Intel planning to cut prices, motherboard makers say

Customers of Intel Corp said the world's biggest computer chipmaker plans to reduce prices on Pentium processors by as much as 60 percent to reclaim market share from Advanced Micro Devices (AMD) Inc.

Executives at Micro-Star International Co (微星) and Gigabyte Technology Co (技嘉), two of the nation's biggest makers of motherboard makers for computers, said Intel officials told them the price cuts will start on July 23. Tom Beermann, a spokesman for Santa Clara, California-based Intel, declined to comment.

AMD last quarter increased its share of the US$35 billion computer chip market to more than 20 percent for the first time in more than four years. Intel chief executive officer Paul Otellini forecast the company's first annual sales decline in five years, and Dell Inc decided last month to buy some AMD chips for the first time.

"They're very aggressive about getting market share back," said Max Tsai, a product manager at Gigabyte.

Tsai said on Thursday that his Intel account manager in Taipei said prices will be cut.

"We're all surprised," Tsai said.

Intel said it would reduce prices of faster dual-core chips by about 15 percent, according to Alex Lin, a product marketing manager at Micro-Star, the nation's third-largest motherboard maker. Intel also told him that it plans to lower Pentium prices by 60 percent.

Citigroup Inc analyst Glen Yeung on Wednesday published a list of price cuts he anticipated from Intel next month, based on discussions with makers of computers and their components.

Pentium prices would fall 61 percent, Yeung said.

AMD also told Gigabyte that it plans to cut prices, though not by as much as Intel, Tsai said.

"Intel is fighting back," Ray Chen (陳瑞聰), president of Compal Electronics Inc (仁寶), the world's second-largest maker of notebook computers, said on Thursday. Such competition "means the consumer will get the benefit and the unit price will get lower so we can stimulate demand."

Yeung, citing conversations at the Computex trade show, predicted that "a more aggressive price war in microprocessors is forthcoming."

AMD isn't positioned for a price war, Yeung said.

Discussions with customers at Computex signaled AMD hasn't responded to the planned cuts.

Deep cuts by Intel may have a broad impact and hurt sales at distributors that market chips for manufacturers, said Patrick Moorhead, an AMD vice president for marketing.

"Knee-jerk pricing reactions like this wreak havoc," said Moorhead, who worked at Compaq Computer Corp before joining AMD.

"These are desperate moves ... I haven't seen this type of behavior, it's like a cornered animal," he said.