Intel and AMD price war subsidies

Intel and AMD price war subsidies

Pinched by microprocessor price wars, Intel and Advanced Micro Devices are trying to move away from competing over prices, to competing on microprocessor features and functionality instead, according to a study released by iSuppli.

Though Intel has a sizeable lead over AMD in global microprocessor revenue, both companies have noted that competition over average selling prices of chips has eased. This could signify the beginning of the end for the x86 microprocessor pricing war, iSuppli said in a statement.

Total global microprocessor revenue for the third quarter of 2007 was $US8.53 billion, increasing 10.9 per cent from the previous year, with Intel retaining the top position with a 78.7 per cent market share, rising 4.6 per cent.

AMD followed with a 13.9 per cent market share, dropping 2.9 per cent year-over-year. Other suppliers, including IBM, Freescale and Marvell Technology, accounted for 7.4 per cent of the microprocessor revenue market.

Global microprocessor revenue increased from strong sales of PCs and entry-level servers, of which 68.1 million units shipped for the quarter, up 13.8 per cent from the previous year, the study said.

Despite strong PC shipments, aggressive pricing by both Intel and AMD hurt microprocessor revenues for both companies, vicepresident at iSuppli, Dale Ford, said. But the situation has improved somewhat as prices had stabilised with the release of new multicore processors and chips made using more advanced manufacturing technologies, he said.

Intel recently launched its power-efficient Penryn chip, manufactured using the 45-nanometre (nm) process. AMD, which makes chips using the 65nm processor, said it will start manufacturing 45nm chips in the middle of 2008.

In addition to upgrading chips with features such as virtualisation support and better graphics, new chip architectures - like the upcoming Nehalem and Fusion chip architectures from Intel and AMD, respectively - are helping to shore up prices, an analyst with Mercury Research, Dean McCarron, said.

Intel said Nehalem, due for release in late 2008, would deliver better performance-per-watt and system performance.

Fusion, AMD's next-generation chip, will merge a CPU and graphics processor on a single die. Strong demand for mobile chips is also helping to keep prices high. Both AMD and Intel have warned that aggressive pricing may continue in the lower end of the desktop PC market, but rising demand for mobile devices may boost prices in that segment of the market, McCarron said.

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