Big Price Cuts Are Over 2488

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A couple people asked me if the Intel price cuts went through, and indeed they have, see here for them.

You’ll probably be disappointed.

AMD will come through with its cuts today, or a couple days from now.

You’ll probably be disappointed there, too.

The reality is that the price war is over. We won, but big price cuts got cut down by friendly fire.

Look at PIII and Athlon pricing. Nothing is priced substantially over $300. Prices for products are far more clumped together than we’ve seen in the past.

For most of the history of the PC industry, Intel determined pricing, and they decided to price the latest and greatest skyhigh (much higher than the additional performance justified), which gave them the room for swinging price cuts.

Intel has been like someone who cut the price of their milk from $8 to $5 a gallon, and fools thought they were getting a great deal. That’s all big price cuts mean in the CPU industry; they charged too much in the first place. A lot better to pay $2.50 a gallon, and never expect a price cut.

Late last fall, AMD introduced an entirely different approach to pricing. They levelled the pricing slope. Rather than charge close to $1,000 for a processor, they charged $500, and made more money as a result. They liked this so much, they then set the bar at $300.

And made Intel crawl under the limbo bar with them with the PIIIs.

This has had a revolutionary impact on people’s buying habits. People don’t think twice now about buying the top of the end processor, even in the overclocking world.

Less than a year ago, you were a freak if you did that, now it’s become commonplace, and it makes sense for many.

The old high-end overclocking pattern was: wait four-six months for the price to get to below $250, then go for a substantial overclock.

Now it’s buy now for $300 or less, then get less of an overclock. For $50 more than under the old pattern, you get the benefits for an additional four-six months.

Pretty much the same can be said on the lower-end overclocker, using a $100 price point, too.

Does it help you?

This change in pricing structure benefits some more than others. Generally, the more you are willing to spend, the more it benefits you in less waiting time.

If you’re willing to spend $300 on a CPU, you can get the best right away. If you’re willing to spend $200 on a CPU, you’ll probably have to wait three-four months to get the same thing.

The people who might end up getting hurt a bit are those only willing to spend, say $120 for a high-end CPU. You’ll wait just as long, and possibly a bit longer for your ideal CPU.

The reason for that is the clumping of prices. Generally, both Intel and AMD prefer orderly, step-by-step price reductions. As new products get introduced, the older ones go one step down the price totem pole.

Let’s look at pricing as of right now:

AMD

1.3GHz: $274
1.2GHz: $220 ($54 difference)
1.1GHz: $192 ($28 difference)
1.0GHz: $168 ($24 difference)
950MHz: $147 ($21 difference)
900MHz: $121 ($26 difference)
850MHz: $104 ($17 difference)
800MHz: $100 ( $4 difference)

Intel (leaving 133MHz models in where Intel doesn’t have 100MHz models)

1.0GHz: $252

933MHz: $221 ($31 difference)
866MHz: $179 ($42 difference)
850MHz: $182 ( $3 difference)
800MHz: $166 ($16 difference)
750MHz: $135 ($31 difference)
700MHz: $131 ( $4 difference)

The price spectrum is much narrower than we’ve seen in the past.

The next two Intel price cuts are scheduled to come April 15 and May 27. AMD usually reacts very shortly afterwards with its own cuts.

So if you look at this chart, and want to get a pretty good idea when a certain processor is likely to hit your price point, just use the totem pole method.

Let’s say you wanted to buy a 1.2GHz processor for $175. Use the totem pole method, and you’ll see that your price point is two price cuts away, or early June.

You can also see that you don’t save a ton of money by waiting three months. Not saying you should break your budget, but at least you can understand why a lot more people will spend $50 more to buy now than would have spent $150 more to do the same a year ago.

What About Willamette?

I left out Willamette simply because that’s where the bad old Intel pricing structure is holed up at the moment.

Intel has not repented its old ways; it just got forced to crawl under the limbo bar with AMD for the moment with the PIIIs.

Willamettes

1.5GHz: $580
1.4GHz: $350 ($230 price difference)
1.3GHz: $340 ( $10 price difference)

(Notice these prices are a good deal below Intel’s official prices; Willy must not be doing too well, and OEMs are fluffing them out through the grey market.)

Want to see where the next big price cut will come from? It’ll be that $580 figure. Big deal. 40% off way too much is still too much.

Lower! Lower! Lower! The Computer Industry Is Going Down the Tubes! Where’s the Price War?

First, the computer industry is NOT going down the tubes. Lots of stupid people have been very busy trying to give you that impression.

If you read some news accounts, you might have gotten the impression that only 3 PCs were sold for Christmas, or at least many fewer PCs got sold this Christmas than last.

Wrong. See here for some hard numbers.

The US sold just about as many computers this Christmas as last. Worldwide, computer sales growth was 9%. Certainly worse than the 15-20% growth one usually would get, but a slowdown in growth is not a decline.

Those 25% decline figures being tossed about were some figures from some companies from US retail sales. US retail sales are not the US computer market. We’re talking about CompUSA-type sales.

A couple computer OEMs did have a bad time of it, Compaq and especially Apple (but Apple’s decline was mostly due to Apple, not the economy). Dell had 30% growth for the period, though, they certainly didn’t hurt.

Six months from now, we might start to see some bad times, but we aren’t yet. As we suspected a while back, AMD is sitting fat and happy selling all the high-end processors it can make and letting Intel be the shock absorber for any shortfalls in demand.

Intel, on the other hand, appears to be putting its hope on persuading people to buy Willamettes over the next few months. Just building a lot of big Willies will suck up a good deal of excess capacity (and keep Intel from pricing them at bargain-basement prices).

I think it unlikely we’re going to see any panic pricing in the CPU industry any time soon.

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