AMD Wages Price War in India

Electronic News, August 28, 2000 by Uday Lal L. Pai

Chipmaker faces tough competition, motherboard compatibility woes

Cochin, India - On a worldwide basis, Advanced Micro Devices Inc. (AMD) may be riding high, as it recently reported a near 100 percent rise in its second-quarter sales to $1.2 billion. But in India, AMD faces tough challenges both internally and externally.

The outside challenge is posed by archrival Intel as it tries to shake off AMD. The challenge from within is AMD's haphazard planning for India, which is evident from the lack of availability of motherboards that work with its microprocessors. Unfortunately, this comes at time when there is a perception in India that AMD's Duron microprocessor line possibly offers better value than Intel's Celeron family.

"AMD could have gotten an edge in a price-sensitive market like India," said Jaya Kumar, a computer assembler in Chennai, India.

Price War Heats Up

Both Intel and AMD have reduced prices on their microprocessors recently. Observers feel that market leader Intel will announce another price cut soon and AMD is expected to follow suit.

The Duron, AMD's answer to Intel's Celeron, was priced in the Indian market at the time of its launch at about $85 for the 600MHz version and $105 for the 650MHz version. In the U.S. market, the 700MHz, 650MHz, and 600MHz Durons are priced at $192, $154, and $112 each, respectively, in 1,000-unit quantities.

The reduced pricing in India compared to the United States is standard strategy, according to Ajay Kapure, AMD's marketing manager in Delhi. AMD officials claimed that sales were up and progressing fast vis-a-vis Intel's processor sales in India.

Intel is expected to announce price drops, to be achieved through a series of rebates, on several of its Pentium III microprocessors soon. The spot market prices could fall to as low as $107 on 500MHz Pentium IIIs and $215 on 733MHz Pentium IIIs.

AMD is set to drastically undercut Intel and take the price war to a new level. Industry sources indicate that AMD will cut the price on its 1GHz Thunderbird processor by nearly half and will substantially reduce the price of its other Athlon and Duron microprocessors.

After the price drop, AMD's 1GHz Thunderbird, which currently costs more than $800, will be priced at around $470, compared to the Intel Pentium III 1GHz chip's price of more than $1,100. The 950MHz Thunderbird will cost about $350, the 900MHz version will be priced at $275, the 800MHz at $185, the 750MHz at $165 and the 700MHz at $145.

The price drop on Durons too seems to be in accordance with the price levels that were already prevalent in the market even before the AMD announcement. The 600MHz Duron, which was launched in late June at about $85, is being sold by dealers in the United States for as low as $68 and the Indian price corresponds to a little over $71. AMD is set to slash this to $65.

"With or without the AMD price drop, Duron 600 is already available at $71," said a PC components seller in Chennai.

But despite its major price cuts, AMD is not likely to make too much of an impact on Indian dealers and computer assemblers. When contacted, most of them said that with Intel bringing down Pentium III prices to the level of Celerons, people would go in for these chips, rather than the untested AMD microprocessors.

"AMD does not provide the kind of support or full solution that Intel does. There is no reason why we should buy AMD chips and make PCs based on them,'' said a prominent computer assembler in Mumbai, India.

However, interest in AMD chips seemed to be picking up due to the aggressive pricing plans for the 1GHz Thunderbird.

Motherboard Dearth

However, AMD seems to have jumped the gun yet again, with the launch of the Duron microprocessors. The launch of the new chip might turn out to be a nonevent due to the unavailability of Socket A motherboards, the only compatible variety of motherboard for the Duron in the Indian market.

AMD had endured a lot of flak a few months ago from both distributors and customers alike when it failed to meet the demand after launching its Athlon microprocessors.

Although there are five manufactures of Socket A motherboards - Asus, FIC, Biostar, Gigabyte, and MSI - none of the brands are available in India.

"Since this is a very new technology, it will take some time for it to get here," said Krishna Bhatt, a PC vendor in Mumbai.

Analysts say that although the Duron chip is possibly better than Intel's Celeron family of microprocessors, the lack of availability of motherboards shows the company's haphazard planning for India. AMD seems to be plagued with problems within the distribution channel.

Earlier, a bad distribution set up had resulted in AMD's Athlon chips not being freely available in the market.

"AMD needs to get its act together fast. Users are not going to wait for the new motherboard. They will just take an alternative chip," said one analyst.