Intel refuses to slash CPU pricing for laptop makers building Ultrabooks

Summary:The see-saw battle continues between Intel and the notebook vendors it's wooing to create its new Ultrabooks. Manufacturers have complained that part costs are too high to sell the systems for $1,000 or less, and Intel has not only thrown big marketing money their way, but also supplied a bill of materials that shows that the magic price point for Ultrabooks can be reached.

The see-saw battle continues between Intel and the notebook vendors it's wooing to create its new Ultrabooks. Manufacturers have complained that part costs are too high to sell the systems for $1,000 or less, and Intel has not only thrown big marketing money their way, but also supplied a bill of materials that shows that the magic price point for Ultrabooks can be reached.

The biggest sticking point is clearly the price of the Core i5 and i7 processors Intel wants inside Ultrabooks, which run around $300. The chip giant is offering vendors a 20-percent discount, but according to DigiTimes, is balking at the 50-percent discount that manufacturers are seeking to prop up their own profit margins.

Intel is refusing because it would depress prices for its mobile CPUs across the board, impacting its profitability. The company currently earns 60-percent gross margins on its processors. Laptop makers counter that the high price for the chips will limit their own profitability in selling Ultrabooks, which Intel has predicted will account for 40 percent of the notebook market by the end of next year.

By holding firm to its prices, Intel is taking a risk that AMD's low-power notebook offerings won't be a more attractive proposition to buyers looking to spend less than a grand on a new laptop, and that its Ultrabooks are in the same league as the MacBook Air, which has clearly inspired the new platform. With the first Ultrabooks set to debut soon, we won't have long to wait to see if the strategy was worth it to Intel.

Topics: Processors, Hardware, Intel, Laptops, Mobility

About

Sean Portnoy started his tech writing career at ZDNet nearly a decade ago. He then spent several years as an editor at Computer Shopper magazine, most recently serving as online executive editor. He received a B.A. from Brown University and an M.A. from the University of Southern California.

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