Why cannot AMD beat Intel by just underpricing them?

J

JLGatsby

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Sep 6, 2005
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AMD is in the gutter. They need to do something.

They seem to set the prices on their procs equal or near equal to their Intel counterparts in terms of performance.

Why cannot they just do something dramatic like sell Phenoms for $99 and X2s for $29, just something dramatically inexpensive to underprice Intel.

Intel is whipping AMD in every way. If there is no reason to get an AMD proc, AMD needs to GIVE people a reason to buy them.
 
until the A64 came out this is how amd was since i can remember
 
ALL4AMD said:
until the A64 came out this is how amd was since i can remember
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Yeah but they're still getting their arses whopped. I mean DRAMATICALLY undercutting Intel in terms of price. They need something dramatic.
 
JLGatsby said:
Yeah but they're still getting their arses whopped. I mean DRAMATICALLY undercutting Intel in terms of price. They need something dramatic.
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I think they need to make SOME profit though, however little that is.... and I think they already undercut quite a bit with their AM2 X2's... I mean, you can buy an unlocked X2 Brizzy for $99 now... that's just ridiculous. They need to make up losses somewhere... and right now that's with the cheapest quad's... even if they're not overly competitive with C2Q's
 
1. They are selling everything that they can make. Why would they lower prices when they are guaranteed a sale at a more expensive price?

2. It is illegal. This could be considered predatory pricing - where a seller will sell a product for less than it costs them to make. This will make the company lose money, but gain market share from their competitor. Unfortunately for AMD, if they were to get in a severe price war with Intel, Intel would be able to lose money longer than they could.

At $29, AMD would be losing more money from costs than they would be making by more sales. - Thing is, to actually sell more, they need to have more capacity, so sales would probably remain constant, just with less money flowing in.


Also, if AMD does this, they risk the fact that Intel might very well follow suit.
 
Does it make more sense to sell 1000 items at $50 profit, or sell 1500 items at $5 profit?

Pricing things doesn't doesn't scale in a linear fashion to total sales. Read up on the Wikipedia site for Profit Maximization and it'll help you understand why simply dropping the price doesn't help your company in the long-run.

202276
 
mpcamer1220 said:
2. It is illegal. This could be considered predatory pricing - where a seller will sell a product for less than it costs them to make. This will make the company lose money, but gain market share from their competitor. Unfortunately for AMD, if they were to get in a severe price war with Intel, Intel would be able to lose money longer than they could.
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Selling at a product at a loss is not illegal. How do you think consoles work?
 
JLGatsby said:
AMD is in the gutter. They need to do something.

They seem to set the prices on their procs equal or near equal to their Intel counterparts in terms of performance.

Why cannot they just do something dramatic like sell Phenoms for $99 and X2s for $29, just something dramatically inexpensive to underprice Intel.

Intel is whipping AMD in every way. If there is no reason to get an AMD proc, AMD needs to GIVE people a reason to buy them.
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Oh noes! The sky is falling! AMD is teh fail!

*yawn*

Really folks, this is getting old. Tell us something we DON'T know about that isn't overblown like Katrina...


Chombo said:
Selling at a product at a loss is not illegal. How do you think consoles work?
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Errr, perhaps you might want to brush up on the U.S.'s anti-trust laws, particularly the US Supreme Court 1993 case, "Brooke Group v. Brown & Williamson Tobacco".

"In many countries, legal restrictions may preclude this pricing strategy, which may be deemed anti-competitive. In the United States predatory pricing practices may result in antitrust claims of monopolization or attempts to monopolize. Businesses with dominant or substantial market shares are more vulnerable to antitrust claims."

In short, AMD and Intel doesn't need any(more in Intel's case especially) anti-trust claims to deal with right now. Selling at a loss = bad idea financially and legally...
 
I don't think they can sell that much lower, to be honest. I think Intel kind of set the lower prices and since their costs are, relatively, lower, AMD suffers at those prices more.
 
Intel is already in a very good position to counter if it becomes an all-out price war, and will in fact be able to beat AMD at it without breaking a sweat. Consider that Intel sells a Pentium Dual-Core for $70 and a Celeron dual-core for $60; both of these are inventory control products, more than market-drivers. That is, both of these could be made out of e4x00 chips that didn't make the grade, or else Intel just has far more Allendale cores than they need. Considering that the alternative would be to toss them in the trash for zero profit, I don't think Intel would have any problem selling a $20 Celeron or a $40 Pentium if they felt that AMD was starting to put the squeeze on them. Similarly, once the Q9000 series launches, Intel could very easily parlay the then-discontinued Q6000's into a bargain-bin quad that would beat Phenom in price AND performance.
 
You do know it costs money to make those processors...

The X2 6000+ is about the same performance to a E6550 not OC'd. And I'm guessing the 6400+ is about the E6750 not OC'd. But the deal is that you can take any Core 2 chip and OC the hell out of it with a decent mobo and cooler and make it beat a AMD chip.

I wish we could all hear from AMD what they are doing right now... it seems like a whole lot of nothing right now.

Any person who wants performance will pay the extra $50-$100 for something that is a whole lot better.

AMD just needs to release some kick ass new procs and price them around the same or maybe a little cheaper then intel.
 
colinstu said:
You do know it costs money to make those processors...

The X2 6000+ is about the same performance to a E6550 not OC'd. And I'm guessing the 6400+ is about the E6750 not OC'd. But the deal is that you can take any Core 2 chip and OC the hell out of it with a decent mobo and cooler and make it beat a AMD chip.

I wish we could all hear from AMD what they are doing right now... it seems like a whole lot of nothing right now.

Any person who wants performance will pay the extra $50-$100 for something that is a whole lot better.

AMD just needs to release some kick ass new procs and price them around the same or maybe a little cheaper then intel.
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a whole lot better? please :rolleyes:
 
ALL4AMD said:
a whole lot better? please :rolleyes:
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Let's not start calling each other fanboys and other ridiculous names, but I'm sure you know that between AMD and Intel, with a decent CPU in gaming there will be next to no difference, but if you're encoding/decoding/number crunching, etc etc, something VERY processor heavy, you KNOW an overclocked C2D at anything above 3 ghz is going to wipe the floor with any X2. Please don't start this debate from a year ago all over again.
 
Citizen86 said:
Let's not start calling each other fanboys and other ridiculous names, but I'm sure you know that between AMD and Intel, with a decent CPU in gaming there will be next to no difference, but if you're encoding/decoding/number crunching, etc etc, something VERY processor heavy, you KNOW an overclocked C2D at anything above 3 ghz is going to wipe the floor with any X2. Please don't start this debate from a year ago all over again.
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Thanks.
 
Citizen86 said:
Let's not start calling each other fanboys and other ridiculous names, but I'm sure you know that between AMD and Intel, with a decent CPU in gaming there will be next to no difference, but if you're encoding/decoding/number crunching, etc etc, something VERY processor heavy, you KNOW an overclocked C2D at anything above 3 ghz is going to wipe the floor with any X2. Please don't start this debate from a year ago all over again.
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stock not a big difference. overclocked yes. most people who buy their little dells don't care or even know what oveclocking is. after kyles review waiting 10 more seconds on something that takes 2 hours justified my decision to pay a little less for the phenom.

P.S. im tired of the intel fanboys who come in here posting "z0mg!!!!111 Q6600 smokes phenom"

when the P4 was getting smoked by A64 u never saw me in the intel sub forum trolling. No respect what so ever
 
I'm surprised that so many people have actually commented on this; anyone with a basic level of common sense would see this as a completely ridiculous question. Companies that are already in a horrible financial situation with a relatively bleak future can't go around selling their own products at a massive loss to "beat" their competitor. At what point did you imagine "beating your opponent" was equivalent to "having no money"?

Lou Ceifer said:
that isn't overblown like Katrina...
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This is the kind of shit that needs the banhammer.
 
mpcamer1220 said:
1. They are selling everything that they can make. Why would they lower prices when they are guaranteed a sale at a more expensive price?
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AMD would be crazy to sell their processore any cheaper than they have to. They are selling everything they make so why lower the price? Now if inventory starts to back up then that's a different story.
 
Pretty basic economics. If AMD cuts their prices dramatically, they have to sell more to make the same money, while having to build more, which costs more (unless they could manage huge sales increases which leads to a lower cost of manufacturing), and outstanding liabilities (warranty, support, cost of business, etc.) They'd also risk people thinking the products are vastly inferior, and actually sell less, like in the old AMD days, when the chips were mostly clones of Intels, and were somewhat lackluster.

Basically at their prices now, they must be selling, or they'd drop them. They probably know they can't raise them or risk loosing sales to Intel. Pricing in a competitive market is a balancing act, and can change several times a day. AMD's got a lot of people in accounting, marketing and sales who are responsible for setting those prices :)
 
Roberty said:
AMD would be crazy to sell their processore any cheaper than they have to. They are selling everything they make so why lower the price? .
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Indeed, if AMD lowered their prices to fire sale levels like the OP suggested, they'd probably be filing chapter 11 within a quarter or two. Cannibalistic pricing doesn't benefit anyone, the consumer included.
 
Hard for AMD to sell processors they don't yet make - at any price. Intel is about to shove 45nm down AMD's throat and it won't be pretty. Intel is also already talking about 32nm and (I think) has a fab capable of 32nm. Does AMD even have any 45nm CPUs available yet? See a trend here?

I was a big AMD fan in late 2005. My current system (see sig), built in late 2005, has served well and just got its final upgrade to an Opty 185 from an X24400 (not much of an upgrade really lol.) My next system will be an Intel 45nm CPU and I feel fine about that. I don't really see anything AMD can do to get itself out of this situation quickly. Partnering with IBM may help them get to 45nm and beyond quicker but even that may not be enough at this point.
 
quadnad said:
This is the kind of shit that needs the banhammer.
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Citizen86 said:
QFT, I wish people wouldn't make STUPIDASS comments because it's the intarweb.
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That dog won't hunt.

I live in Louisiana thank you very much and quite frankly, I get rather tired of hearing people using the tragedy of Katrina here to further their agendas or objectives.(namely some special interest groups) BECAUSE LIKE THE ABOVE "SKY IS FALLING" CRAP, I hear it here just about every day on the news.

So DO NOT take my comments to be towards the people who's lives were lost or destroyed by it, they still need help and my heart goes out to them. Don't put words in my mouth and don't waste your time stretching what I said into something else. I think this thread's been derailed enough, I've said my piece... As you were.
 
Lou Ceifer said:
Don't put words in my mouth and don't waste your time stretching what I said into something else.
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Nobody is putting words in your mouth; if you read your original comment back to yourself, I think you can see how someone might find it a little inflammatory.

Whether you have a more thought out sentiment than your original comment implied doesn't matter when you consider what you should or shouldn't say.

On topic: I really do think this thread has outlived its usefulness. AMD can't just cut prices for the hell of it, certainly not when they're still losing money like it's their MO. This article from Xbitlabs focusing solely on dual core parts, it just goes to show how increasingly difficult the landscape is becoming for AMD; if you want to save time by not reading the entire article, just read the conclusion (it really does say it all).
 
ALL4AMD said:
when the P4 was getting smoked by A64 u never saw me in the intel sub forum trolling. No respect what so ever
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Um, yes. Yes they did. Anyone in the Intel forum or General Hardware who made a thread about building a new Intel-based rig for video encoding would get about a dozen users spewing things like "Intel? LOL, can their processors even *run* Half Life 2?"

The OP would patiently explain that he was using his computer mostly for video encoding, which the P4 did have and advantage over the A64 in, and the two forum users who still had Intel PCs would try to help the guy out - for about five minutes, until another wave of users half-read the OP, skipped all the intervening posts and posted something along the lines of "OMG P4 SUX BUY AMD!!!!!!!!"
ALL4AMD said:
P.S. im tired of the intel fanboys who come in here posting "z0mg!!!!111 Q6600 smokes phenom"
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On one hand, sticking one's nose into every AMD thread to toot Intel's horn is probably trolling. On the other, merely stating the truth, or merely offering an Intel alternative into a discussion, is not, in my opinion, trolling.
ALL4AMD said:
stock not a big difference. overclocked yes. most people who buy their little dells don't care or even know what oveclocking is. after kyles review waiting 10 more seconds on something that takes 2 hours justified my decision to pay a little less for the phenom.
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And this is how flame wars start. "Not a big difference," is a very relative amount of difference. Many think that the performance difference between C2Q and Phenom is no big deal. Others see the same difference and would never consider buying a Phenom. Everyone is convinced that their idea of "a big difference" is right, and is willing to argue about it until they're blue in the face.

IMHO, the ones who insist upon their favorite processor are the trolls, and the ones who offer up facts and let you decide for yourselves are not.

DISCLAIMER: I am not calling you a troll.
 
LstOfTheBrunnenG said:
Um, yes. Yes they did. Anyone in the Intel forum or General Hardware who made a thread about building a new Intel-based rig for video encoding would get about a dozen users spewing things like "Intel? LOL, can their processors even *run* Half Life 2?"

The OP would patiently explain that he was using his computer mostly for video encoding, which the P4 did have and advantage over the A64 in, and the two forum users who still had Intel PCs would try to help the guy out - for about five minutes, until another wave of users half-read the OP, skipped all the intervening posts and posted something along the lines of "OMG P4 SUX BUY AMD!!!!!!!!"On one hand, sticking one's nose into every AMD thread to toot Intel's horn is probably trolling. On the other, merely stating the truth, or merely offering an Intel alternative into a discussion, is not, in my opinion, trolling. And this is how flame wars start. "Not a big difference," is a very relative amount of difference. Many think that the performance difference between C2Q and Phenom is no big deal. Others see the same difference and would never consider buying a Phenom. Everyone is convinced that their idea of "a big difference" is right, and is willing to argue about it until they're blue in the face.

IMHO, the ones who insist upon their favorite processor are the trolls, and the ones who offer up facts and let you decide for yourselves are not.

DISCLAIMER: I am not calling you a troll.
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read read what i said, i said I didn't go into the intel subforum and troll around.

as i said something that takes 10 seconds longer on a task that takes around 2 hours isn't enough to justify me paying more for intel. so how is this flaim war material? i also stated that overclocked yes the C2D does smoke phenom. in my personal life i prefer amd but when it comes to the military and i get to choose which cpu i want. i go with what ever is fasted for the money at the time amd or intel.
 
ALL4AMD said:
as i said something that takes 10 seconds longer on a task that takes around 2 hours isn't enough to justify me paying more for intel.
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It's when people make these kinds of generalizations that it turns into flame war material. For example, in the realm of "significant cost differences," the difference between Phenom and Q6600 is insignificant due to motherboards on both ends being quite inexpensive (good P35/G-series motherboards are $50-$100). If you'd like to look at the dual core realm, check out the xbit article up above.

As long as people focus on what facts there are, disregarding their own fanboy-ish preferences, I have no problem with someone recommending a system from the other side of the fence. I just think we have way too many people that will steer others in the wrong direction based on a false premise.
 
Lou Ceifer said:
Oh noes! The sky is falling! AMD is teh fail!

*yawn*

Really folks, this is getting old. Tell us something we DON'T know about that isn't overblown like Katrina...




Errr, perhaps you might want to brush up on the U.S.'s anti-trust laws, particularly the US Supreme Court 1993 case, "Brooke Group v. Brown & Williamson Tobacco".

"In many countries, legal restrictions may preclude this pricing strategy, which may be deemed anti-competitive. In the United States predatory pricing practices may result in antitrust claims of monopolization or attempts to monopolize. Businesses with dominant or substantial market shares are more vulnerable to antitrust claims."

In short, AMD and Intel doesn't need any(more in Intel's case especially) anti-trust claims to deal with right now. Selling at a loss = bad idea financially and legally...
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Selling at a loss is not predatory pricing. Especially when they need to lower prices just to be competitive. Predatory pricing is when Wal-mart lowers prices to drive other companies out of business.

Have you ever seen old technology being sold for less than it cost from the manufacturer? I have, better call the Feds.
 
quadnad said:
This article from Xbitlabs focusing solely on dual core parts, it just goes to show how increasingly difficult the landscape is becoming for AMD; if you want to save time by not reading the entire article, just read the conclusion (it really does say it all).
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The closing thoughts at Xbit hit the nail on the head perfectly.But all the same I dont think they were straight forward enough in thier final analysis.A month or so from now when all the b&m's and 'neweggs' are flush with cheap 45nm chips the chart on page one of that article,and the final thoughts,will really start to hit home for everyone.
 
Manny Calavera said:
The closing thoughts at Xbit hit the nail on the head perfectly.But all the same I dont think they were straight forward enough in thier final analysis.A month or so from now when all the b&m's and 'neweggs' are flush with cheap 45nm chips the chart on page one of that article,and the final thoughts,will really start to hit home for everyone.
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That is true, we do have to wait for about a month or a few weeks before 45nm are plentiful; until then we'll still see groups like NewEgg price gouging like it's their job.

I was quite impressed however at how extensive the testing methodology was that Xbit employed. A thorough article.
 
I remember the Phenom 9600 first day of release was around $280 while Q6600 was about $270 on Newegg.

This quickly changed in a week after all the reviews and AMD did drop their prices to what is close to price per performance compared to the Q6600 and to secure the low-end enthusiast quad core section.
 
Tytalus said:
Does it make more sense to sell 1000 items at $50 profit, or sell 1500 items at $5 profit?

Pricing things doesn't doesn't scale in a linear fashion to total sales.
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I understand that, but AMD could simply up production significantly. Just flood the market with cheap, but decently performing procs and outdo Intel that way. It was just an idea.
 
Chombo said:
Selling at a loss is not predatory pricing. Especially when they need to lower prices just to be competitive. Predatory pricing is when Wal-mart lowers prices to drive other companies out of business.

Have you ever seen old technology being sold for less than it cost from the manufacturer? I have, better call the Feds.
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Exactly, what would be predatory pricing would be Intel undercutting their products to drive the final stake into AMD's coffin. Intel will never do this, they realize that AMD actually helps the industry and it avoids them looking like a monopoly...like how Toyota doesn't want American car manufacturers to fail.
 
JLGatsby said:
I understand that, but AMD could simply up production significantly. Just flood the market with cheap, but decently performing procs and outdo Intel that way. It was just an idea.
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They can't seem to produce enough of them. AMD is already maxed out their own fabs. They also can't seem to pull in enough capital finish building more fabs (New York?).

Is AMD contracting out any of there processor production (CPU's not GPU's) to companies such as National Semiconductor? Or was there some sort of limit on that with the x86 license?

If they haven't started doing this, and it is possible for them to, then I don't see why its not possible for them to have other companies produce some of the older Athlon's so they can focus more on Phenom production.:confused:
It would seem to me that AMD would be wanting to get as many B3 Barcelona based Opterons as possible out the door right now. All the defect's sell as X2's or X3's to the OEM's for cheap as hell, then worry about the desktop procs later. That would be unfortunate for the enthusiast sector, but I don't think these chips are flying off the shelves right now anyways.
 
quadnad said:
This article from Xbitlabs focusing solely on dual core parts, it just goes to show how increasingly difficult the landscape is becoming for AMD; if you want to save time by not reading the entire article, just read the conclusion (it really does say it all).
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I saw that yesterday, but decided it was too cruel to post here. :p
 
JLGatsby said:
AMD is in the gutter. They need to do something.

They seem to set the prices on their procs equal or near equal to their Intel counterparts in terms of performance.

Why cannot they just do something dramatic like sell Phenoms for $99 and X2s for $29, just something dramatically inexpensive to underprice Intel.

Intel is whipping AMD in every way. If there is no reason to get an AMD proc, AMD needs to GIVE people a reason to buy them.
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If they did that, then they would really not be around anymore.

You need to understand that AMD already has their prices way too low, just to stay competitive, which means lower profit margins. They can't lower them anymore, otherwise profits won't even exist and they need them to get out of their current situation.
 
JLGatsby said:
I understand that, but AMD could simply up production significantly. Just flood the market with cheap, but decently performing procs and outdo Intel that way. It was just an idea.
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Again, profit margins. Yes, they could do that, but that would be the same as suicide, since to up production, they need money, which they don't exactly have to spare. Selling them cheap, would mean that they would probably be left with tiny, or non-existent, profit margins and a company cannot survive without profits for long.
 
Additionally, an all-out price war that reduces profits from both camps would stifle innovation in the long run leading to a stagnant market. Less profits results in less available resources for R&D, and thus affecting the roll out of new microarchitectures. Too much competition is as bad as not enough. What this industry needs is more competition but not with the loss of profits from either side.
 
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