Desktop chip price battle looms as AMD prices Trinity aggressively

Intel may respond by lowering its dektop chip prices, analysts say

A pricing battle is looming in the desktop chip market after Advanced Micro Devices shipped aggressively priced Trinity desktop chips, which might prompt a price-reduction response from Intel, analysts said.

AMD has priced the Trinity chips starting at $53 in quantities of 1,000. AMD's new dual-core A4-5300 desktop processors are priced at $53, which is the lowest of all Trinity desktop chips, and lower than comparable Intel Core i3 processors, which are based on the Ivy Bridge microarchitecture and start at $117.

AMD also shipped the new A10-5800K chip that can be unlocked for $122, while Intel's unlockable processors start at $216, according to a price list.

AMD announced the chips last week, but announced the pricing today. AMD said the new Trinity chips could allow PC makers to build inexpensive but powerful desktops. Lenovo earlier this week announced the ThinkCentre M78 desktop, which with AMD's new chips start at $479. By comparison, the cheapest Lenovo desktop with an Intel Core processor is the ThinkCentre M72e, which starts at $659 with a Core i3-2120 processor based on Intel's older Sandy Bridge microarchitecture.

A fundamental design difference makes an apples-to-apples comparison of Intel and AMD chips difficult. But with PC shipments slowing down, AMD and Intel will be looking closely at competitive pricing closely to retain market share, analysts said.

On a general basis, Intel's Ivy Bridge chips win in overall performance and AMD's Trinity chips offer better graphics, said Jim McGregor, principal analyst at Tirias Research.

For AMD, price is one way to keep pace with Intel and stay afloat in a slumping PC market, McGregor said. PC sales are suffering in the current economic environment and competition from smartphones and tablets is only becoming fiercer, McGregor said.

"I think some of the AMD systems I've seen advertised latest, already offer great value and they are likely to get even better throughout the holiday season, especially with the new pricing," McGregor said.

AMD is also trying to address the challenges of slumping PC sales and competition from smartphones and tablets while drawing the interest of system builders and device makers in PCs, ultrabooks and tablets. Intel will not engage in a full-scale price war, but will definitely take notice of AMD's pricing, McGregor said.

"It could definitely lead to more aggressive pricing going into 2013, especially if AMD is successfully in capturing more design wins in the newer Windows 8 platforms," McGregor said.

Microsoft is releasing Windows 8 in late October to succeed Windows 7, and PC makers are expected to announce new desktops and laptops based on new chips from Intel and AMD.

The pricing of AMD's new desktop chips is "super aggressive," said Patrick Moorhead, president of Moor Insights and Strategy.

"Given the competitive position AMD has on the graphics side they're going to move a lot," Moorhead said.

It appears that AMD is making a market-share move in the channel, which is the easiest way to get the attention of PC makers in emerging markets, Moorhead said.

"Intel will undoubtedly need to react. And I believe that they will react because they need business as much as AMD," Moorhead said.

Intel and AMD have had a see-saw market share battle over the last few years. At the end of the first quarter this year, Intel's market share dropped to 80.2 percent from 81 percent in last year's first quarter, while AMD's market share rose to 19.1 percent from 18.2 percent, according to numbers released by Mercury Research.

For the last few years, Intel's market share has been hovering at around 80 percent for x86 processors, with AMD's market share hovering in the 19 percent to 20 percent range. The third x86 player, Via Technology, largely sells netbook and embedded chips and its market share is under 1 percent.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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