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Here's Why Intel Corp. Just Killed This Desktop Chip Feature

By Ashraf Eassa - Feb 11, 2016 at 10:30AM

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It's all about market segmentation.

The vast majority of PC buyers don't want to tinker with their hardware; they want to buy a system and have it work reliably out of the box. However, there are quite a number of PC hardware enthusiasts out there that like to tweak their systems in order to extract as much performance as possible.

One key thing that PC enthusiasts like to do is to engage in what is known as overclocking. When a customer buys a chip, the CPU cores run at a certain frequency, usually expressed in "gigahertz." When the chip is run at speeds beyond the rated specification, we say that the chip has been "overclocked."

Generally speaking, if one wants to overclock an Intel (INTC 0.64%) processor (the most popular processors among enthusiasts as they are by far the best performing), one needs to purchase specialized models whose model numbers either end in a "K" (i.e. 4790K, 6600K, 6700K) or "X" (i.e. 4960X, 5960X). These feature what is known as an "unlocked multiplier," allowing the user to easily adjust the speed of the chip.

These chips tend to be sold at a slight premium to their "non-K" counterparts, but in exchange the chips can typically be run at much higher speeds than they're rated at.

However, with the company's most recent Skylake processors, the chips themselves are designed in such a way that, with the proper motherboard/BIOS support, even "non-K" models can be overclocked.

Motherboard makers began adding in this support and the reports of users managing to take very low-cost Intel processors and get some very nice performance gains from them became commonplace across the Web.

However, it is well known that the same motherboard vendors that have been actively promoting boards with the ability to overclock "non-K" chips are now putting out firmware updates disabling the feature.

Why disable this feature?
At the end of the day, it all comes down to Intel's desire to have customers buy up its product stack. On Newegg.com, a Core i5-6600 (non-unlocked) sells for about $230. The "K" model sells for $250, a $20 premium.

On the surface, it would seem that Intel is just trying to make that extra $20. Indeed, Intel's goal is to maximize shareholder value, so it would be silly of them to not want to squeeze out just a little bit more money for what is essentially the exact same silicon.

From a customer perspective, that extra $20 is actually well-spent. If I can run the chip at 4.4-4.5GHz, up from the max rated turbo of 3.9GHz, then I'm getting about 15% more performance for just 8% more cost.

The problem for Intel, though, is when customers go ahead and buy, say, the Core i5-6400. This is, once again, essentially the same chip as the i5-6500 and the i5-6600/6600K, but it sells for just $190 on Newegg.com. If a customer is able to buy such a chip and overclock it to the same speeds that a 6600K can ultimately go to, then there's little reason to buy the more expensive part.

The difference between $190 and $250 is simply too large for Intel to ignore, particularly in a business environment in which PC unit shipments are shrinking and the company is trying to compensate by increasing chip average selling prices. 

I understand why, but Intel likely to generate controversy
Had the "non-K" overclocking genie never been let out of the bottle, there would be no problem for Intel -- business as usual. What I think makes it tricky at this point is that customers had this feature, and likely made purchasing decisions based on this feature, only to have the rug pulled out from under them.

Fortunately for Intel, since its processors are far-and-away the best in the business, I don't expect much in the way of a negative impact to the financials; in fact, if anything, putting a stop to this should only push potential buyers to go with the more expensive "K" chips.

However, there will be some customers who will remember being "burned" by Intel in this fashion. These customers represent a small subset of the overall PC buying population, but they can be loud and the whole situation ultimately serves to breed negative sentiment in the PC enthusiast community toward the company.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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