The battle for the high-end PC market is heating up. In mid-May, Advanced Micro Devices (NASDAQ:AMD) announced its most powerful central processing unit (CPU) for the consumer market, called the Threadripper. But CPU market leader Intel (NASDAQ:INTC) decided to fight fire with fire, launching an even more powerful consumer-focused CPU just two weeks later.
Why is Intel trying to match AMD step-for-step despite owning the lion's share of the CPU market?
Intel is feeling the heat
Intel has tightened its grip on the CPU market over the past decade, currently estimated to hold an almost 80% share. But the chip giant has started feeling the heat from AMD's latest Ryzen CPU lineup, which PassMark, according to tweaktown.com, estimates gained 2% market share during the first quarter of 2017.
The market-share gain was solely driven by the launch of the Ryzen 7 processor during the first quarter. AMD now has more firepower after launching Ryzen 5 during the second quarter, while the launch of the Ryzen 3 CPUs during the third quarter should provide another boost.
AMD's market-share gain can be attributed to the performance, pricing, and marketing blitz accompanying the Ryzen CPUs. For instance, the chipmaker's internal tests have consistently proved that Ryzen is far better than competing Intel chips at any budget, though investors should take the tests with a pinch of salt since they aren't independent.
But the market-share gain clearly indicates that the strategy is working as Ryzen has started gaining traction, allowing AMD to take business away from Intel. Not surprisingly, investors will expect AMD to further boost its market share once the full range of Ryzen CPUs hit the market. However, Intel is trying to rain on AMD's parade with a marketing blitz of its own.
Intel doesn't want to lose the high end
AMD is stressing the fact that its CPUs deliver more value for money in terms of performance. This claim is corroborated by independent tests. For instance, UserBenchmark tests indicate that the Intel i7 6850K is just 4% faster than the Ryzen 7 1800X but is 9% costlier than AMD's offering.
This value-for-money proposition of AMD's chips, especially in the premium market, should be a worry for Intel investors, given that high-end systems account for much of PC sales.
This is why Intel has been forced to lower its CPU prices to ward off competition from AMD, but the chip giant can't go on cutting prices forever. Not surprisingly, Intel has now made a bold move by challenging AMD's flagship CPU offering with its latest product.
The company grabbed headlines late last month by packing its latest high-end CPU, the Core i9 Extreme, with superior specs. The top-of-the-line Intel Core i9 Extreme processor contains 18 cores and 36 threads, costing a shade under $2,000. But the company is also going to offer stripped-down versions of the processor, with the 10-core, 20-thread version costing $999.
By comparison, the Threadripper is powered by 16 cores and 32 threads, so Intel seems to have stolen AMD's thunder with its latest offering. But AMD can still bite Intel back by pricing the Threadripper aggressively.
Recent rumors suggest that AMD might price the entry-level Threadripper CPU at $849, which would make it cheaper than Intel's entry-level Core i9 offering. Such a big price difference could turn the balance in AMD's favor, since the cheaper Threadripper would carry better specs that would help it perform intensive workloads in a more efficient way.
AMD's combination of pricing and performance could help it win more market share in the high-end CPU space.