Slashing prices on processors seen as a means to stunt rival AMD’s growth and could trickle down to channel partners
Intel has no shortages of challenges, and the latest is the expanding strength of longtime rival, AMD. The chipmaker, which is still weathering a disastrous 2018 processor production shortfall, is reportedly considering lowering prices on some of its desktop and notebook processor units in a bid to stem the market share expansion of AMD.
The Lowdown: As reported by Digitimes, Intel is considering dropping prices on some models by as much as 15%. The price reduction would come concurrent with the launch of AMD’s latest Ryzen processor, which is getting solid reviews from analysts and alliance partners. AMD’s Ryzen, a 7mn processor that boasts 12 cores, will hit the market July 7.
The Details: Analysts say Intel must make some radical moves to maintain its dominant market share. While it still commands more than 85% of the PC processor market, its numbers are moving in the wrong direction. According to IDC, AMD’s gain in market share – approximately 4.5% in the last quarter of 2018 at the time of Intel’s inventory debacle – is almost exactly the same amount Intel lost. Intel is also suffering from innovation fatigue. Once known for its technology superiority, Intel is struggling to keep up with the technical advancements of AMD’s products.
The Impact: Neither Intel nor AMD commented on the various reports of coming price cuts. A price cut, analysts say, would at least keep current Intel partners and customers from defecting to the rival brand. If Intel implements a price cut, and depending on how it positions the new prices, the reduction could trickle down to channel partners in the form of lower average sale prices on desktops and notebooks that could stimulate sales. Juicing the PC market could help resellers and solution providers, as the business market is refreshing many of their older PCs with the coming end of life for Microsoft’s Windows 7 in 2020.
Analysts add, however, that performance-sensitive users – data quants to gamers – will pay for better technical specifications regardless of the brand.
Background: Intel continues to wrestle with numerous challenges such as the poor production planning and inventory shortfalls in 2018 that rippled through the industry, the changing of its CEO, the rise of semiconductor rivals, and the impact of trade wars. For many, Intel looks less of an industry innovator and more of a laggard trying to find its way in a strange new world. Analysts are not saying Intel is down and out, but rather facing challenges it’s rarely had to deal with in the past.
“Targeted price cuts make sense. “I would expect that they are considering price cuts,” analyst Linley Gwennap of The Linley Group, a semiconductor market research and consulting firm.
“Intel is still struggling to get 10 nanometer up and running, and AMD is expected to release 7 nanometer parts in Q3,” analyst Roger Kay of Endpoint Technologies Associates.
“When late to the party, and trailing technologically, price is the tool,” said Martin Wolf, president of martinwolf.com.