMD said it has falling average selling prices. While both companies do not break out detailed financials for its desktop processor families, we have witnessed an ongoing trend in which Intel apparently leverages its Pentium D series to drag down mainstream desktop processor prices, which has a direct, negative impact on AMD. The higher end Core 2 Duo series shows little impact and relatively stable pricing.
AMD has very little to defend itself against this move; more competitive processors, including the “Agena” quad- and “Kuma” dual-cores as well as the 5800+ and 6000+ Athlon X2 processors are not expected to arrive until late Q2 or early Q3 of this year. The company confirmed that it continues to expect stiff competition from Intel for another two quarters, which indicates a continuing trend of falling processor prices. A comparison of current AMD tray prices with our current list of average retail prices provides an indication of the pressure on AMD prices: Four of eleven CPUs (FX-62, 4600+, 4200+, 3800+) have average retail selling prices that are below AMD’s 1000-unit tray price. Keep in mind that we are not able to break out 90 nm and 65 nm versions in this list.
Intel, as comparison has also two processor that currently sell below the tray price (X6800, E6700), but they are on the very high end where company has substantial wiggle room. If Intel keeps its pressure on AMD, there is a good chance that the Athlon X2 may become a deal you can’t turn down, if you are looking to build a Vista PC on a budget.
Read on the next page: AMD undercuts Intel’s price/performance on the low end
AMD undercuts Intel’s price/performance on the low end
On the whole, prices of Intel’s Pentium D processors have been on a downward swing over the past weeks. However, this week, on the lowest end, the prices jumped. This, compounded with multiple weeks of price drops for AMD’s 3800+, has actually given AMD a bit of a performance advantage over Intel in the low-end pricing arena.
The Pentium D 820 saw a huge jump this week, nearly doubling the average price from Pricegrabber.com over last week. Because of this, AMD’s 3800+ and 4200+ offer a higher level of performance than the Pentium D 820, at a lower average e-tail price. This marks an important step for AMD as it tries to distinguish itself and find its way back in the market that Intel has closed in on. However, the Pentium D and especially the 90 nm D 800 has been in a phase-out for a while where drying up supply and jumping prices should not come as a surprise. The only 800 series left in Intel’s official portfolio is the 820 model.
Going up on the performance line, though, there is a different story that is still unfolding. On the most part, we saw a decreasing trend for AMD’s processors. The only oddball was the 4400+, which jumped 24% to log a $70 increase from $292 to $362.
However, the biggest change for AMD came with the one we’ve continuously said is the most volatile when it comes to pricing, and that’s the (phased out) FX-60. It fell a considerable $126 from $678 to $552 this week. The FX-60 was the one that became the most overpriced, so this price decrease is critical for AMD.
Also, thanks to a $37 week-to-week decrease for the 4800+, it now offers more performance than the Pentium D 960 at a lower price. This level of performance is around the mid-end market, and shows how AMD must keep its prices very competitive in this area, since it has no real chance of competing in the high-end desktop market against Intel at this time.
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Graphically, we can see that, at around the performance index levels of 1.35, 1.45, and 1.55, AMD offers the lowest price points. At 1.7, it is where it really starts to get undercut by Intel, though AMD does still offer acceptable, competitive pricing. However, when it gets to 2.0 and above, there is just no contest. Intel’s prices beat AMD by at least $200 at this level.
Additionally, the FX-62 and the FX-60 are still quite overpriced. These prices need to come down at least $100 more, each, before AMD can really claim its stake in the mid-range performance level.
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What we can see when we split up Intel’s data is an unusual trend, where Intel offers essentially a reflective image of its price/performance options for the Pentium D processors. It currently has a line of products that sell under its trendline, and a seemingly matching processor that offers less performance at a higher price.
This also really helps to show AMD’s dominance in the low price, basic performance section of the graph. One other thing of note is that the Intel EX6800 has begun to fall in place by a little bit, after a $19 decrease this week. It has been on a trend to decrease ever since the QX6700 was officially released.
AMD is caught in an increasingly solid position in the lower end mainstream and entry-level desktop processor market. For consumers and system builder, of course that opens the door to potentially good deals in Q1/Q2: If it doesn’t have to be the best possible performance, but still offer plenty of power for Vista, then there may be more value in your next PC than you have seen in many years.