After about two years on the market, Advanced Micro Devices's budget Duron processor is being retired--and consumers may see some PC bargains disappear along with it.
AMD expects to stop producing Duron by 2003, the company says. The news came along with the announcement last week of its Opteron chip. For AMD, it's apparently an economic decision, but reaction is mixed among processor gurus. Most analysts consider Duron a strong product caught in the crossfire of AMD's price wars with Intel Corp., and say its demise could boost prices on AMD-based value PCs.
"The consumer may not have always recognized it, but the Duron was an incredible value," says Dean McCarron, principal analyst at Mercury Research.
MicroDesign Resources analyst Kevin Krewell agrees. "You definitely got more bang for your buck with a Duron over a Celeron," he says. Celeron is Intel's budget processor.
Because it was based on the strong Athlon core--which continues to compete well with Intel's Pentium 4--Duron was an excellent performer, says McCarron.
PC World's own early reviews of Duron-based systems back that assertion. After a slow start caused by delayed motherboard support, it sold well, too. At its most successful, Duron supplied as much as 50 percent of AMD's volume sales, McCarron says.
But as AMD dropped Athlon prices to compete with the P4, that pushed Duron prices to as low as US$40 each, making it difficult to make money on the chip, McCarron says, Profitable value-priced chips generally sell in the $70 to $80 range, he says. Plus, the Duron's volume sales were declining, he says.
Athlon trickles down
AMD executives say they'll move Athlon into the low-priced market where Duron currently resides. But that could be a mistake, says MDR's Krewell.
"Taking Athlon into value will take the value of the name down a notch," he says. AMD has built a strong brand with Athlon, a brand associated with high performance. People are going to notice if their high-end PC has the same processor, at least in name, as the value-priced system next to it, he says.
AMD's Mark de Frere, Athlon brand manager, disagrees, saying customers win when Athlon hits all price points.
"We have made this decision to have a single performance metric in the market and that metric is model numbers and the Athlon processor," de Frere says. "Buyers will get a better-performing PC from top to bottom."
Nor does AMD believe putting Athlons in value-priced PCs will hurt the brand's reputation of performance, de Frere says. "It doesn't damage the brand--it creates a great brand that says 'regardless of where you buy your PC, you know if it has Athlon it has the best performance for the price you paid,'" he says.
As for consumers, if AMD manages to keep the price of its budget Athlons higher than today's Duron prices, buyers could see an effect on PC prices, or at least on configurations, Krewell says. Prices may go up, or you'll get less for the same price.
PC vendors can adjust for price points, Krewell says. But if the chip costs more, a vendor may plug in less memory, or a smaller hard drive, to sell at the same price, he says.
AMD's de Frere says PC vendors will set system prices. But he too notes that value PCs are generally based on price points, and he says he expects vendors to continue to hit certain levels. "We think that our decision will mean customers get a better processor at the same price point," he says.
Athlon XP 64?
AMD hasn't gotten specific, but Krewell expects it will try to segment the product line by offering multiple flavors of Athlon. Just as the Athlon XP usurped the standard Athlon, future products will undoubtedly carry additional tag lines, he says.
For example, when AMD launches its first Athlon based on a 64-bit architecture, currently code-named ClawHammer, it may carry another designation such as Athlon XP 64, he says. (AMD's de Frere declines to comment on future Athlon branding).
Additional suffixes allow for some brand differentiation, but it's still risky, says Krewell, who confesses he's not sure why AMD is dropping Duron.
"I'm surprised that AMD is letting the brand die," he says. Plus, pushing Athlon into the value space could lead to lower prices for that CPU (central processing unit), too, he says.
Krewell says Duron's production was tricky; AMD couldn't flip a switch to go from Athlon to Duron because the chips are made from different dies. But AMD could have easily created a Duron processor based on a pared-down version of the Athlon with a smaller L2 cache, he says. That's how Intel creates its Celeron chips, he says.
"The reality is that Intel takes it latest chip, disables it, and calls it a value chip," he says.