Round Rock (TX) - For AMD's planned price drop for its dual-core processors to enable the company to regain its aggressive price/performance competitive position against Intel as it has promised, the company would have to reduce its existing Athlon 64 X2 and Athlon FX prices by between 38% and 56% for its various models, with cuts averaging about 51%. This estimate is based on a comprehensive price/performance review of Intel's soon-to-be-released Core 2 Extreme and Core 2 Duo processors, along with its existing Pentium D dual-core line, pitted against AMD's FX-62, FX-60, and Athlon 64 X2 processors in Tom's Hardware Guide tests.
Intel recently declassified its own plans to reduce dual-core Pentium D prices as soon as this upcoming Sunday afternoon, just prior to launching its new, top-of-the-line Core 2 Extreme CPU at a price at or below the street price of AMD's current flagship Athlon FX-62. Since that time, multiple sources have obtained what appears to be a leaked table of information showing AMD is planning to slash prices for certain dual-core processors, including FX-62, by as much as half on Monday morning. UPDATE: AMD spokesperson Damon Muzny declined to confirm or deny the accuracy of this table, though he confirmed once again price cuts are forthcoming.
If the table is indeed accurate, then AMD could very well make a legitimate claim to the price/performance lead, perhaps for the first time in the dual-core category.
According to the table of Intel's projected price cuts received by TG Daily, distributors' cost for the highest-level performer in its older product line, the NetBurst-oriented, dual-core Pentium D 960, could drop to $316 when sold in 1000-unit quantities. Street prices for the 960 today average $550, according to data provided to TG Daily today by PriceGrabber. Today, AMD's top-of-the-line Athlon FX-62 has an average street price of $1,018, according to PriceGrabber, although in recent Tom's Hardware Guide tests, it performed about as well as Intel's Pentium D 950. The distributors' cost for that particular model is expected to drop next week to $224 - today it sells for about $330 on average.
Two days ago, TG Daily examined claims that, based on general performance data, AMD would have to slash prices by as much as 70% to regain the price/performance crown. Using general performance data supplied by PCMark05 benchmark tests conducted by Tom's Hardware Guide, it appeared from our initial examination that AMD would actually have to destroy the price floor for its dual-core products, plunging prices by as much as 83%.
But PCMark05 is not an accurate measurement of performance for graphics and large-scale memory operations, especially in the gaming categories where AMD processors generally excel. To make a fairer projection, TG Daily constructed a mathematical performance model taking five categories of workload into account: general number-crunching, everyday applications, gaming, audio streaming, and video streaming. This was harder than we thought it would be: To make this model bullet-proof, we needed a series of complete benchmarks that would triangulate modern processors' performance against an old CPU that could serve as a reliable index.
For the "index" processor, we chose a Pentium 4 2 GHz model, which appears at or near the bottom of Tom's Hardware Guide's current "Mother of All Performance Charts" as a sort of baseline. Quite conveniently, PriceGrabber projects the average sale price for a P4 2 GHz unit at $100, although much higher-performing processors are available for substantively less, especially from AMD.
We needed five benchmarks that represented performance in our chosen categories, and for which data was available for not only all the dual-core processors likely to be affected by price changes next week, but the Pentium 4 index CPU as well. We were a bit surprised to find that complete data is hard to come by for all tests, especially since the nature of the tests change to take higher performance levels into account. So we had to choose the benchmarks that stretched the furthest distance, if you will, between old and new processors.
Our choices were: PCMark 05 for general performance, CloneDVD for applications performance, LAME MP3 for audio encoding, Windows Media Encoder 9 (WME 9) for video encoding, and Doom III for graphics and gaming performance. This latter set had the most available data for all processors across the board, although for the most recent Intel and AMD models, data was not yet available from Tom's Hardware Guide. So we created a mathematical model based on relative performance figures from Intel and AMD, to construct an analytical forecast of Doom III performance on Athlon FX-62, Intel Core 2 Extreme, and other top-of-the-line dual-core CPUs.
With Pentium 4 performance setting an index value at 1.0, for example, performance in each category is measured relative to the P4. So the PCMark05 score for the Core 2 Extreme of 3.21 means the Core 2 Extreme performed at 321% the rate of the P4. For the final score, each benchmark contributed 20% of the value, meaning the final tally was an average of all five put together.
Here's what we learned: If raw processor performance were sold on a utilitarian model, with the P4 as the index, then what you would pay for a processor such as Core 2 Extreme that delivers 371% the performance is about $370, give or take a few pennies. Its actual price, which is projected to be $999, underscores the premium one pays for the top-of-the-line model. A similar theory holds for the AMD Athlon FX-62, which would sell for about $294 in "Pentium 4 dollars." Intel would have to drop its Core 2 Extreme price by 63% to even out the price performance scale to a flat line. This helps illustrate the premium price customers pay for the top-of-the-line processor, as well as make this test significantly fairer: For an AMD processor to be considered competitively price, it must fall at or below the curve set by Intel, not some theoretical flat line.
But notice how relatively evenly the Pentium D prices fall in line with the baseline set by the P4, after the projected price cuts take effect. By comparison, AMD processor prices would have to be adjusted by as much as 71% in order for them to fall within a utilitarian performance scale. This is in keeping with numbers stated throughout this week by analysts projecting how deep AMD's cuts must go.
Since top-performing processors will always be priced at a premium, the price/performance scale will always be a curve, not a straight line. For us to determine how much AMD really should cut to keep its promises, TG Daily used a spreadsheet to project the formula for Intel's projected price/performance curve. Then based on the performance indices we derived, we plotted where a processor with equivalent indices would intersect that curve. For instance, since the Pentium D 960 scored a 2.46 while the Pentium D 940 scored a 2.17, what would an Athlon 64 X2 4600+ reasonably cost if it scored a 2.21? By our projections, according to the table above, the 4600+ should cost $240.67 - reflecting a 55.5% cut in AMD's current prices.
If the table we've seen distributed throughout the press today is accurate, and AMD truly does plan to slash prices on the 4600+ to $224, then not only would that place that processor fairly below the Intel curve - making good on AMD's promise, and then some - but it would also bring that processor in-line with the P4 utilitarian model, which would price the 4600+ at $221.
A complete picture of the ground AMD has to make up is available on our analysis chart on the following page.
This chart represents the fact that Intel has held a price-performance advantage in dual-core processors leading up to today. The dark blue line represents Intel's current pricing data; the dotted blue line represents the trend line, or the exponential curve that best fits the plot points for all processors in that category. UPDATE: On the advice of a reader, we changed the chart above from logarithmic to exponential trend lines, which we agree is a better fit. AMD's pricing data is clearly separated, with Intel's blue trend line touching the $1,000 mark well past the 4.00 performance index point.
For AMD's price cuts to be completely competitive, they must approach Intel's dark blue trend line. The red trend line shows where they actually end up. They're not quite matching up, but that's only by virtue of the not-so-steep projected cut in the FX-62's price. In 1000-unit quantities (or what's known in the industry as the "tray price"), the FX-62 price would be cut, according to the table (whose authenticity AMD has not officially confirmed), to $799. That's not nearly enough to bring it in line with the $425 it would need to claim the price/performance advantage.
But just on the other end of the scale, AMD may be carving a sweet spot for itself with its $224 price for the 4600+, which helps bring the curve back down the right direction. So far, AMD's highest performing processor whose cuts appear to fall below the Intel price/performance curve - way below - is the Athlon X2 5000+, the new Socket AM2 chip which could end up selling for $282. Our price/performance model showed it could sell for as high as $355 - a 48.5% cut - and still find itself on the Intel curve.
Today's quarterly earnings call shows AMD must make a competitive move soon. It doesn't have secondary sources of income to fall back on, like Intel - it is mainly a CPU company. Cuts as steep as we're projecting will take their toll on company revenues in the near-term, and will not be good news for investors. But they could restore AMD's competitive advantage in the long-term before Intel effectively carves its dual-core niche in the market where AMD had plans to figure prominently.