Does Business Really Care About Faster Computer Chips?
Feb 28, 2002 (NewsFactor.com via COMTEX) -- The speed wars between Intel
(Nasdaq: INTC) and AMD (NYSE: AMD) have become somewhat muted lately, perhaps
because of an AMD public relations campaign that pleaded with buyers to consider
factors other than clock speed in their buying decision.
But despite AMD's efforts and the overall tech slowdown, chip speeds -- and
prices -- are still rising. This trend leads to an inevitable question: Do
businesses really make their upgrade decisions on the basis of chip speed?
"They really don't," Giga Information Group analyst Rob Enderle told NewsFactor.
"In fact, they would just as soon stop [upgrading to] faster computer chips so
they can stabilize their environment and concentrate on something else."
"Do they care about more speed on the desktop? I don't know of anybody who does,
frankly," said Russ Craig, director of research for semiconductors at Aberdeen
Group .
"The desktop machines are plenty fast enough for the environment that most of us
use at the office," Craig added. "Speed is very valuable to people like graphic
artists or people who do three-dimensional renderings. But unless you're
modeling figures for games or something else of that nature on the desktop,
nobody cares."
Could Be Detrimental
In fact, Craig said, small and mid-sized businesses can be harmed by
too-frequent upgrades to the newest speed leader.
"It could be detrimental, because if you have to buy a new machine to run the
most recent operating system, let's say Windows XP Professional, some of the
legacy software you have may no longer be supported on that machine," Craig told
NewsFactor.
"It could cause you to have to move off a legacy application, just as Windows XP
no longer supports MS-DOS," he added.
Speed: Not a Problem
So, do chip makers keep churning out speedy chips in order to keep prices high
and stay ahead in a megahertz race that only they care about? Not really,
according to analysts. Speed does have its uses.
"The reason speed comes into play is that [buyers] want to make sure they get
the best value for the money when they're buying a new system," Enderle said.
"That's the only benchmark they've got that's consistent. So it's a
'differentiator.'
"But [speed] isn't what they're complaining about," Enderle noted. "They're
complaining about security problems. They're complaining about network problems.
Speed is not a problem they're trying to solve right now."
Long Shelf Lives
For chip makers, there are sound financial reasons for making racehorse chips.
"In the semiconductor environment, what you want to do is have very long runs of
the same product, because that's what allows you to maximize the yield and
minimize your costs," Craig said.
"So, therefore, if you want to have a faster chip that's important to this whole
series of high-end markets, your best business strategy is to sell that chip
across all applications, everywhere," he added.
In the manufacturing process, he noted, makers will literally grade the devices.
Those that are extremely fast are marked as high-end, while chips that work fine
but are not quite as speedy become the low end of the product offering.
"They sell those low-end devices into the more commodity-like application
spaces, if you will," Craig said. "So, you really only want to have the one
product or product family running at any given time.
"That's the reason why they stopped making the earlier generations of processors
and transitioned to the new generation. They phase one in and another out.
They've got an overlap, and there's no risk in case something unforeseen
occurs," he said.
Switch to Budget Chips?
Then why do people buy faster chips if they don't really need them?
"The strange thing is, they're starting to question that," Enderle said. "We've
got more and more clients who are moving to Celeron and away from Pentium 3s and
Pentium 4s and the rest because they don't need anything more. They're providing
more power than these folks are likely to use in the next few years."
Traditionally, buyers have bought "ahead of the curve," believing that by the
end of the service contract, the machine in question would still be powerful
enough. Now, said Enderle, they are finding it is more than simply "enough."
"They don't necessarily need to be spending that kind of money," he said. "It's
one of the reasons average selling prices have dropped so precipitously over the
last few months. People are buying lower-cost hardware."
More Confusion Later
Enderle said the situation will become even more confused around mid-year.
"That's when the Celeron chips go to the Pentium 4 core, so the difference
between a Pentium 4 and a Celeron will be relatively small," he said.
"Then we expect a lot more companies to move to the Celeron [or other]
processors."
By Tim McDonald
URL: gigaweb.com
aberdeen.com |
