AMD is introducing its B3 quad (and B2 tricores) Phenoms.
Here’s all you need to know about them:
When Performance Decides Price
Some have reasonably asked, “Does it really matter if AMD doesn’t have the fastest CPU? After all, only a few buy those.”
Yes, it does matter when Intel has all the fastest CPUs. It gives Intel almost complete control over the price of AMD’s chips.
It’s one of the great ironies of the CPU industry that many people have a special space in their hearts for AMD because of their generally low prices. They really ought to be thanking Intel for that. When AMD offers bargains, it’s not because AMD loves you. It’s because Intel hates AMD and forces them to do that.
When Intel has the upper hand, the prices it charges set the upper limit for what AMD can charge. If Intel processor X has Y level of performance, and it costs Z; AMD can’t charge anymore than Z for any product that offer Y-level performance or less. Indeed, since extra performance means a premium price, AMD usually finds itself having to offer a big discount on its products. Historically, that discount has been along the lines of 33% or more when the AMD product is in regular production.
Some may say, “Joe Sixpack doesn’t know squat about performance levels. True, but the OEMs who buy the chips for Joe’s boxes sure do, and they have even more reason to want a low price than Joe.
When Intel has all the fastest chips, that means the price AMD can charge for its best chip in a class has to be lower than what Intel charges for its worst chip. This leaves Intel free to low-ball the price of their worst-chip, while charging whatever the market can bear for anything above that.
Would you like to see an example of this? Let’s see what Intel will do with its prices on its 65nm quads next month.
The price of the Q6600 is $266. The 2.5GHz Phenom isn’t quite as good as the Q6600, so you would expect the price of the 2.5GHz Phenom to be less, and it is.
Intel will cut the price of the Q6600 to $229 on April 20, which means AMD’s entire Phenom line will have to go down in price accordingly. One price cut on one Intel product means many price cuts from AMD.
The 2.5GHz Phenom does get close against the Q6600 pretty often, so when AMD comes out with a 2.6GHz Phenom, that chip will win some of the close matchups. Does that mean AMD will be able to break free from Intel’s pricing? No, because Intel will cut the price of the Q6700 to $270, and that will certainly beat any 2.6GHz Phenom. Later in the year, Intel will have slightly better Penryn replacements to cover these strategic price points.
This means AMD will remain stuck in the price ghetto, guaranteed, at least until 45nm chips show up.
Absolutely none of this would matter if AMD could make a decent profit at these price points, but that’s the rub. The way the company is structured today, they can’t.
Does that mean the company is doomed? No, but it probably means AMD is going to have to make some radical changes before the year’s out, and we’ll talk about that tomorrow.
Tags: Systems & Components