Cheap Chips Deflate Dual-core Desktop Prices

Price cuts on processors by Advanced Micro Devices and Intel, which lopped as much as 61 percent off the prices of its Pentium desktop chips on July 27, combined with lower costs on items such as LCD panels, are allowing PC makers to offer dual-core processor desktops, whose main chips contain twin processors cores, on the cheap.

PC prices, already at aggressive levels in the corporate space as vendors combat a slowing market, appear to be headed the same way in the consumer and SMB (small and midsize business) markets, particularly dual-core processor desktop PCs.

PC makers such as Dell and Hewlett-Packard, perhaps making good on a pledge by Intel to push dual-core processors to lower price points, have begun offering a variety of dual-core processor desktops for prices in the $500 to $600 range for consumers and businesses.

"I think youre definitely going to see [dual-core desktops] in the $500 price range … and thats the sweet spot of the market," said Shagorika Dixit, product manager for consumer desktops at HP, in Palo Alto, Calif. "At that point [buyers] have a good choice between AMD and Intel—both of them offer dual core for that price point."

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The prices will help dual-core processors proliferate, analysts said. Following Intels Core 2 Duo launch on July 27, theres likely to be a tremendous amount of activity around the lower-priced Pentium D, said Dean McCarron, principal analyst at Mercury Research, in Cave Creek, Ariz.

"The Core 2 Duo will occupy the top bins of the market for dual core, and the mainstream or even the upper end of the value PC market is going to migrate to dual core probably this quarter," he said.

Indeed, Core 2 Duo desktops for consumers, unveiled on July 27, began around the $900 to $1,000 mark.

PC buyers tend to wait to adopt technologies such as dual-core processors, as prices eventually fall naturally as the technology matures. To motivate these buyers, PC makers and suppliers such as Intel often cut prices.

A $100 or $200 price break on a processor doesnt always translate directly into a $100 or $200 lower price on a desktop, however. PC makers often spread the savings around by mixing in upgraded and therefore more expensive components, such as higher-end processors or extra memory at a given price point. Sometimes they offer smaller price drops, rebates or even free shipping. Many are now offering discounted flat panels or including the displays in bundles with their new desktops.

HPs Pavilion a1520y desktop, for example, can be fitted with a Pentium D 805—Intels entry-level dual-core desktop chip—for as little as $539 after rebates via HPshopping.com, HPs direct-to-consumer arm.

Click here to read about why Intel says its Core 2 Duo processor is the most important chip since the first Pentium.

The site also offers Pavilion a1550 desktops starting at $629, after rebates, with either Pentium D or Athlon 64 X2 chips. For that price, buyers can choose either an AMD Athlon 64 X2 3800+ or Pentium D 805. The machines both come with the same base configurations, which include 512MB of RAM, an 80GB hard drive, a combination CD-RW/DVD-ROM drive, Microsofts Windows XP Media Center Edition operating system and a one-year warranty. HP was also offering a $50 flat-panel monitor upgrade and free shipping for the PCs on July 28.

Dell on July 28 advertised a Dimension E510 with a Pentium D 805, 512MB of RAM, an 80GB hard drive, a combination CD-RW/DVD-ROM drive, a one-year warranty and Windows XP Home Edition operating system for $568 after an instant rebate. An upgrade to Windows XP Media Center was priced at $24. Dell also offered on July 28 free shipping and an $81 flat-panel monitor upgrade on the machine.

Dells Small & Medium Business site, meanwhile, was offering a Dimension 5150 desktop with the Pentium D 805 for a starting price of $499, sans monitor, on July 28. The 5150 machine was somewhat more basic than the E510, offering 512MB of RAM—thanks to a free upgrade, valued at $50—an 80GB hard drive, a DVD-ROM drive and Windows XP Home Edition.

While Intels July 27 Pentium price cuts ranged to as much as 61 percent on the 3.2GHz, single-core Pentium 4 model 541, the chip maker dropped its Pentium D prices by somewhat less. Its family of Pentium Ds, which range between 2.6GHz and 3.6GHz, now list for up to 40 percent less. Its least expensive Pentium D, the model 805, lists for $93. Its top-end Pentium D, the 3.6GHz model 960, now has a list price of $316, down from $530.

AMD, in a pre-emptive move, lowered the prices on its single-core Athlon 64 and dual-core Athlon 64 X2 desktop chips as well, dropping its Athlon 64 3800+ by 61 percent to a list price of $112. But most of its Athlon 64 X2 chips were cut by between 44 and 57 percent. The chips now list for between $152, for an Athlon 64 X2 Model 3800+, and $301, the price of AMDs top-end Athlon 64 X2 5000+.

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