Pricing Parity. . .

We’re Not Joking Any More

You can see a chart with the offical Intel and AMD prices over here.

Far more importantly, though, the principle of following the official price is also reflected in the Pricewatch prices, for AMD processors, too.

For the first time in years, the actual Pricewatch price bears close resemblance to the official price. A few discounts here and there, but even there, it’s only around a 10% discount from the official price rather than the 33-50% we’ve been used to seeing.

No More “More For Your Money”

Official vs. actual pricing had little effect on consumers. Price parity with Intel is quite another matter, though.

Over the past few years, AMD processors have generally sold at a discount of 33-40% off the price of the equivalent Intel CPU.

Now all of a sudden, that goes away. Suddenly AMD thinks it can get the same price as Intel even though it’s never been able to in the past.

This might work on the lower end, provided people realize an Athlon is considerably better than a Celeron. Will Joe Sixpack pay the same price for a cheap AMD system that he would an Intel system? This is questionable.

It’s even more questionable on the high end.

There is no compelling or even apparent reason (unless you’re the advertising exec for the “AMD Me” campaign) to think that people in general have suddenly become willing to pay substantially more for AMD products.

If AMD had a product that was clearly better than Intel’s, that would be a leg to stand on, but that’s not the case here.

No, there’s no good reason to price like this.

Unless . . . .

Supply and Demand

Those big discounts didn’t happen because AMD loved you. They happened because AMD was cranking out eight million CPUs a quarter, and they had to lower the price to sell the chips (and from the inventory buildups AMD had, even that wasn’t a complete success).

If AMD was perfectly capable of cranking out tons and tons of high speed chips, pricing high makes no sense. Since the marginal cost of making a CPU is low and the fixed cost of building the fab plant that makes them is so high, you’re better off making more chips for less than less chips for more.

Unless, of course, for whatever reason, you can’t crank out tons and tons of high speed chips. Then pricing them high makes a good deal of sense. You lose a lot of potential sales, but that doesn’t matter because you can’t sell what you can’t make.

You make the best of a bad situation, and maximize your revenues on what you can get out.

You don’t do that voluntarily, though. Dresden was built to make ten million or more CPUs a quarter, not just the four or five million AMD apparently expects to make.

When you see ask, you have to ask yourself, “If everything is so fine, why so few?”

Ed