Core 2 Duo launched: Intel and AMD slow to slash pricing on legacy chips

The problem with this performance-aware pricing is that it would devastate the entire line of legacy Intel processors which are still abundant along with AMD's entire line of existing processors. The current pricing may simply be a reflection on current inventory levels it will take some time to clear out Intel's legacy inventory and fully transition to Core 2 Duo production. Even by Intel's own estimates, the full transition to Core 2 won't even be close to completion by the end of this year. While Intel expects to ship a record-breaking million Core 2 Duo processors in 7 weeks compared with a year to ship the same number of the original Pentium CPU, it isn't anywhere close to being enough.

Intel had one of the biggest CPU launches in the history of its existence yesterday at its Santa Clara head quarters.  Although the event was held in side of a "tent", it was big enough to be considered a miniature convention.  This was a massive air conditioned tent that could have held a circus performance and at times it did have a circus performance feel when two of the "Frag Dolls" appeared on stage to demonstrate the gaming prowess of the Core 2 Duo processor (no offense to the Frag Dolls or their presence since the two ladies behaved professionally).

The theme at the event was "believe the hype" with all the media accolades flying around on big screen projections.  But this is one of those rare instances where the product actually does live up to the hype because of the massive jump in performance corresponding with an equally massive drop in power consumption.  The numbers quoted by Intel was a 40% performance jump along with a 40% drop in power consumption.  This isn't just a small leapfrogging effect where one processor manufacturer regains the lead and edges out their competitor, it's the kind of jump where even the second slowest Core 2 Duo processor makes AMD's flagship extreme processor look bad.  But it isn't all good news for Intel since Core 2 Duo makes their existing massive inventory of "NetBurst" Pentium 4, Pentium D, and Pentium Extreme processors obsolete.

As I mentioned earlier this month, the release of the Core 2 Duo or "Conroe" would put massive pricing pressure on AMD's entire line of desktop processors along with Intel's previous generation products.  The problem is that the new price list for both AMD and Intel are unrealistic compared to any Core 2 Duo processor.  Intel wants $999 for their old "NetBurst" 965 Extreme Edition processor and AMD wants $827 for their FX-62 processor.  By any reasonable estimates based on processor performance (even ignoring the power inefficiency issues of the AMD FX-62 and the even less efficient "NetBurst" processors), the price of the AMD FX-62 should be around $225 and the Intel 965 Extreme Edition processor around $200.  Anyone taking power efficiency and overclocking performance in to consideration will simply skip the "NetBurst" CPUs altogether.  The AMD FX-62 might be worth consideration if the price was dropped well below the $180 price tag of any Core 2 Duo processor which will likely be able overclock beyond the performance of any AMD CPU while consuming less power.

The problem with this performance-aware pricing is that it would devastate the entire line of legacy Intel processors which are still abundant along with AMD's entire line of existing processors.  The current pricing may simply be a reflection on current inventory levels it will take some time to clear out Intel's legacy inventory and fully transition to Core 2 Duo production.  Even by Intel's own estimates, the full transition to Core 2 won't even be close to completion by the end of this year.  While Intel expects to ship a record-breaking million Core 2 Duo processors in 7 weeks compared with a year to ship the same number of the original Pentium CPU, it isn't anywhere close to being enough.  We will probably see many more gradual price drops in both "NetBurst" Intel and AMD CPUs as Core 2 Duo availability rises.

Of course this strategy of gradual price drops will only work so long as corporate and home buyers remain ignorant on the performance and energy efficiency gap between Core 2 Duo and the non-Core Intel and all AMD CPUs.  The majority of consumers who don't know the difference will hopefully (from the vendor's perspective) buy up all the current inventory of obsolete Intel and AMD CPUs.  The truth of the matter is that they wouldn't be getting any less of a deal on the non-Core CPUs than they were getting before and in fact just the opposite.  It's just that the new Core 2 Duo price/performance ratio is out of this world and I'm going to buy one as soon as it's available.  One day after the launch of Core 2, I only see one very expensive Dell E6600 2.4 GHz Core 2 Duo system available and one vendor selling the C2D E6600 processor $50 over the list price of $316.  There will most likely be more vendors offering the Core 2 Duo processor soon but don't be surprised if supply is short and the prices remain higher than list.

[Update 2:20 PM:] I had a chance to meet John C. Dvorak yesterday who I've been reading for more than a decade.  John posted this blog this morning on the event.  Fellow blogger Tom Foremski was also at the event and had this to say.

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