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Timna chip turns back the clock, Part II

Timna alone would have to significantly increase PC makers' profit margins in order to encourage Compaq, HP and others to jump back into the sub-$600 market
Written by John G.Spooner, Contributor

Are the economics of the chip good enough to convince PC makers to adopt the chip? Yes, according to analysts.

Timna "is enough to make a difference at the low end. It can help in terms of bringing the cost of (a PC's) building materials down," said Roger Kay, manager of International Data Corporation's Desktop PC Practice.

PC makers will support Timna, it if they can make money with it. And "Major OEMs (original equipment manufacturers), could potentially support an aggressive price point on Timna," he said.

"It's going to be a compelling value proposition for some people," Kay said. Timna could be particularly compelling for North American households looking to add a second or third PC and for the more price-sensitive markets around the world.

However, Kay warns that, right now, entering the sub-$600 PC market can be likened to climbing Mount Everest. "You can go up there and take a look around, but you have to come down," he said.

Here's how Intel is hoping to alleviate the Everest effect of low-cost PCs. One issue at stake for PC makers and Intel alike is this: As the mix of products change from high-end high price units to lower-priced, low margin products, how do you maintain profit margins?

According to sources, Timna will improve Intel's cost-structure for low-end PCs -- allowing for higher profit margins. It is expected that Intel will be able to pass on better margins to PC makers.

Timna is targeted at two segments in the value PC market. The chip, Intel believes, will fit into a $700 (£462) and below category and a $700 to $850 category, sources said. It follows that discreet Celeron chips would occupy a $850 to $999 and up category. However, not all PC makers will adopt the Timna chip right away.

A few dollars make a big difference to PC makers. The secret of Timna, sources said, is that it won't necessarily cost less than a discreet Celeron chip, however, it will work to decrease the overall cost of a PC's components. The chip may cost more, sources said, but it would still allow a PC maker to save about $10 in cost, versus building a PC with a discreet Celeron chip and 810 chip set.

Timna's price includes the chip set's graphics processor and memory controller, along with a processor core. Adding certain other efficiencies in manufacturing might save another $10 in cost, sources said. The result, based on the typical 3x multiplier applied to the cost of materials to finished goods, could offer a savings of about $60 to the end user.

Additionally, Timna, with all of its features on the same chip, will take up less space. Cost savings could be realised by using smaller-sized motherboards with Timna chips.

By passing along these savings, PC makers could possibly entice new customers or repeat customers looking for an inexpensive second PC, analysts say.

What do you think? Tell the Mailroom. And read what others have said.

Part I

Part III

Take me the CPU Roadmap: AMD vs. Intel

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