PCs are cheap today, and soon they’ll be even cheaper, thanks to a price war between the two leading chip suppliers, AMD and Intel. Thursday’s expected launch of Intel’s next-generation Core 2 Duo range leaves AMD needing to halve the prices of many processors in order to stay competitive. And on Tuesday it did it, more than halving Athlon 64 prices.
Intel has been developing three 64-bit chips based on a new microarchitecture developed to replace the old Pentium NetBurst design. They have been code-named Merom (for notebooks), Conroe (for desktops) and Woodcrest (for servers).
We have been looking forward to them because the new chips are faster than the Pentium 4, run more coolly and use less power. This should lead to systems that run more quietly, with less need for powerful fans, and to notebooks that are either cooler or thinner and offer better battery life. They also have virtualisation features to help run multiple operating systems at once, and support TPM (Trusted Platform Module) features that can be used to increase security.
The wait is almost over. Woodcrest was launched a month ago as the Xeon 5100, with testimonials from Pixar Animation Studios and BMW, and support from more than 150 computer manufacturers. Conroe designs have already been tested by several magazines and start shipping in volume at the end of this month. Merom processors should be shipping by the end of August, according to Alistair Kemp, Intel UK’s PR manager.
For the past few years, AMD has enjoyed most of the bragging rights in the microchip market, particularly in high-end games machines and multi-processor servers. AMD also led the way in extending the current 32-bit x86 design to 64-bits, forcing Intel to follow.
But that’s changing. Now Intel is claiming leadership in performance, price/performance and, particularly, performance per watt of power consumption.
Independent tests from PC World magazine in the United States and various websites seem to bear this out, and Tom’s Hardware Guide concluded that AMD needed to cut prices by around 51% in order to stay competitive.
On Monday, when THG reported receiving an AMD price list with price cuts averaging 47% in ”strategically important” areas, it was no longer a surprise.
Richard Baker, AMD’s channel marketing manager for Europe, sounded surprisingly chipper about all this bad news. He didn’t confirm the price cuts in detail but said Tom’s Hardware was, ”as always, fairly well informed” — and he claimed that, in most respects, Intel was actually responding to architectural changes AMD had already made. ”We’re more than happy with where we are.”
What about the significant price cuts Intel is introducing with the Core 2 Duo, which look like hurting AMD? Baker responds with a grin that Intel is cutting its own margins ”and their financial results were worse than ours”.
Intel announced its latest quarterly financial results on July 19, and Wall Street gave it a beating. Intel’s sales fell by 13% from $9,2-billion to $8-billion, while profits plunged by 57% from $2-billion to only $885-million, compared with the same quarter last year. Intel says it is shedding 1 000 managers to reduce bureaucracy, and more cuts could follow.
This week, AMD has also bought ATI, one of the two leading suppliers of graphics processors, in a deal worth about $5,4-billion, subject to shareholder approval. ATI also makes support chips, so this will enable AMD to compete directly against Intel, which has built a healthy business around integrating graphics on motherboards.
In the long term, the ATI acquisition is even more important, because graphics capabilities will be built into the processor itself, just as most memory caches and maths co-processors — once separate chips — are today.
But for now, graphics processing is a brutal business: in the 2005 financial year, ATI made only $17-million profit on its $2,2-billion turnover. The company may also suffer when it stops being one of Intel’s best buddies and is targeted as the division of a hostile enemy. If ATI staff are not prepared for that, I suspect they are in for a rude awakening.
It’s far from clear that AMD can do what its chief financial officer, Bob Rivet, suggested during the ATI takeover: break Intel’s monopoly. However, in the short term, users can certainly look forward to increased competition in the PC market, bringing faster chips and faster PCs at even lower prices. – Guardian Unlimited Â