News Intel Announces CPU Price Hikes, Hopes to Spur Near-Term Purchases

[Admin]

Intel is increasing CPU prices in the near future for its customers, which appears to be an effort to reduce CPU oversupply before the Fall by spurring purchases now, before the increases go into effect.

Intel Announces CPU Price Hikes, Hopes to Spur Near-Term Purchases : Read more

 

[LastStanding]

Upcoming back-2-school deals you say? About that, if parents, students, etc. did not take advantage of the most recent Prime Day Deals (all major retailers drop prices doing this event), these upcoming b2s deals will be weak by comparison unless you need a bunch of stationery products. 🤣

 

[InvalidError]

If people aren't buying current-gen stuff at current prices, they aren't going to buy next-gen stuff at higher prices especially if they just bought something current-gen.

With the number of people who had out-of-cycle purchases and upgrades due to covid, I wouldn't expect people to be rushing for upgrades now that covid is (at least presumably) mostly over.

 

[waltc3]

A smart retailer will wait and see if indeed Intel does raise prices, and if so, by how much and for what, etc. I would certainly like to see a link to the actual Intel announcement...

 

[shady28]

Their (AMD, Intel) big problem this year is two fold.

One is the obvious crypto collapse, which will affect primarily GPU but to some degree CPU sales. Combined with rising energy prices, many mining farms are likely to get shuttered.

The other is the pull forward effect where purchases people would have normally made in the future, and in some cases would not have made at all (laptops for school kids remote learning for example), they pulled forward those purchases in 2020 / 2021 due to covid. I saw this happen a lot. A great deal of pull forward happened to electronics in general (TVs, game consoles, stereo / home theater speakers, media boxes like AppleTV / Roku etc.).

Intel's oversupply issue reflects that they weren't prepared for this. It should have been pretty obvious, that pull forward effect is well known and happens in many industries.

I seriously doubt Intel's strategy is going to work out here. If there isn't demand there isn't demand, the OEMs they're trying to unload on aren't going to want to get stuck with old inventory either. Especially not with product cycles as fast as they have been with Intel (Gen 10 / Rocket Lake / Tiger Lake/ Alder Lake / Raptor lake in 24 - 30 months - 4 desktop gens and at least 3 laptop gens).

 

[TerryLaze]

Their (AMD, Intel) big problem this year is two fold.

One is the obvious crypto collapse, which will affect primarily GPU but to some degree CPU sales. Combined with rising energy prices, many mining farms are likely to get shuttered.

The other is the pull forward effect where purchases people would have normally made in the future, and in some cases would not have made at all (laptops for school kids remote learning for example), they pulled forward those purchases in 2020 / 2021 due to covid. I saw this happen a lot. A great deal of pull forward happened to electronics in general (TVs, game consoles, stereo / home theater speakers, media boxes like AppleTV / Roku etc.).

Intel's oversupply issue reflects that they weren't prepared for this. It should have been pretty obvious, that pull forward effect is well known and happens in many industries.

I seriously doubt Intel's strategy is going to work out here. If there isn't demand there isn't demand, the OEMs they're trying to unload on aren't going to want to get stuck with old inventory either. Especially not with product cycles as fast as they have been with Intel (Gen 10 / Rocket Lake / Tiger Lake/ Alder Lake / Raptor lake in 24 - 30 months - 4 desktop gens and at least 3 laptop gens).

Don't confuse the articles click baiting with intel strategy, there is no strategy here, prices are going up and intel is not going to cut into their margins all that much, that's all there is to this.
TSMC already increased prices by 10% last year and is going to increase them by another 6% in 2023. Prices are going up for everybody.

https://www.tomshardware.com/news/tsmc-to-hike-chip-prices-in-2023

The world's largest contract maker of semiconductors plans to increase prices for most of its fabrication processes by 6% starting from January 2023, reports DigiTimes. Last year TSMC increased prices on chips made using its N7 and N5 process technologies by 10%, while prices of older N16 and thicker nodes grew 20%. Earlier this year, it was reported that TSMC was considering increasing chip prices by up to 9% starting from 2023, but it looks like the company won't be quite that aggressive with its price hike.

 

[InvalidError]

Don't confuse the articles click baiting with intel strategy, there is no strategy here, prices are going up and intel is not going to cut into their margins all that much, that's all there is to this.

Intel's margins don't exist in a vacuum. Raising prices only work when demand exceeds supply. Right now though, due to the sales slow-down, AMD, Nvidia, Apple and others are looking for companies to dump their excess TSMC wafer allocations onto in order to avoid paying penalties or end up with heaps of excess chips in warehouses. Intel won't have much success raising prices when everyone else is taking a slice of humble pie out of their profit margins to recover capital tied up in wafers.

 

[TerryLaze]

Intel's margins don't exist in a vacuum. Raising prices only work when demand exceeds supply.

Are you living on Mars or something?!
Everything has increased in price without demand increasing.
It's called inflation.

Right now though, due to the sales slow-down, AMD, Nvidia, Apple and others are looking for companies to dump their excess TSMC wafer allocations onto in order to avoid paying penalties or end up with heaps of excess chips in warehouses.

So everybody tries to dump excess TSMC product but TSMC still raises prices but intel is the one in trouble?!
At least the (almost) only client of intel FABs is intel, they might reduce production if they have to but that's all, they aren't going to loose clients/orders/whatnot.

Intel won't have much success raising prices when everyone else is taking a slice of humble pie out of their profit margins to recover capital tied up in wafers.

There is no "everyone else" the only other FAB is TSMC and they also increased prices.

 

[InvalidError]

Are you living on Mars or something?!
Everything has increased in price without demand increasing.
It's called inflation.

When a company is making a monopoly-sized 60+% gross and 25+% net margins on most of its product portfolio, it can afford to eat the inflation to maintain sales.

Companies that are operating near-cost at ~10% net raising prices to remain viable is understandable. Companies like Intel already making exceedingly large profit margins raising prices some more just because of their quasi-monopoly position is a different story, this is entirely greed for greed's sake assuming the market can cope with it, which it very well may not in a recession following a pandemic period where most people who needed new equipment already got it and won't be back on the market again for another 3-5 years.

 

[shady28]

Are you living on Mars or something?!
Everything has increased in price without demand increasing.
It's called inflation.

So everybody tries to dump excess TSMC product but TSMC still raises prices but intel is the one in trouble?!
At least the (almost) only client of intel FABs is intel, they might reduce production if they have to but that's all, they aren't going to loose clients/orders/whatnot.

There is no "everyone else" the only other FAB is TSMC and they also increased prices.

In 2020 \ 2021, the demand curve shifted up, towards the top right in the graph below (D2) from a stable baseline (D1). The covid environment stole demand from the future in this space.

Here in 2022, that demand curve is rapidly shifting down towards the lower left (D3), while supply is rising as production increases. This means either supply has to be reduced for current demand, or prices have to come down.

TSMC has also implied they are reducing capital expenditures for new plants and equipment. While I was writing this, ASML came out with great earnings but are reducing future revenue projections, which implies TSMC / Intel / Samsung are not buying as much from them as originally thought.

TSMC, AMD, Intel all have huge gross margins. If they over-produce, they will have to lower prices at some point. The only other option is to warehouse chips, but that simply kicks the can down the road - and in an environment where they are introducing new architectures this rapidly that road is not a very long one.

I don't agree with Intel raising prices because they seem to want the OEMs to eat the negative effects of a demand curve shift. OEMs are unlikely to do that, for the same reason Intel doesn't want to. They are all in a cycle of likely flat or maybe even negative growth for a year or so IMO, depending on how the economy shapes up.

 

[shady28]

And here is that supply / price curve in action, from stockx.

Notice how there were no sales in Apr-May. That's not just on this card. People simply wouldn't buy them, the curve moved and the sellers were not on that curve anymore and refused to lower prices. They are likely losing even more money now.

 

[TerryLaze]

When a company is making a monopoly-sized 60+% gross and 25+% net margins on most of its product portfolio, it can afford to eat the inflation to maintain sales.

Or they can afford to raise prices, what are companies but also people going to do NOT buy computers? ,the effect for them is probably the same, either they sell a bit less but make a bit more from each sale or they sell a bit more but make a bit less from each sale.
Since the amount of units they can create is fixed increasing prices is probably the better way to go for them.

 

[shady28]

Or they can afford to raise prices, what are companies but also people going to do NOT buy computers?

That is exactly what they are going to do. After inflation real wages in the US have dropped 4.4% in the past 12 months. 1.5M people turned off Netflix this year and you think they're going to buy a bunch of new computers??

 

[TerryLaze]

That is exactly what they are going to do. After inflation real wages in the US have dropped 4.4% in the past 12 months. 1.5M people turned off Netflix this year and you think they're going to buy a bunch of new computers??

If you've told me that they turned off their broadband I would have been impressed but cancelling something they rarely if ever use is not a big deal.
I'm sure they just couldn't be bothered before otherwise they would have done it earlier.
People that need a PC will get a PC, they might get a cheaper one but they will still get one.

 

[spongiemaster]

That is exactly what they are going to do. After inflation real wages in the US have dropped 4.4% in the past 12 months. 1.5M people turned off Netflix this year and you think they're going to buy a bunch of new computers??

The overwhelming majority of PC purchases are by businesses. Intel doesn't dominate the market because of DIY users. Price increases may slow businesses purchases some as upgrades are delayed, but they aren't going to stop them. If you work for a growing company they have to buy computers for new employees.

 

[shady28]

The overwhelming majority of PC purchases are by businesses. Intel doesn't dominate the market because of DIY users. Price increases may slow businesses purchases some as upgrades are delayed, but they aren't going to stop them. If you work for a growing company they have to buy computers for new employees.

Client compute sales (laptops and desktops) are already down, and will go lower over the next year. Watch and learn.

 

[KyaraM]

The overwhelming majority of PC purchases are by businesses. Intel doesn't dominate the market because of DIY users. Price increases may slow businesses purchases some as upgrades are delayed, but they aren't going to stop them. If you work for a growing company they have to buy computers for new employees.

And existing machines have to be exchanged regularly as well, yeah.

 

[shady28]

IDK why people argue with something that is already well underway.

Try to use facts, not wishful thinking.

Gartner Says Worldwide PC Shipments Experienced the Sharpest Decline in Nine Years in Second Quarter of 2022
Global PC Market Declined 12.6%; EMEA PC Shipments Dropped 18% in Second Quarter

PC Demand Is Sagging. Intel and AMD Head Into a 'Much Weaker' Second Half.

Recession fears have caused consumers to put off buying new computers. Chip makers Intel and AMD will be hit hard, says a Barclays analyst.

www.barrons.com

 

[TerryLaze]

IDK why people argue with something that is already well underway.

Try to use facts, not wishful thinking.

Gartner Says Worldwide PC Shipments Experienced the Sharpest Decline in Nine Years in Second Quarter of 2022
Global PC Market Declined 12.6%; EMEA PC Shipments Dropped 18% in Second Quarter

PC Demand Is Sagging. Intel and AMD Head Into a 'Much Weaker' Second Half.

Recession fears have caused consumers to put off buying new computers. Chip makers Intel and AMD will be hit hard, says a Barclays analyst.

www.barrons.com

You don't know what people argue about...
The market normalizing after the huge covid bubble is not the same as the market crashing.
The companies had huge issues with coming up with enough supply last year so going down 10-20% from that could still be 100% of current production since people would even buy up older gen hardware last year.