Not Going To Pay A Lot For That CPU . . .

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Yesterday, we spoke about AMD’s historically low ASPs.

I’ll put it another way, since the K6-2 era, AMD has only very rarely gotten up to around the $100 ASP level, no matter how good their processors have been.

On the other hand, during the same time frame, Intel has only rarely gotten down to the $120 level.

Why is that?

Maybe this little test can help:

Here are three words. Which CPU company first comes to mind when you read these words?

  • CPU, PC, leader
  • low-priced, value, underdog

    I would bet that most of you would say, Intel for the first set, and AMD for the second. I would bet practically all your Sixpack friends would say Intel for the first, and if they didn’t say AMD for the second, they’d say “There’s somebody else?”

    And that’s the problem.

    Now you may love AMD with the fiercest fanboy fervor. You may think “low-priced, value, underdog” are wonderful words conveying the highest praise.

    But that still leaves you not willing to pay a lot for that CPU.

    Let’s illustrate with three quite different people:

    Your grandma wants a new PC (or maybe this happened some years ago). If she even knows a CPU on her own, it’s going to be Intel, simply because the ding-dong ads have sunk in. She has certainly never seen an AMD ad, and if she knows about them, it’s only because you or somebody like you told her.

    99% of the time, nothing else withstanding, Grandma is going to buy what she’s heard about over something she’s never heard about. But there is something else withstanding, and those of you who have been in these shoes knows what it is. You told or tell Grandma that the AMD system is good enough or just as good and cheaper (or maybe she figured that out on her own).

    Next, we have . . . you. You’ve built yourself and others a lot of PCs over the years. The vast majority of you have used AMD processors at least sometimes. Why? With rare exception, isn’t the word “cheaper” somewhere in your reason?

    Even when you’ve chosen Intel, weren’t you glad AMD was around because you thought their existence made that Intel processor cheaper than it would have been otherwise?

    Finally, there are those who think cheap is a bad word, and think a low price means inferiority, so they don’t buy AMD at all. Can’t say that attitude helps AMD at all.

    The concept of “cheap” is welded to AMD’s image, held by friend and foe and those inbetween.

    Why is that?

    We’ll get to the usual reasons in a moment, but I suspect the biggest reason of all for the average person is AMD has no media image.

    It’s like choosing between some advertised bread and the store brand. You may find the store brand perfectly fine, you may buy it all the time, you may even think the people who buy the nationally advertised bread are stupid and shallow, but that doesn’t mean you’d pay the same price for it.

    In short, you expect to pay less for the no-name, otherwise, you don’t buy it.

    It’s also fair to say that for most of its history (i.e., the Jerry Sanders era), AMD’s selling strategy was essentially, and often explicitly price, even during those times when AMD had a performance advantage.

    It really wasn’t until Hammer that AMD even tried to charge premium prices. That worked for a little while, but crumbled when Intel grabbed back the performance title and did a little price-warring on its own.

    More Than Intel Evil

    Was AMD forced into all this low-balling due to underhanded Intel tricks? I’m sure Intel didn’t mind, and gave shoves and kicks when deemed advantageous, but that doesn’t seem to be enough to explain all of this.

    I suspect the bulk of the answer can be found if you compare AMD with another company it’s not often compared to: Walmart.

    The customers certainly expect low prices from Walmart. Low prices are certainly engrained into the corporate structure. Imagine what would happen if Walmart tried to become a high-end retailer like Nordstrom, or even a middle-of-the-road retailer like Target. How hard would that be to do?

    Of course, Walmart makes plenty of money with that approach, and AMD hasn’t and isn’t and likely won’t be around much longer if they don’t start getting Intel-like prices.

    Ask yourself this: If your supernatural being of choice came to you and said, “AMD will live forever if you agree that you’ll pay the exact same price you’d pay for an equivalent Intel chip from now on.” Be honest, what was your initial gut reaction? I would bet in most cases, it wasn’t too pleasant.

    It’s not that all the problems we’ve talked about before aren’t legitimate and serious issues, but underlying all of them is the fact that we’ve put AMD into the “bargain box” part of our brains, and getting that out of our brains (and even theirs) is probably AMD’s biggest challenge.

    Ed


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