PC market slows ahead of anticipated Intel price cuts

IDG News Service - Users looking for a new PC might want to wait for a round of price cuts that are expected soon from Intel Corp., the world's largest maker of microprocessors.

Component vendors and analysts in Taiwan say the company may announce such reductions in July, and the PC market has already slowed in anticipation of the move. The microprocessor is one of the most expensive parts inside a PC, so price reductions could have a big impact on the cost of an overall system.

Taiwanese companies often have inside information about the PC industry, such as upcoming chip launches or price reductions, because they make many vital components for PCs and need to know about upcoming technical or business changes in order to prepare new products. Taiwanese companies hold over three quarters of the global market for computer motherboards.

Intel announced its most recent price reductions on June 4. It regularly updates its price lists because older processors usually fall in price as it introduces newer ones.

The company said it hasn't made any formal announcements about a price reduction in July. "There has been no announcement, but I believe everyone has speculated on that," said Nick Jacobs, a corporate communications manager for Intel. Intel is often the subject of rumors and speculation, he noted.

Whether the current talk turns out to be real or merely speculation, it has caused demand for a host of PC components, including memory chips and LCD (liquid crystal display) screen panels, to slow. That's because PC vendors don't want to have built up a backlog of PCs with more expensive processors if Intel is about to cut prices.

"Overall DRAM demand remains minimal, as PC demand has been postponed since Intel had foretold its July price reduction," said market researcher DRAMeXchange Technology Inc, in a report yesterday.

Meanwhile, prices of LCD panels used in laptops and desktop monitors fell by 3% to 5% in the second half of June, according WitsView Technology Corp.

A reduction in microprocessor prices could produce bargains for users looking for a new PC. Lower prices could allow PC makers to pass the savings directly on to users, or enable them to add more goodies to a PC, including more memory, a larger hard drive or a flat display screen, without increasing the price of the system.

Part of the reason people believe Intel will slash prices is the stiff market competition with rival Advanced Micro Devices Inc. (AMD). The two companies have been in a pitched battle over the past year, with AMD gaining some market share on its rival and even winning a key new customer, Dell Inc. The world's largest PC maker once exclusively used Intel microprocessors, but recently announced it would use AMD processors in some servers.

Another reason Intel might cut prices would be to make way for its upcoming family of powerful and more energy-efficient Core 2 Duo microprocessors, said one component maker. As the company releases new microprocessors, it usually slashes prices on older models in order to clean out its inventories.