Intel explains that because of improved higher-efficiency manufacturing they will be able to cut prices on older chips. The CPU giant recently finished construction on a fourth factory allowing them to more easily ramp up production of additional 65-nanometer Core architecture. This public statement is likely an effort by Intel to compete directly with Advanced Micro Devices (AMD).
Recent news reports cited that AMD had surpassed Intel in retail store sales, a major victory for AMD who has been battling against the CPU giant for years. The Current Analysis report showed that 49.8 percent of PCs sold for a particular month contained AMD processors while Intel CPUs were present in only 48.5 percent. While AMD has surpassed Intel in number of units sold, they failed to generate more revenue because AMD usually sells chips for less than Intel. In fact, Intel sales accounted for 57.6 percent of the U.S. retail market revenue while AMD lagged behind at 40.1 percent.
Another thorn in Intel's side was a recent decision by Dell to cancel their exclusive CPU contract with Intel in favor of carrying chips from both Intel and AMD. Offering the versatility of either chip will likely cause a big boost in sales for Dell, whose customers have been requesting AMD chips for years.
A spokesperson from Intel commented:
"We have a more aggressive product and manufacturing ramp, so thoseWhile no direct comment on pricing was made, Citigroup analyst Glen Yeund said that based on talks with Intel customers, he believed that Pentium price cuts could fall between 8 percent and 61 percent by July. The problem for major chip manufacturers like Intel and AMD is a growing inventory of old chips whose value are rapidly diminishing due to increases in chip speed and performance.
older Pentium products will move down faster. It's not like we're cutting prices
for the sake of cutting prices."
Additionally if the computing market goes, both companies will see huge losses attributed to inventory that won't sell. Cutting prices is an early effort by Intel to minimize loss and overcome difficulties with a potentially slowing economy.