Intel drops prices, kills OEM incentives

[Uraniun235]

now we're playing with power

Intel to quote same desktop CPU prices to OEMs and channel; prices to drop

On the sidelines of the May 23-24 Spring Intel Developer Forum (IDF) in Shenzhen, China, Intel told Taiwan vendors that it will begin offering OEM and channel players the same prices and that it will no longer offer rebates to OEMs that place large-quantity orders. In addition, the company showed a new price list with significant reductions coming into effect on July 23.

The company responded to the news by saying, "Intel cannot comment on our communications with customers. However, Intel's strategy is to bring the latest technology to consumers worldwide as fast as possible. Intel Core Microarchitecture products are ready to ship as we previously announced (Woodcrest in June, Conroe in July, Merom in August). The products combined with our high volume 65nm technology and energy efficient design will allow us to ramp quickly into both mainstream and performance, and we are ensuring the industry can ramp these products in every segment."

Taiwan OEM makers commented that Intel announced the pricing at the IDF event and it will implement the "equal OEM and channel pricing" strategy by September. The makers expressed concern that the strategy would remove the incentive to place high quantity orders with Intel and that the move to force consistent pricing in the market would impact their working relationship.

Taiwan-based clone PC companies said the move, which follows Intel's Channel Marketplace ("Cedar Wood") program that was launched April (see March 26 article), is an effort to boost the competitiveness of PC sellers in the channel to support the DIY market against the giant desktop OEMs. The companies also indicated that there is a serious problem with leading OEMs selling CPUs in the channel, especially in China: when a large OEM can get significantly lower prices than the channel vendors by purchasing high quantities, there is nothing to stop it turning a profit from selling the CPUs directly against the channel vendors that have no way of competing. This situation has also affected Intel's ASP (average selling price) and margin, sources said. However, the channel vendors remain suspicious of Intel because they have no idea what Intel is saying to its large PC-brand customers.

Taiwan-based motherboard makers offered a different viewpoint. They anticipate that the new pricing strategy and improved pricing transparency will help Intel defend itself against AMD's anti-trust accusations. For the price reduction strategy, the motherboard makers also indicated that the plan shows Intel's determination to put regaining market share before profitability. They added that Intel stands a good chance of stimulating demand by the price cut.

Intel's new price list shows reductions in its Celeron D, Pentium 4 and Pentium D processors on July 23, with the reduction range as much as over 60% for some of the processors, sources revealed. In addition to the price cut, Intel will roll out high-end Core 2 Duo processors during July, with prices at US$183-530, the sources said. They added that, for the remainder of the year, Pentium 4 processors will target the entry-level market, the Pentium D series will be mainstream, and the Core 2 Duo will target the high-end.

Almost everyone that was questioned about the price cuts said that the move was an obvious broadside aimed squarely at preventing AMD's AM2 platform from building steam.

[Mr Bean]

Why we've giving the shaft to big business who buy the most of our products! It's not like we have any competition in this industry or anything! Not like our customers have anything platform to switch to over us... oh wait...


Wake up Intel, your pissing off the big boys now.
Dell, HP, Gateway and the Goverment, the people who buy massive numbers of your chips each year and now your saying that the special deals are over?
Not a bright move...

[Ace Pace]

Intel also knows that it needs to clear space for Conroe and merom to hit the market in quantity.