Competition is the cornerstone of a free market. Without healthy competition, unchallenged incumbents grow complacent, the pace of innovation slows, and prices either stagnate or rise. Those ill effects can be witnessed across a number of industries, but over the past few years, they've become increasingly apparent in the x86 processor market.
To be fair, Intel can hardly be faulted for not innovating. Year after year, the behemoth from Santa Clara manages to churn out new generations of chips with better performance and power efficiency than their predecessors. But Intel has been spoiled this past little while by a relatively placid competitive landscape. AMD, for all of its hard work, has largely failed to outdo its chief rival. Lately, it's had a hard time just keeping up.
You might have already noticed the resulting price stagnation. We've seen it first-hand when putting together our system guides. No matter how many chips AMD throws into the ring or how often it slashes prices, Intel CPUs always seem to stay put at roughly the same price points until the next generation comes along. There are exceptions in the bargain-basement realm of sub-$100 processors, but they're few and far between.
We were interested in quantifying the phenomenon, so we called on the lovely folks at Camelegg, who provided us with a treasure trove of historical CPU pricing data. That data covers Newegg pricing for budget and mid-range CPUs across the past three years or so. We stuck the numbers into an Excel spreadsheet, worked our famous graphing magic, and unearthed clear evidence of how dire the situation has become.
In the chart below, you'll see the difference between peak and minimum prices during the first 50 weeks of availability for a broad range of AMD and Intel processors, both new and old. Why 50 weeks? That happens to be roughly the amount of time AMD's FX-series CPUs have been available, and we wanted to see how they stacked up against other offerings, historically speaking.
Note that the numbers below account for occasional dips and hikes as well as permanent price cuts. Also, if you notice some chips missing from the list below, there's a good reason for that. Camelegg only tracks price changes. Its data for discontinued processors only shows the last price change before discontinuation, so large stretches of data between the last price cut and the product's end of life are missing. Since we weren't always sure when a processor dropped out of stock for good, we've cut off the data for discontinued items at the last price change. Older, already-retired CPUs for which we lacked a full 50 weeks of Camelegg data were kept out of the chart below.
Based on the data, it appears Intel's most substantial price cuts have applied to budget offerings—the Core i3-540, Core i3-530, and Core i3-2120. That's no coincidence, because the budget market happens to be AMD's last great stronghold in this competitive battle. Among Intel's more upscale mid-range chips, which have few to no challengers from AMD, price drops of more than 10% are very uncommon. Some chips, like the Core i5-2400, saw virtually no discounts during their first 50 weeks of availability. Compare that to AMD's FX-8150, whose price has tumbled almost 38% since launch.
We can illustrate the stagnation of Intel prices even better by plotting them over time. Here, the incompleteness of Camelegg's data for discontinued offerings is no great obstacle. We can still see where old processors used to reside on the pricing scale—and how new arrivals and price cuts affected the competition. You can click the buttons below the graph to switch between AMD and Intel CPUs.
Going as far back as 2009, it's clear AMD's mid-range processors have consistently followed a downward pricing slope. Their plots make me think of rainwater trickling down a mossy bluff. That bluff has only been getting steeper since the debut of Intel's Sandy Bridge processors in early 2011. For the most part, Sandy Bridge's arrival forced AMD to compete on price rather than performance in this segment. Ivy Bridge only made matters worse. The deep cuts to the FX series after the Ivy Bridge debut earlier this year are clear evidence of that.
By contrast, Intel's mid-range offerings have hardly budged over the days, weeks, and months. While we see occasional dips here and there, they're usually followed by rapid returns to the status quo. The only exceptions we can see here are the Core i7-2600K and the Core i5-3570K. The former saw its price decline only after being supplanted by the Core i7-3770K, and the latter was simply marked up by Newegg at launch. Intel's official bulk price for the i5-3570K was $225 from the start.
Intel's ability to maintain prices is also visible in the budget market—albeit to a lesser extent, likely due to AMD's stronger presence there.
Throughout 2010 and much of 2011, AMD had an ace in the hole in the budget game: its $100 quad-core Athlon IIs and Phenom IIs, which offered excellent performance for the money. Intel's dual-core, Core i3-500-series chips could manage superior single-threaded performance, but they weren't quite as compelling, especially in the eyes of enthusiasts. Nevertheless, Intel had no qualms about charging a premium. The Core i5-540 only slipped to $100 after its replacements in the Core i3-2100 series had already arrived.
Around the same time, AMD made the unfortunate decision to replace the Phenom II X4 840 with its A-series APUs, which were priced somewhat ambitiously. Intel prices remained stationary, and in light of the A series' somewhat underwhelming performance, we had to switch our recommendation for the system guide's budget build to the Core i3-2100.
Since then, and despite subsequent AMD price cuts, Intel has held the Core i3-2100 steady at around $120. The marginally quicker Core i3-2120 has fallen to within a few dollars of that, yet Intel seems uninterested in offering the slower model for less. Similarly, the Core i3-2105—a variant of the i3-2100 with faster integrated graphics that's a more direct competitor to AMD's offerings—remains at $135 despite AMD's continued cuts to the A series.
None of this bodes terribly well for consumers.
AMD's recent missteps have, it seems, given Intel very little incentive to cut prices—even when it doesn't always have the clear upper hand. The only way Intel offers substantially better value over time is with yearly generational refreshes, and those refreshes raise performance per dollar not by lowering prices, but by delivering higher performance for the same money. Consider that, almost two years after the release of the Core i5-2500K, Intel still doesn't offer an unlocked quad-core processor for less than $200. Meanwhile, Intel's gross margin has climbed to an eye-popping 63.4%, nearly 20 points higher than AMD's.
This, folks, is why a healthier AMD is absolutely vital to this industry. The underdog needs to score a home run (or something close to it) and upset the status quo, or else prices will continue to stagnate. In a couple of years, perhaps the pace of innovation will begin to slow, as well. Maybe AMD's new Trinity A-series and upcoming Vishera FX-series processors are the answer. Or perhaps AMD is going to need third-party help to succeed, through either an investment or a takeover. There's been talk of Qualcomm or Samsung possibly making a bid.
In any case, it's clear we're already feeling the effects of sluggish competition in the x86 CPU market. Let's hope things don't get any worse.
103 comments — Last by diable at 7:52 PM on 10/10/12
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