Intel, AMD Ready Steep Price Cuts

On April 22, Intel is slated to announce a 40 percent price cut on its current quad-core processors and significant drop on Core 2 Duos, channel sources said.

AMD has said it plans to launch its first quad-core processors, developed under the code name Barcelona, in mid-2007.

"There will be dramatic price drops on quad-cores, something AMD does not have, and dramatic price drops on Core 2 [Duo], an exciting processor that AMD has not had for two years. Advantage, Intel," said one system builder that works with both chip makers.

Another source familiar with the companies' plans said Intel plans price cuts on its Core 2 Duo E6300, E6400, E6420, E6000 and E6700 processors, and the reducaions will range from 20 percent on the low end to 40 percent on the high end. There's also a 40 percent reduction planned for the Q6600 processor.

AMD on April 9 is expected to announce big discounts across its entire Athlon 64+ product line and its lower-end processors, several sources said. Some of the reductions will be as high as 30 percent, but like Intel, AMD is leaving some of its popular processors unaffected, such as the 4200+, sources said.

"On April 9, AMD will introduce a bunch of new SKUs and is dropping prices tons," said one source who attended AMD's Executive Forum for partners in late February and Intel's Solutions Summit last week. "It will be as low as $70 for [AMD] dual core in the U.S."

Both Intel and AMD briefed channel partners on their planned April price cuts at their recent partner conferences. Intel and AMD didn't respond to requests for comment on the planned price cuts.

Although some industry observers view the price cuts as an expected midyear move for both chip giants as they prepare to announce their next-generation processors for late 2007 and 2008, others say the steep cuts signal that the battle is heating up.

"This price drop is dramatic, and the strategy, in my opinion, is to drive the quad-core to broader adoption into mainstream servers before Barcelona ships," said another Intel partner, who requested anonymity. "To me, it's clear that this price benefit is the result of extreme competition between Intel and AMD."

Sources also saidIntel's mobile Core Duo processors will be unaffected by the April 22 price drop and that the company will continue to sell entry mainstream Core Duo processors like the T2300 for more than $200.

Analysts said the price cuts signify that the gap is narrowing between market leader Intel and AMD.

"What you have today are two vendors with products that can be substituted for each other fairly easily, engaged in an aggressive technological and manufacturing battle with each other," said Gordon Haff, principal IT analyst at research firm Illuminata. "This inevitably puts a lot of pressure on pricing, and both AMD and Intel haven't been shy to use pricing as a lever."

Several system builders maintain that Intel holds a performance lead over AMD in Core 2 Duo and remains the only vendor on the market with quad-core processors. Still, other partners said the two chip makers are competing head to head for the hearts and minds of big OEMs and channel partners, and the gap is narrowing.

"AMD has become very competitive with Intel over the last three years, and major hardware vendors are providing more options about which processor to buy, which is giving AMD more market share," said Tom Raisbeck , president of technical services at Nortec Communications. "It's a see-saw battle right now, with AMD slightly on top. The bottom line is that AMD will be very competitive this year."