When Advanced Micro Devices (AMD -0.17%) launched its Ryzen 5000 desktop CPUs in late 2020, there were good reasons why the company had nothing to offer below $299. The semiconductor industry was hamstrung by component shortages, so it made sense for AMD to focus on higher-end products.

This time around, that same strategy makes a little less sense. There are still pockets of shortages across the semiconductor industry, but the great semiconductor shortage is quickly coming to an end. Chip companies, including Micron and Nvidia, are dealing with an oversupply of chips as consumer demand for PCs has plunged.

An AMD Ryzen chip.

Image source: AMD.

Nothing new below $299

While AMD has brought prices down for its Ryzen 7000 launch compared to the Ryzen 5000 series, there's still nothing new for anyone looking to build a budget gaming PC. The lowest-end product AMD is launching is the Ryzen 5 7600X, priced at $299.

At lower price points, AMD is leaning on its older products. The 5600X, for example, can be bought for $199 today. This is a nearly two-year-old chip, and the big problem for AMD is that Intel (INTC -0.03%) has much newer options available.

Intel launched its Alder Lake chips late last year, and it did not ignore lower price points. AMD's 5600X is competing with Intel's i5-12400F, and even with the lowered price for AMD's chip, Intel still comes out on top. Tom's Hardware found that the i5-12400F, which can be had for $180, clearly beats the 5600X in both gaming and application performance.

Intel also has plenty of new Alder Lake chips at even lower price points, which were launched a few months after the top-tier chips. Suggested prices start at just $42 for the lowest-end dual-core option, and there are four other chips that sit below the i5-12400F in pricing. If you want an AMD chip at these lower price points, you're stuck with last-gen products.

Of course, AMD could fill in its lineup with lower-priced chips in the coming months. It didn't do that with the Ryzen 5000 series until earlier this year with a couple of new chips, but they were quite late to the party. That tardiness may have just been a function of the state of the semiconductor supply chain. This time around, the supply situation should be better.

One problem, though, is that AMD is moving to a new platform with its Ryzen launch. AMD made the choice to only support DDR5 memory, which is still substantially more expensive than older DDR4 memory. In contrast, Intel supports both DDR4 and DDR5 for its Alder Lake chips, and its upcoming Raptor Lake chips will maintain that dual compatibility.

So even if AMD does roll out budget Ryzen 7000 processors, building a system around them may end up being pricier than an Intel-based alternative. For reference, the top-selling 32GB DDR4 memory kit on Newegg sells for $90 today, compared to $170 for the best-selling DDR5 memory kit with the same capacity. When we're talking about CPUs below $200, that difference is meaningful.

The timing might work out

While DDR5 memory is expensive today, AMD's timing could turn out to be spot on. The memory chip market appears to now be entering oversupply, and prices are in decline. Memory chip manufacturer Micron lowered its expectations for demand growth this year, and it's pulling back on expanding its capacity to cope with weaker demand.

Memory chip prices can decline rapidly when the market is flooded with chips and manufacturers are desperate to unload them. AMD's choice to hitch its wagon to expensive DDR5 memory is certainly risky, but there's a decent chance that the newer type of memory will become far more affordable in the months ahead. If AMD does launch lower-end chips down the road, the cost to build a system around them may end up being much more reasonable than it would be today.

For now, though, AMD is largely ceding the low end of the market to Intel. We'll have to wait and see if the company has anything up its sleeve to win back gamers on a budget.