Intel is making a bold move to try to inject some life into its CPU processor revenue stream: It's slashing prices of its chips, in some cases by 40%. It's a reaction to the lower consumer gadget spending that's been caused by the global economic slowdown, and it shows that Intel's rival AMD is successfully beating Intel in some cases.
The high-end quad-core desktop Core 2 Quad Q9650 chip is benefiting from that 40% drop, taking it from $530 in December to just $316 now. Other quad-cores are dropping between by 16 to 20% as well—the Q9400 is taking an 18% drop to just $219, for example.
Just a few weeks back, AMD launched a few new highly-anticipated Phenom II processors: the X4 940 and X4 920. The 940 is a 3 GHz quad-core processor that competes with Intel's 2.66GHz Quad Q9400 chip, and was launched at a list price of $275, while the 920 is a 2.8 GHz chip designed to compete with the Q9300.
It's fair to say then that Intel's tweaking its price structure to compete with some strong offerings from AMD.
But Intel's also adjusting prices across all ranges: The dual core Pentium E5200 is getting a 23% cut from $87 to $67, while at the very lowest level of chip capability, the Celeron dual core E1400 is dropping 19% from $54 to $44 (see here for a full list of the price cuts.) These changes aren't so much a reaction to competition as an attempt to get people buying more goods that use Intel chips—by dropping CPU prices, it will make OEM products less expensive to produce, and the manufacturers may benefit from better sales by passing the cost saving on to the consumer.
And Intel really needs to reinvigorate its business a little: In its recent fourth-quarter financial report, the company posted a 90% drop in profits measured year-on-year. To January this year, the chip maker's profits totaled $234 million versus a net profit of $2.27 billion this time last year. Chief executive Paul Otellini directly admitted that "fourth quarter results reflect the difficult economic climate." And Intel can't have missed the effects of the downturn in PC buying in the last quarter of 2008—the first such slip for many years.
Yet Intel's Atom chips are at the heart of millions of netbook PCS, so not all its revenue streams are threatened. The hope is clearly that this round of price drops should definitely improve the company's financial outlook for 2009.