Again that unspoken assumption is at the base of the belief that Intel can under-price AMD only by doing grievous harm to itself. Let me ask here the same question that none of the AMD partisans answer.
Doing harm to yourself on pricing is mostly something related to the change of pricing. If your pricing is high and you lower prices without increasing demand enough to get higher revenue than you have done harm to yourself with the price cut (unless you imagine a situation where your product would have been uncompetitive without the price cuts and you would have had even lower revenue and profits if you had not cut prices), even if you still make a profit after the cut.
Apparently AMD currently has lower prices than Intel except perhaps on the high end. I don't think AMD plans any large price cuts. If Intel cuts prices a bit, Intel's prices will still be higher than AMDs, AMD might still be competitive. If Intel cuts prices a lot, then maybe AMD would find it hard to compete without lowering its own prices. Whether or not AMD is forced to cut prices by Intel's price cut, Intel will be making less money with each sale, and I don't think sales would go up enough to make up for the difference. Intel's profits would be slashed they might even have a loss. AMD might be forced in to a loss as well, but I think having to report a loss would hurt INTC more than AMD. Investors are used to Intel being a steady profit making machine. From time to time it has had warnings and misses but most of the time it makes good profits. When was the last time Intel reported a loss? AMD is the more speculative play than INTC, but most of the INTC owners or people planning to buy INTC expect continued profits.
It could well be that Intel will hurt itself to spite its nemesis.
Hopefully that won't happen. Maybe we will get continued healthy growth in demand. Increased demand will probably not be enough by itself, but combined with larger caches, a higher percentage of dual cores instead of single, the introduction of quad cores etc. might be. If so you don't have to have any price wars, and both companies do well as they fight over a growing pie. OTOH if market growth slows down and Intel tries the "hurt itself to spite its nemesis" strategy, I think it will have to hurt itself a lot more than it did in the past when it went after AMD. AMD isn't limited to the low end, or almost locked out of servers anymore. Also the litigation between AMD and Intel might deter Intel from using certain tactics that it is claimed Intel used in the past.
Do you think that Dell pays a higher price for Intel chips than H-P pays for equivalent AMD chips ?
It can be hard to figure our what companies pay for chips. The deals don't have to be public, and the top line price is only part of the deal because their are discounts, rebates, and marketing funds etc. Overall the evidence seems to clearly point to Intel's ASPs (again with the possible exception of the high end) being higher, but I couldn't even make an educated guess as to what specific companies pay for their chips.
Tim |
