Intel, AMD Cut Chip Prices

By Dennis Callaghan  |  Posted 2001-10-29

The worlds leading PC chipmakers cut processor prices once again on Monday, but the cuts were less severe and sweeping than previous moves, possibly indicating that a once hotly contested price war is cooling off.

Intel Corp. reduced prices on its fastest selling Pentium 4 chips up to 29 percent, while rival Advanced Micro Devices Inc. trimmed the price tag on its fastest chip by 11 percent.

While Intels cuts were deeper than AMDs, the chipmaker giants latest reductions were more modest than previous reductions, such as a 54 percent price cut on its fastest chip in August.

"The cuts for both of the companies will be pretty mild," said Jonathan Joseph, a market analyst with Salomon Smith Barney, in San Francisco.

Intels ability to push the Pentium 4 to higher clock speeds than rival AMDs Athlon XP, he said, should give the Santa Clara, Calif., chipmaker a competitive advantage that will ease pricing pressures.

"In successfully moving on its Breakaway strategy to keep at least 500MHz between itself and AMD at all times, Intel should see better blended pricing and better profits in coming quarters," Joseph said.

Earlier this year, Intels struggles with sagging sales and its eagerness to boost sales of its new Pentium 4 chips spurred the chipmaker to cut prices aggressively. AMD, of Sunnyvale, Calif., responded with cuts of its own, resulting in a price war that cost both chipmakers millions.

The damage was readily apparent in the latest quarterly earnings reports from the two companies earlier this month. Intel, which garners about 80 percent of the PC processor market, posted a 96 percent decline in profits. AMD ended up losing about $187 million, despite having shipped a near record number of processors.

In particular, August price cuts highlighted the aggressive moves by the two rivals. That month, Intel dropped the price on its then fastest chip, the 1.8GHz Pentium 4, from $562 to $260, or 54 percent. At about the same time, AMD slashed the price on its top-speed chip, a 1.4GHz Athlon, to $253, a 49 percent cut.

Unlike those previous reductions, the latest cuts are more along the lines of traditional price moves prior to this year.

Intel cut the prices on only three of its eight Pentium 4 processors, with the 2GHz price dropping 29 percent, from $562 to $401; the 1.9GHz falling 27 percent, from $375 to $273; and the 1.8GHz decline 12 percent, from $256 to $225. Prices based on 1,000-unit volumes.

Intel also reduced the price of its fastest Xeon processor for servers and workstations, a 2GHz version, by 26 percent, from $615 to $455. In addition, the chipmaker trimmed prices on its Pentium III desktop chips up to 14 percent. No changes were made in mobile or Celeron prices on Monday.

Meanwhile, AMD lowered the cost on its fastest and newest processor, the 1800+ Athlon XP, which it introduced last month, trimming the price tag 11 percent, from $252 to $223. The prices for slower Athlon XP processors were unchanged.

In other price moves, AMD trimmed the cost of the 1.4GHz Athlon a meager 3 percent, from $130 to $125, and reduced the costs of three Duron processors targeted at the low-end of the market by up to about 14 percent.

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