Some ASP Observations . . .

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We showed you this the other day:

ASP

A few observations:

The Advantages of Being On Top

You don’t see it on the chart, but Q1 2006 was Intel’s first “bad” quarter. In 4Q 2005, Intel’s ASP was about $150.

Shortly after Q1, Intel started slashing prices on PIVs, and began to bring in C2D. Intel’s ASP continued to drop, but the drop was partly offset by the higher prices of C2Ds.

AMD had to slash prices, too, but it had no new CPU line to buffer the other price drops. So the average price drop was almost double that of Intel’s.

More importantly, though, even during what was AMD’s best quarter in recent times, their ASP was still much lower than Intel’s. In Q1 2006, Intel probably made an operating profit of at least $40-50 a CPU, while AMD made only about $20.

If you’re making $50 a CPU, and you cut the price $20, that’s one thing. If you’re making $20 a CPU, and you cut your prices by $40, that’s quite another. That’s why the financial results of Intel and AMD look so different.

Servers Don’t Save You

You can see that both AMD and Intel get much, much more money for server processors than for desktop and mobile. However, they really don’t boost the average selling price very much, maybe $10-12 for AMD, probably a bit more for Intel.

That’s because not many server chips are sold compared to desktop/mobile chips; the number of server chips sold is roughly 5% of the market for desktop/mobiles.

So no server chip, Barcelona, Cloverton, anything else can singlehandedly turn a bad financial situation around or greatly boost profits, simply because too few of them get sold.

In short, server chips give a CPU companies a lot of bucks for the bang, but not too many bangs.

The Role of OEM Pricing

If you look at mobile prices, they’re . . . low, considerably lower than you would expect looking at the official prices.

Yes, if you think Dell and HP pay official prices for their mobile CPUs, you probably believe in the tooth fairy, too, but there’s more to it than that.

Yes, Intel sells some Celeron mobile processors and still sells Core Duos, but what has been much more noticeable on the low-end has been what I call “unofficial” CPUs. These are CPUs that aren’t (at least initially) part of Intel’s product line. If the increase in price you get when you step up to an “official” CPU while configuring a notebook is any indicator, they’re pretty cheap.

AMD has started to do the same, but the ASPs for AMD mobile chips show that they’ve been practically giving them away all along.

The days when mobile chips were a gold mine are over.

Competitive Or Not?

A lot of people talk about the competition between AMD and Intel.

Actually, the opposite is more the case. You’re not competitive when you get half the price for your product your competitor gets. You’re not competitive when you get only about 70% of the price your competitor gets even when you’re up and your competitor is down. You’re not competitive when you have to cut your prices almost $2 for each dollar your competitor cuts.

“Ah, hah!” some are saying. “That proves Intel must be doing foul things to oppress AMD.”

I don’t think so, and I think these numbers show it. You can’t say AMD’s being significantly and actively shut out of markets these days, yet their ASP is as bad as it has ever been before.

Even when they were riding high, the only area where they could get equal pricing with Intel was in the server space.

I think there’s something a lot bigger than a few questionable Intel promotions that are causing this, and I’ll talk about that tomorrow.

Ed


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