Intel may cut prices by nearly 40 percent

CHENNAI

JULY 7, 2006

The ongoing price war between chip-major Intel and archrival AMD will become
a more fierce battle soon. By July 23, Intel is expected to announce another
round of price cut in its processor family, but this time by nearly 40 percent.
This will be a historic moment for both Intel and the market, as for the first
time Intel processors will be sold at a very low price much below the AMD quote.
In the last one month, Intel has dropped the processor prices sharply, across
the product segments, triggering off the price war between them and AMD. In
fact, AMD also tried to do its bit in the fast moving Athlon 3000, 3200 and 3500
skews, cutting the prices between Rs 500 to Rs 2,000. Intel is however getting
more aggressive to beat out the competition.

According to market sources, the price war between Intel and AMD is part of
their global strategies to take on each other. And, it is understood that Intel
is facing competition from AMD and its growing popularity across the globe.
"AMD is surely growing across the world and no doubt about it. At the same
time, it is true that Intel is afraid of competition, which is very explicit
behind such moves. But, Intel has the muscle power to wage a (price) war and
turn the battle in its favor," said a leading reseller from upcountry
market in Tamil Nadu, who is also a key dealer for Intel.

Intel's price cut in the fast moving skews has raised many doubts and spun
off stories among the channels. According to resellers, Intel will completely
phase out Celeron and bring in entry-level P4 to Celeron place, while Dual-Core
will be positioned in P4 rank. "We are expecting good-configuration PCs to
be sold below Rs 10,000 and mid-range P4 machines at Rs 14,000. This is
something which industry totally unexpected and it will surely spur the PC
growth in the country," opined a leading reseller from Chennai.

"Celeron processors are already not available with the distributors and
whatever is available in the market, it is only through parallel import. The
resellers are also not stocking enough goods (Intel processors) as the news
about price cut is quite widespread now," said another reseller from
Chennai.

However, few resellers in the city have confirmed that they hold some stocks
and the product movement is very slow, as people are waiting for the major price
cut from Intel on July 23. There is also news that Intel is going to appoint
`Distribution Associates' (similar to sub-distributors) under the national
distribution partners. Supreme Computers, Vajawat and RM Computers are the
likely names for distribution associate in Chennai.

"Intel presently dumped some goods with these probable distribution
associates and they are selling at a good price, which even the national
distributors could not offer in business. So, people (other resellers) are
buying products only as and when they require and overall, the product movement
is very slow now," confirmed another leading sub-distributor in the market.

Key channel partners, who are close with Intel, have confirmed that Intel is
going to appoint distribution associates in business. "Initially, it will
be limited only to the metros, before opening up for upcountry market. We are
also expecting to be appointed as a distribution associate when they expand it.
Intel is a very strong and powerful company, which can change the market
dynamics and create a fortune for itself. The very announcement of Intel's
major price cut by July 23 has sent shivers down the spine of AMD and its
resellers. And, AMD sales has already dipped over the last month," said a
reseller from Coimbatore market.

When contacted Ashok Nair, National Sales Manager, Intel, for his comments on
the price war and appointment of distribution associate, he said,
"Introducing a new channel layer in the distribution structure was in
proposal for long and we have not finalized or announced it yet." But, Nair,
refused to comment on the price cut issue.

Similarly, AMD sources are also refusing to divulge any information on the
price cut and future developments. But, it is understood, from reliable sources
that AMD is also bracing up for the war. And, after Intel's major price cut
announcement by July 23, AMD will release their new list of prices.

Finally, customer is the king. They are going to benefit out of the ongoing
price war and competition between Intel and AMD, as processor constitutes nearly
50 percent of the PC price. And, any major price cut in the processor will bring
a big change in the PC price tag.