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Intel & AMD end PC processor price war

Chip giants focus on functionality and features

Intel and AMD are calling an end to the PC processor price war and focusing on features and functionality instead, according to a study released by iSuppli.

Though Intel has a sizeable lead over AMD in chip revenue, both companies recently noted that competition over the average selling prices of chips has eased, which could signify the beginning of the end for the x86 microprocessor pricing war, iSuppli said.

Overall, microprocessor revenue globally for the third quarter of 2007 was $8.53bn, increasing 10.9 percent from the previous year, with Intel retaining the top position with a 78.7 percent market share, rising 4.6 percent. AMD followed with a 13.9 percent market share, dropping 2.9 percent year-over-year. Other suppliers, including IBM, Freescale and Marvell Technology, accounted for 7.4 percent of the microprocessor revenue market share.

Despite strong PC shipments, aggressive pricing by both Intel and AMD significantly hurt microprocessor revenues for both companies, said Dale Ford, vice president at iSuppli. But the situation has improved somewhat as prices have stabilised with the release of new multicore processors and chips made using more advanced manufacturing technologies, he said.

Intel recently released its power-efficient Penryn chip, manufactured using the 45-nanometre process. AMD, which makes chips using the 65-nm processor, said it will start manufacturing 45-nm chips in the middle of 2008.

In addition to upgrading chips with features like virtualisation support and better graphics, new chip architectures - like the upcoming Nehalem and Fusion chip architectures from Intel and AMD, respectively - are helping to shore up prices, said Dean McCarron, an analyst with Mercury Research.

For example, Intel said Nehalem, due for release in late 2008, will deliver better performance-per-watt and system performance. Fusion, AMD's next-generation chip, will merge a CPU and graphics processor on a single die.

"New and differentiated products keeps the price tack moving," McCarron said.

Strong demand for mobile chips is also helping to keep prices high. Both AMD and Intel have warned aggressive pricing is likely to continue in the lower end of the desktop PC market, but rising demand for mobile devices is likely to boost prices in that segment of the market, McCarron said.


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