Wednesday, April 19, 2006

Intel entered a death trap

Back in Feburary, I emailed Intel execs reminding them of the "Operation crush" Andy Grove used against Motorola. Essentially, the trick was to pump vaporware like crazy and push competitor off balance.

But the time has changed. In the old days, the microprocessor was a new business, Intel was only selling a few chips a day. Back then, people were still deciding on which instruction set to go, promising a future was extremely important. Today, the world has already settled on AMD64 and have become much more sophisticated thanks to the Internet. Another major difference is Intel today has a huge existing product line to sell --Pentium-M, Pentium 4, Core Duo. Its 4Q05 projections for Conroe shipment is only 25%.

The result of Conroe pumping will be a quick death for Intel. The moment Conroe sells at $250 price, sales of other Pentium stuff will stop cold. Remember, CPU is just part of the computer cost. People would rather pay $150 extra to get a Conroe that can last longer, the electricity savings alone will pay for the extra $150.

Check how the celeron Xbox is selling (after Xbox 360 made a brief appearance), you will understand.

So, expect Intel's ASP to drop below $100, or 50% below current levels. Try figure out the gross margin yourself, and you will see red after deducting the $3 billion a quarter OpEx.

The same issue will plague the OEMs, especially Dell.

9 Comments:

Anonymous Anonymous said...

I disagree. The average user doesn't recognize CPU markings and belives in Intel brand. Corporate buyers (I work for one of them) don't care about technology for desktops. Maybe in the ideal world the day after Conroe introduction would be the last day of Pentium. I'm sure that people just don't care to much and Intel knows about that. Enthusiast market is in 85-90% occupied by AMD - they count every $ they spend on CPU. To grow AMD must persuade people that AM2 is somehow better than Intel. Live, AM2 and education can change that - but it requires years. I still can hear that AMD is not incompatible with x86 instructions. Can you belive that?!

12:31 PM, April 19, 2006  
Blogger Sharikou, Ph. D said...

The internet has changed everything. It's the young people that are driving PC growth. They are no dummies, they know AMD is cool and Conroe promised huge stuff. Corporate buyers is only a fraction of Intel's sales. 59% of Intel's revenue came from Asia, Americas contributes less than 20% of the Intel's revenue. Right now, Intel is pumping Conroe like crazy there.

12:42 PM, April 19, 2006  
Anonymous Anonymous said...

I disagree as well. I'd rather try imagine AMD selling AM FX at $1000 cpus that are slower in games and most apps (ok ok, i forgot ScienceMark that is most important app and has exchanged 3D Mark as our most belowed game) than some $305 Conroe chip. AMD will have to drop prices HARD. Wanna bet their entry level X2 CPU will cost 50% of it's current price by Xmas? Want hard numbers? ~$150.

AMD had wonderfull 3 years of Hammer dominance. But question is if they have an answer to Conroe in near future? K9 and K10 are rumoured to be cancelled. K8L is barely a stopgap solution for 2007. It's not like Intel has stopped developing Conroe. I bet it will have some real nasty suprises for AMD with 45nm tech. Think about Conroe as P4 Willamette chip - best effort and bad results. Northwood had double L2 , a bit tweaked core and owned K7 core big time after a bit of ramp up to 3Ghz.

12:56 PM, April 19, 2006  
Anonymous Anonymous said...

Iv'e put my order in for my conroe I've been told its due real soon, gee I cant wait, woopee wow and k-poww!.
Your dead right everywhere I go in IT the Intel religion promise of resurection has everyone on hold for purchase of the old stuff, ready with mouths watering.

12:58 PM, April 19, 2006  
Anonymous the architect said...

Much of what happens next depends on AMD's ability to execute their transition to DDR2, AM2, and Socket F.

As virtualization is not available with the current DDR compatible AMD offerings, AMD is pushing a large and expensive upgrade on everyone wanting the latest feature set.

Having been with AMD64 a long time, I know at the beginning it was really rough. They are still fixing bugs. I can't imagine that AM2 / Socket F is going to be debugged until mid-2007. It will take two years, mid-2008, before it is really rock solid.

Unfortunately this gives Intel -- which often delivers at a higher initial quality level (for the *system*) -- breathing room.

So I don't see the trap as being that deadly for Intel. AMD has plenty of cooking to do so its restaurant stays popular.

1:06 PM, April 19, 2006  
Anonymous Anonymous said...

Will the cheap Conroe affect the amount AMD charges for it's top end cpu's though and if so will this not also affect AMD's revenues ?

1:09 PM, April 19, 2006  
Blogger netrama said...

This is mostly true ...on my personal expereince, most of the so called Intel fan 'boys' are fat,balding men
in their 60's , who had brought Intel stock in 1985..
Almost all the AMD fan boys (including me) that I know are like in their 20's and 30's. Seriously, I dont know of any Intel fan boy in this in that age range.
The common folks I talk to, relate pretty well to AMD, they know Athlon is the speed boat and Opteron for servers and Turion for laptops..but when it comes to Intel ...everything else besides 'Centrino' is a confusion for them...Finally only the five letter "Intel" remains !!!

1:44 PM, April 19, 2006  
Anonymous Anonymous said...

lolz...
intel religion bible says "we'll reach 10GHz in no time"

intel religion bible says "64-bit is unnecessary, as 32-bit is clearly adequate for another decade"

intel religion bible says "only pentium Ds are good enough to run Skype"

....so much for your belief huh..

let's see if intel can really satisfy everyone's need with "conroe" by its offical release.

3:55 PM, April 19, 2006  
Anonymous Anonymous said...

Intel's fall from grace started with Itanium, A religious crusade to kill off their own sporn.
No one apart from Bob Cowell could see the folly. Now Intel is dead, thats the rumor, not a good look. No matter what Intel do now the public perception will be of a dead decaying company, most will treat this a cancer and cut its name from their thoughts and purchases.!

12:39 AM, April 20, 2006  

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