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Fierce Competition Prompts Chip Discounts

AMD cuts will follow Intel%squots; system prices will be next.

By Bill Snyder, PCWorld   

%dquotWe will stay competitive with Intel,%dquot AMD spokesman Scott Allen said. %dquotWe%squotve been defining %squotcompetitive%squot as 25 percent less than the price of competing products from Intel.%dquot

What does it mean for consumers?

%dquotExpect the system makers to pass all (or nearly all) of the cuts straight through,%dquot said Scott Miller, an analyst for Dataquest Inc., in San Jose, Calif.

In some cases, however, system vendors will add features such as more memory or a bigger hard drive and keep the price the same.

Cyrix Inc., has yet to be heard from, but Miller believes the Richardson, Texas, company has little choice. %dquotThey%squotll follow,%dquot he predicted. %dquotCyrix knows it has to stay below Intel and AMD.%dquot On Monday, a Cyrix representative said company executives were discussing pricing this week and could not comment.

The actual size of the expected price cuts is still not certain. Intel has said it will cut prices on all of its microprocessors by August, well ahead of its usual schedule. Analyst believe the cuts will range from 30 percent to 50 percent, rather than the 25 percent or 30 percent originally planned.

AMD has priced its high-end K6 chips about 25 percent below Intel%squots comparable offerings, while Cyrix has been even cheaper than AMD. And most analysts believe that Cyrix, which suffered massive losses when it tried to price its chips on a near-par with Intel, has learned its lesson and will continue to keep prices well below those of the two market leaders.

Do the chip vendors have room to cut prices even more? %dquotAbsolutely,%dquot says Miller.