AMD slashes CPU prices
Monday 09th April 2007, 12:50:00 PM, written by Arun
In a move that has been widely rumoured for a while, AMD has just significantly reduced the price of its entire CPU line-up, with the FX-74 moving from $999 to $799 and the Sempron 3000+ now selling for $31 instead of $41, making it cheaper than anything previously in AMD's line-up. Intel is expected to cut its prices on April 22, and introduce new low-end products based on Conroe-L on June 3. AMD's answer? SPARTA!
The full pricing details are available on AMD's website, and a nice comparative table with the previous prices can be found at Digitimes. As can easily be seen, some of the cuts are fairly drastic. The correct way to consider the impact on average selling prices (ASPs) and thus gross margins is to evaluate how this changes the ASP of the different chips in production, rather than the actual price drops.
The reasoning there is that if you introduce a new model at the top and shift every model slightly downwards, and kill your previously lowest-end model, this will not affect margins as much as if you do not introduce a new model and simply cut the prices of all your products. In this specific instance, the latter is true; and the lowest-end model, the Sempron 3000+, is also receiving a drastic price cut rather than being discontinued.
This implies that the impact on AMD's margins will, we believe, be fairly significant. Obviously not as terrible as the price cut percentages would imply (remember AMD only has a couple of different chips, not dozens with different die sizes, and that consumers tend to shop for a given price point - not a given product!), but it'll definitely be interesting to see how AMD's Q2 results will react to these cuts. The Q1 results are expected to be announced later this month and thus, forecast will also be given then for the coming quarter. Either way, AMD doesn't look too worried about their balance sheet, and hopefully rightfully so!
In June, Intel will release the Pentium E21xx family (dual-core, 1MiB cache) and the Celeron 4xx family (single-core, 512KiB cache), and we believe both of these families are based on Intel's upcoming Conroe-L core, rather than just the Celeron 4xx as previously rumoured. Based on our analysis of available data, we further believe that Conroe-L is a 80mm² chip (while Allendale is 111mm² and Conroe is 143mm²) or perhaps a bit more, but still likely not more than 90 mm2. It will be present in at least three product families: Pentium E21xx, Celeron 4xx and also as Merom-L, which will have the full 1MiB cache but only one of the two cores enabled. It is not impossible, however, that one of the two upcoming Pentium E21xx models will actually be based on an Allendale core with half the cache disabled.
This small die size and large amount of potential redundancy would explain why Intel feels comfortable selling the Celeron 4xx at just $49, but even then, ridiculously high margins shouldn't be expected. AMD's answer to the Celeron 4xx will likely be the chip codenamed Sparta, which is a 65nm single-core derivative of K8 with only 256KiB of L2 cache, and one model with as little as 128KiB enabled. Needless to say, that should be a ridiculously small chip, which should in theory allow AMD to compete favorably against Intel in the lowest-end parts of the market.
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