April 2001 Industry Update

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Only a few weeks ago, the industry was literally stunned by the reports that Intel will introduce the 1.7GHz P4 at around $350 (OEM price, qty of 1000), while dropping the lower speed parts by up to 51%. Though first reports claimed that Intel was making a panic move to counter the Athlon’s rapid increase in popularity, Intel has been trying to convince industry people that this is a normal, competitive move, and that they have been planning for a major ramp in April for many months. I reported on this recently in this article.

After discussing this with several readers, I decided to hunt down a recent OEM price list to see whether there was any earlier indication of such a move during April. What I found is scheduled price reductions on April 15 and May 27, with the May prices showing the 1.7GHz P4 at $669, the 1.5GHz at $455, the 1.4GHz at $316 and the 1.3GHz at $241. I then spoke with an anonymous source at one manufacturer who indicated that they had only a three week notification of the price move (basically, the same day that the story broke). No, this was no ordinary competitive price reduction., it would seem.

There is one other piece of information that would indicate that Intel is in reaction mode, rather than in the driver’s seat. When the P4 was launched last year, Intel instituted a DRDRAM rebate program for OEMs and distributors to assist with the costs associated with the platform. Originally, it was to last for only two quarters (Q4 2000 and Q1 2001), and would be $70 and $60 respectively. Recently, Intel indicated that this rebate would continue until the Brookdale launch in September of this year. Now it seems that they have changed their strategy once again. For OEMs, the rebate program will end on April 29, when the 1.7GHz P4 is introduced. Apparently, they have decided that a lower price on the processor is better than a small saving on a complete system.

This makes me wonder if perhaps OEM sales are less important now than in the past. The DIY market has largely rejected the P4, due to the large pricing disparity between a system based on it and one based upon the Athlon. If this is true, then even a lower priced P4 may not achieve the results that Intel desires, as the DIY market has also largely rejected DRDRAM. It may well be that the P4 will not gain much of a foothold in the market until there is a DDR chipset available for it… which relates back to the rumors of a P4 DDR chipset from Intel in Q3.

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