The Great CPU Price War of 2001

Facts:

1. World PC Demand in 2000: Figure 30-35 million for each of the first three quarters of 2000; 35-40 million for 4Q 2000.
2. Projected Athlon production in 2000:
   • 1Q 2000: 1.2 million Athlons
   • 2Q 2000: 1.8 million Athlons
   • 3Q 2000: 3.6 million Athlons
   • 4Q 2000: 7.2 million Athlons

Opinion:

1. Right now, it would be incredible stupidity for Intel to start a price war. You don’t start a price war
   when you can’t even meet the demand you have. You don’t start a price war on your bread and butter items when you lose $10-20 in profit for every dollar AMD would lose. You don’t start a price war when Wall Street will kill the price of your stock if you miss projections by a few pennies.
   You don’t start a price war when your competition can put out more and faster products than you can, keeping up its average selling price while driving yours down even more.
   It takes a major Wall St. analyst who used to work for you to be this stupid (though you certainly don’t mind him being that way to scare people off supporting your competitor).

2. Rather, you make all the money you can and let AMD nibble away a bit while it can’t really do much to you since they can’t produce all that much (and to a large degree replace K6-2 sales with Athlon sales). You wait until you get your new generation of processor ready. You keep them occupied a bit at the low end with products like Tinma like you did with Celeron the year before.
3. It’s only when you have all your guns lined up and AMD is incurring big expenses in running and depreciating Dresden at the end of the year that you let them have it. You make some of your Willamettes enticingly cheap. You use your Coppermines as Celerons (why else would Intel say they’ll keep PIIIs around for most of 2001?) to wipe out AMD on the lower end (with Tinma taking care of the basement). You eventually get .13 micron working for your nice high-end 2Ghz or 3Ghz Willamettes and make your money from that and Itaniums, while AMD tries to reequip and try to get Sledgehammer out while not making money.

4. So expect to see Intel to not put its money where its mouth is about AMD for most of the year until they begin to become a real threat to market share, then expect them to start taking action during Christmas season and into 2001

Next year may be a great time to buy a computer, with CPU oversupply, and flagging demand.

Email Ed