AMD takes knife to desktop chip prices

AMD has slashed prices on desktop processors, as new manufacturing technologies make it easier to swallow lower prices.

The cuts, as much as 35 per cent on high-end dual-core Athlon 64 X2 processors, come just weeks after rival chipmaker Intel made a similar pricing move. They also come after AMD reported disappointing fourth-quarter results due to pricing pressure in the server market.

AMD and Intelhave been undercutting each other for almost 12 months now on price, as Intel cleared its decks in anticipation of its Core 2 Duo processor launch and AMD followed suit to stay competitive. Both companies took hits to their gross margins as a result but AMD has been hurt a little more, as it makes the transition to a new manufacturing technology.

AMD's new 65-nanometer manufacturing technology is now cranking out chips in greater numbers, said David Schwarzbach, division marketing manager for desktops at the company. The 65-nanometer technology allows it to build smaller transistors and reduce the size of its chips. AMD and Intel cut their chips from circular silicon wafers. Making smaller chips means you can get more processors from the same wafer, lowering the cost of building a single chip.

But Intel has had 65-nanometer manufacturing technology in place for more than a year now, while AMD didn't start building such chips until late last year. It takes a few months to get a new chipmaking technology up and running. But now that it's a little more mature, AMD can make more profit on some server and desktop chips, or make the same profit on lower prices.

The new prices reflect chips bought in quantities of 1,000 units, not necessarily what individuals might pay at the local electronics store. The steepest drops came on the highest-performing chips but every dual-core desktop model was affected.

Tom Krazit writes for CNET News.com