AMD and Intel Put Processor Prices Up!

by Anton Shilov
03/31/2003 | 07:59 AM

The war in Iraq has caused the demand on computer hardware in the USA to tumble and distributors started to clear-out their stocks by selling the products at considerably cheaper prices on grey markets.

The report over here claims that CPUs from AMD and Intel are sold below official price in Taiwan. Asian press believes that inexpensive microchips come from the USA-based distributors, who cannot sell their products in Americas.

Actually, grey market of computer hardware parts has always been and in general it does not affect sales much, nevertheless, the problem may become really serious for a lot of companies involved in the industry, when numerous distributors start to sell products at a loss, basically competing with the manufacturer itself. Note that in current market condition the situation is just the same: too weak demand and a lot of inventory in stocks.

In order to stop sales-channels from continuing disorganization, AMD and Intel started to rise CPU prices last week. AMD told its major distributors that the prices of its microprocessors would soar by as much as $12 per chip, with the price rises taking effect in the Americas this Monday. It is believed that those, who already have the CPUs will stop dumping and the prices will not tumble quickly.

Although the CPU manufacturers reacted on the demand drops pretty quickly, I expect that the main challenges for the industry are ahead. Distributors will now start to sell-off the inventory rapidly, the only question is to find markets for it, so, official sales are likely to be impacted.

With the demand in the USA declining, leading hardware makers and developers may reconsider their quarter expectations sometimes in future if the situation remains the same. Since the war in the gulf is going to last longer than it was originally expected, I suppose that sales of PC hardware will be lower than it was estimated earlier. In addition, companies may reconsider their plans concerning new products announcements in order to leave more time for distributors for selling the current products; as we know, Intel has already pushed its Springdale chipsets family launch ahead (see this news-story).