A Sneaky, Subtle Price Increase

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XBitLabs has an article about future Intel processors here. In all honesty, this probably isn’t going to interest most of you very much, since you don’t plan on buying one.

However, hidden in plain view is information that ought to affect you very much, no matter which CPU company you patronize.

Intel is creating a new initial price point for its mainstream CPUs.

For the past few years, the initial starting price point for mainstream Intel processors (EEs are something different) has been $637. In the XBit Labs article, a new price level of $872 appears. It’s not the price of the next EE, that’s set even higher.

The Xbit Labs folks make a few additional assumptions about “regular” PIVs based on the information they have, but those assumptions make sense and are probably right.

Why should you care about the specific price of CPUs you’ll never buy?

You should care because a new price tier affects the price of everything else under it. It eliminates an Intel price cut, which means you’ll either pay more for the processor you want, or you’ll have to wait a few more months until it reaches the price you want.

Let me illustrate:

An Increase, Illustrated…

An Increase, Illustrated

Here is current official Intel pricing:

CPU Speed

Price

3.6GHz

$417

3.4GHz

$278

3.2GHz

$218

3.0GHz

$178

The up-to-now highest price point ($637) will be filled by the 3.8GHz PIV whenever it shows up, so there won’t be any price cut then, and the lineup will then look like this:

CPU Speed

Price

3.8GHz

$637

3.6GHz

$417

3.4GHz

$278

3.2GHz

$218

3.0GHz

$178

Under the old price setup, whenever the 4.0GHz showed up, the price of the 3.8 and below would drop a notch. This won’t happen now. The price of the 4GHz will be $872, and everything else will remain where it is.

What difference does it make?

CPU Speed

Price You’d Pay Under Old System

Price You’ll Pay Under New System

Effective Price Increase

4.0GHz

$637

$872

$235

3.8GHz

$417

$637

$220

3.6GHz

$278

$417

$139

3.4GHz

$218

$278

$60

3.2GHz

$178

$218

$40

3.0GHz

$163

$178

$15

You may say, “Well, I’ll wait until the next price cut after that,” and yes, you can wait another three or more months and do just that. Mind you, though, the way this works out, if you want to pay less for a CPU than you would now, that’s probably not going to happen until next May or June. All this finagling essentially means that Intel wants to keep prices where they are for the next nine months or so.

That’s a long wait, and even though you’re not shelling out any more, you’re paying in time instead.

Or you can buy one speed grade down (though that’s hardly an option for the average overclocker), but then you’re getting less for the same amount of money.

What’s important to note is that this effective price/wait time increase is permanent. Let’s say a processor comes out, and you won’t pay more than $178 for it.

To get what you want at the price you want it, you’ll have to wait through five price cuts rather than four. This will mean an additional wait of two-four months.

If you don’t want to wait any longer than you do now, it will cost you an extra $40. If you set your sights higher up the food chain, you’ll pay rather more than that.

Why Is This Happening?

That’s simple. The Intel cupboard is bare. They don’t have a steady flow of new, better products to feed into the top of the food chain, and any items they say they’ll have look like they’ll only nominally exist.

In a situation like that, it hardly matters what price Intel charges for mostly mythological products. What does matter is keeping up the price of the products that aren’t mythological.

And that what this does.

Good Thing I’m An AMD Fan…

Good Thing I’m An AMD Fan

Ha. Ha. Ha.

AMD’s steadfast policy on Hammers is to charge whatever Intel charges for an equivalent CPU.

If they keep that up in the months again, you’ll end up with the same price/wait time increase the Intel folks will have. You can forget about any price cuts until next June or so, too.

If they keep it up.

Will they? That is the question. Will AMD keep saying “me too,” or will they try to get a competitive pricing advantage simply by sticking to the old price schedule?

There’s no doubt what the AMD execs will want to do. They’ll want to keep saying “Me too” and bank any extra revenues.

The AMD cupboard doesn’t look much better than Intel’s either. By next June, if all goes well, we’re looking at 2.8Ghz processors. Better than Intel, but that’s not saying much.

Can You Stand Pat In A Slump?

Under such circumstances, it is understandable that AMD would want to keep saying “Me too.” But can they?

Intel just announced that sales haven’t been too hot this quarter. That seems to be the case for the tech industry in general.

Historically, AMD is affected by general market swings much more than Intel. When times are good, their sales jump up a lot more, when they are bad, they drop a lot more.

Then again, Intel has been busy machine-gunning its feet this quarter, so history may not quite repeat itself this time around.

However, if computer sales in general are slumping, and continue to stay that way, it will eventually affect AMD, and under such circumstances, an effective price increase is not going to help matters.

Especially when AMD is effectively going to have to relaunch Hammer, this time for the rest of us.

Some may say, “Why do you always say that AMD is in deep doo-doo whenever times get bad?” There’s a very simple reason for that. Intel makes a ton of money. AMD doesn’t. Bad times affect the weak more than the strong.

AMD is fortunate, though, in that they have a lot more room for competitive price cuts with Hammers than they do with XPs, and of course, Intel may not be able to stay the course, either.

What To Do

In recent times, many of the problems the CPU companies have had a much worse effect on overclockers than the average Joe.

This time around, we get a break. If you’re out to buy the cheapest CPU in a product line, this move isn’t going to affect you very much.

Over the last year or so, there has been a trend among overclockers to try to move upscale, but this pricing move should pretty much kill that.

The determining factors in when to buy, especially on the AMD side, haven’t been really financial. We’ve said many times in the past that an affordable 90nm socket 939 is what people should wait for, and if 3000+/3200+s meeting those specs show up in November or January at $178/$218, waiting a half-year to save $15/$40 will likely be too penny-pinching for many (provided they perform well, of course).

Of course, if your idea of a CPU price is $100 or less, this is an outrage, but then, from that perspective, it was an outrage before, too.

Nobody will stop you from waiting, but realistically, the only way you’re going to get that kind of price is if the CPU market goes to hell and AMD is forced by circumstances into doing so.

What are the odds on that? Can you say “global recession?”

In other words, don’t count on it.

Ed

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