I'm not sure if this was posted here over the weekend, I hope I didn't miss much, but I couldn't make it through all the notes:
Intel Set to Attack AMD Via P4 Prices
Will RDRAM turn P4 into an underwhelming system bargain?
By Jayant Mathew
Intel Corp.'s imminent Pentium 4 launch has generated more buzz than the subway series — yet analysts are divided over the yet-to-be-released P4's estimated prices. Is Intel being too aggressive in its ongoing battle with Advanced Micro Devices Inc. (AMD), or is it sticking to pricing strategies that have been time-tested since the days of the Pentium?
Embroiled in ongoing wrangles over Rambus memory, price cuts, rebates, performance issues and a launch that was apparently pushed back by a month, Intel desperately needs the P4 to succeed and reassert the chip giant's supremacy in the PC microprocessor world. Apparently its battle plan includes low-ball pricing that could launch a price war with AMD in which the cash-rich Intel would have the numbers on its side.
Every few weeks, new prices for the P4 start to circulate around the industry and, in response to inquiries, Intel cites a policy of not commenting on products that haven't been launched. But as of last week, several industry sources had confirmed the latest reported prices. A 1.5GHz Pentium 4 is expected to sell for $795, while a 1.4GHz model should debut at $625.
For Intel, events leading to the P4 launch have caused concern inside and outside of the company. The company's initial choice of Rambus has ensured that the first systems that will be ready will use Rambus DRAM (RDRAM) and therefore will be expensive, leaving the P4 a far cry from hitting the sweet spot of the market. In a concession to the market, Intel has announced that it will do a P4 chipset that will work with less-expensive standard memory. The company is also investigating the possibility of using double data rate (DDR) memory.
Some analysts believe Intel is being too aggressive in its P4 pricing. After all, the chip is expensive to manufacture, comes with expensive memory and will only be produced in limited quantities, at least until the second quarter of 2001. "I don't understand why Intel is so aggressive," said Kevin Krewell, senior editor at the Microprocessor Report . "They are just shipping thousands, which will sell out. They will also have no inventory." On top of this, Intel is running a Rambus rebate program of $70 in the fourth quarter and $60 in the first quarter of 2001.
Given the expected microprocessor prices, P4 systems would cost between $2,000 and $2,200 after the rebate, and most observers don't expect systems much cheaper than this in the next two quarters. Others in the industry believe Intel has always priced its flagship chips at about $800, if the company expected the chip to be a winner in the sense that it would sell in the millions of units. Otherwise the chip is usually priced at around $1,000. "They had the 1.13GHz Pentium III priced at $999," said Nathan Brookwood, principal analyst at Insight 64. "It's saying we don't expect to sell much of this, but buy it if you want." Separately, the 1.13GHz Pentium III was recalled because of glitches and is expected to resurface next year.
Another possible scenario is that Intel might regularly boost the clock-speed of the P4 at very short intervals. Krewell, for instance, said a 1.7GHz Pentium 4 could hit the market before the market can digest the 1.5GHz. "My concern is they might get too far ahead of the marketplace in terms of (clock) frequency," he said. Intel's plan in this scenario might be to reflect the frequency increase by pricing the new chips higher.
Analysts believe this pricing scheme would stray from the tradition of Intel drastically cutting prices on existing chips at the same time that it introduces a higher-frequency chip. "You won't see a $200 Pentium 4 anytime in the near future," said Mike Feibus, principal analyst at Mercury Research. "I think it will gradually start to come down." In any case, the P4 is bound to affect Intel's average selling prices (ASPs) next year.
Moreover, competition from AMD will put pressure on Intel to initiate more price cuts, leading to lower ASPs. The company's ASPs will be pushed lower by the Rambus rebate, lower prices, and competition. The P4's larger die size is more expensive to produce and will therefore squeeze Intel's margins.
But given that Intel will not have a standard memory option until mid-2001, the price of systems powered by the P4 is bound to remain high for a while. Intel, however, will get some cost relief when the P4 is changed to a 0.13-micron process.
Systems powered by the P4 will be significantly cheaper if Intel follows a three-tier strategy that offers Rambus, DDR and SDRAM memory. If this is the case, consumers will be able to choose among systems using the three memory technologies, depending on the price and application. What's more, Intel could maintain margins, and not need to cut prices aggressively to discount the Pentium 4. This might take time because Intel has not introduced an SDRAM chipset or a DDR chipset for the Pentium 4. "Intel is frustrated on the one hand but they have to live with it for at least another nine months," Feibus said.
electronicnews.com. |
