Chip giant Intel (Nasdaq: INTC) is working up a new way to double-dip into system sales.
Reports from Engadget that lead back to an official Intel site point out that certain systems built around a specific Intel processor can now be upgraded by means of a software download. The chips ship with some features disabled, but a $50 upgrade card bought in retail stores can enable the missing goodies again. This program is currently in an early testing phase that includes stores in Canada, the Netherlands, Spain, and has been spotted at a handful of Best Buy (NYSE: BBY) stores right here at home.
Chips with disabled features are commonplace; Intel, Advanced Micro Devices (NYSE: AMD), NVIDIA (Nasdaq: NVDA), and other processor wranglers have been "binning" their chips for years. But then we're talking about imperfect chips, where you'd rather sell a lesser version of your product than throw out the whole thing due to manufacturing blips. Here, you have a complete product where some of the functionality will simply cost the end user a little something extra.
From Intel's perspective, this could work out nicely. Assuming that the average computer buyer at Best Buy and other mass-market consumer outlets aren't of the hardcore chip enthusiast ilk (because people like that generally buy their hardware elsewhere), this strategy lets Intel dump unsold chips to system builder partners at a lower price point -- and then make up the difference with an aftermarket upgrade.
If the tests turn out to Intel's liking, I wouldn't be surprised to see "package deals" with a computer plus upgrade card popping up like dollar weeds across the retail landscape. The first systems compatible with the cards come from Acer subsidiary Gateway, but Dell (Nasdaq: DELL) and Hewlett-Packard (NYSE: HPQ) and everybody else would probably be quick to secure low-cost chip supplies while promising high performance after an upgrade.
Engadget and other enthusiast sites expect a firestorm of irate backlash, but chances are that this will simply become standard practice in due time. If you want a cheap computer, leave the card on the shelf. For the full experience, you can always go back and upgrade later. Intel gets rid of unwanted inventory, system builders get cheap chips, and consumers get more choice. Everybody wins, even if some of us will complain about it.
Do you agree with my rosy view of the upgrade program or with the angry critics? Either way, start a discussion in the comments below.
