PC Market Slows Down

By John G. Spooner  |  Posted 2006-08-01 Print this article Print

The lower prices have since made it possible for PC makers to offer dual-core-processor desktops for $500 to $600, for example. But Intel and AMD—which are on the front lines of what many analysts say is a slowing PC market—may not change their pricing drastically again soon unless economic or competitive situations call for it.
McCarron said that at the moment, there are more reasons to keep prices the same.
If Intel were to make major Core 2 Duo price cuts, it risks hurting itself by giving up revenue even more than it might hurt AMD, McCarron said. Intels average selling price for a processor is typically higher. AMDs ASP was under $100 in the second quarter, he said. Intel has, in the past, used prices to motivate demand for its chips by collapsing more than one planned processor price drop, for example. But "AMD is at a size, now, that its going to be difficult to push it out of the market with only one particular tool, such as pricing," McCarron said. "Both have a lot of revenue to lose if they play this particular game." Meanwhile, PC makers are showing more support for AMD. Lenovo, for one, will offer AMDs desktop processors in a new ThinkCentre A60, aimed at large businesses, during the second week of August. Even Dell, which has signed on to offer an AMD Opteron-based server, is expected to launch AMD-based PCs to compete with Hewlett-Packard, published reports have said. PC makers are "seeing the benefit of AMD being present and stronger," McCarron said. "Were seeing a level of competitive activity [between the two chip makers] that we havent seen in probably more than a decade." Thus market conditions, dictated more by economics than any measure like processor pricing, are more likely to spell out what happens in the quarter. The third quarter, which includes the consumer back-to-school season, is generally better than the second quarter. The mixture of new chips and higher demand—if it materializes—could make for an entirely different environment than in the second quarter. More market share will be up for grabs. VIA Technologies, which normally garners 1 or 2 percent of the market, carved out a 5.5-percent market-share figure in the second quarter of 2006 versus 1.4 percent in the second quarter of 2005. To read more about AMDs plan to buy graphics make ATI Technologies, click here. The change came as the chip maker sold customers large numbers of older C3 processors ahead of the end-of-April close of a technology licensing agreement with Intel. Therefore somewhere in the order of four points of market share—millions of processors—will be up for grabs this quarter. Given the arrival of new products, the availability of inexpensive desktops and notebooks using slightly older dual-core processors, and the potential for easier sales in the third quarter, the two chip makers could see their average selling prices increase, McCarron said. "The concern I have, separately from this, is there seems to be a lot of evidence that the market is getting softer. Q2 was weaker than seasonal and we have this inventory issue still hanging around… and weve got macroeconomic indicators that are far from positive," he said. "Were seeing some great product being launched and some great pricing from both companies. But it may be happening in a market environment where its falling on deaf ears." And that has the potential to hurt more than just Intel or AMD. Check out eWEEK.coms for the latest news in desktop and notebook computing.

John G. Spooner John G. Spooner, a senior writer for eWeek, chronicles the PC industry, in addition to covering semiconductors and, on occasion, automotive technology. Prior to joining eWeek in 2005, Mr. Spooner spent more than four years as a staff writer for CNET News.com, where he covered computer hardware. He has also worked as a staff writer for ZDNET News.

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