Intel reportedly plans to slash chip prices. Analysts say the move makes sense at a time when the tech giant is falling behind archrival AMD.

• Intel is reportedly planning to cut the prices of some of its desktop processors, ahead of the release of new chips from AMD.
• Analysts say such a move would make sense given the stiffer competition Intel faces from rival AMD.
• They say Intel has lost its manufacturing technology edge which rivals like AMD have historically struggled to match.
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Intel is reportedly planning to slash prices for some of it desktop processors in a competitive gambit at a time when the chip giant is seen falling behind archrival AMD.

Intel is said to be considering a 15% price reduction on some of its main products, according to Digitimes, citing unnamed sources among motherboard manufacturers. The move would come ahead of the release of the next generation of AMD's Ryzen processor, which has earned upbeat reviews from some analysts.

The price cuts would market the latest setback in a turbulent period for Intel, following a CEO change that put finance chief Bob Swan in the top job at the start of the year. Intel announced in April that it was abandoning its business making chips for smartphones, amid reports of production challenges, ceding the market for the most popular tech product used by consumers today.

While the company is betting its future on providing the server chips that power datacenters, the PC market remains an important pillar of Intel's business.

The Santa Clara, Calif.-based said company it does not comment on rumors or speculation. AMD also declined to comment.

'Targeted price cuts make sense'

Analysts say cutting prices is certainly one of the smart options for Intel in the face of stiffer competition from its longtime rival.

"Targeted price cuts make sense," analyst Linley Gwennap of The Linley Group, a semiconductor market research and consulting firm, told Business Insider. "I would expect that they are considering price cuts."

That's because the semiconductor powerhouse faces a tough bind, he added. "They need to either cut prices to be more competitive against these new AMD offerings, or just sit by and let AMD gain more market share."

To be sure, Intel remains dominant, with 86% of worldwide unit shipments for desktop and laptop processors in the fourth quarter of 2018, compared to AMD's 14%, according to data from IDC. But AMD's share of the market jumped 4.5% year-over-year in that quarter, while Intel saw its share fall 4.4%.

Competitive pressure

"There is competitive pressure going on," he added. "I've looked at the new AMD Ryzen product and they look very strong."

Patrick Moorhead of Moor Insights and Strategy also cited AMD's recent market gains, telling Business Insider, "AMD played a very strong hand with its latest Ryzen desktop parts on gaming and media workloads."

AMD also enjoys a strong position in the gaming market following its 2006 acquisition of ATI Technologies which boosted its graphic chip capabilities, said Steve Allen, an analyst with S2C Partners.

"The cold hard facts: gamers pay for performance," he told Business Insider. "AMD has cache with gamers and superior silicon technology."

In a development that has surprised some analysts, AMD also has outpaced Intel in chip manufacturing technology measured based on the width of each transistor installed on a chip.

Intel loses technology lead

Intel historically has led the way in producing smaller and less expensive processors, guided by Moore's Law, the chip industry trend named after Intel co-founder Gordon Moore, in which the number of transistors that companies are able to put on an integrated circuit has roughly doubled every two years. This trend has allowed chip makers to make smaller, more powerful, and less expensive processors.

But AMD has managed to outpace Intel in recent years.

"Intel is still struggling to get 10 nanometer up and running, and AMD is expected to release 7 nanometer parts in Q3," analyst Roger Kay of Endpoint Technologies Associates told Business Insider, referring to manufacturing technology based on the the line-width on chips.

Gwennap noted that AMD "has always been behind. This is the first time in at least 10 years that AMD is clearly ahead in process technology."

This could be another factor for the reported price cuts, analysts say.

"Intel, to defend against being overmatched, is left with the old AMD strategy of discounting," Kay said.

Martin Wolf, president of Martinwolf.com, echoed this view. "When late to the party, and trailing technologically, price is the tool," he told Business Insider.

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