Intel is refusing to halve CPU prices to help OEMs improve profitability from their ultrabooks, reports say
The issue of price for Intel’s ultrabook concept is being raised again, this time in regard to how much the chip maker is charging OEMs for its processors.
System makers asked Intel to cut the price of its CPUs by half in hopes of giving them a better chance to increase their profitability, according to the Taiwan news site DigiTimes. The report said Intel officials, worried about their own profitability, refused, saying they would reduce the CPU cost by 20 percent to top-tier notebook makers, the news site maintained, quoting unnamed “sources from notebook players”.
OEMs May Back Away
The giant chip maker is risking scaring OEMs away from building ultrabooks, which Intel introduced in May during the Computex 2011 show. Intel executives believe that ultrabooks will become 40 percent of the notebook market by the end of 2012, competing with the likes of Apple’s MacBook Air and other thin-and-light systems.
The ultrabook idea is one avenue Intel is using to push its way into the mobility space, where smartphones and tablets are primarily powered by non-x86 chips designed by ARM Holdings and manufactured by vendors like Nvidia, Qualcomm and Texas Instruments. According to Intel’s definition, ultrabooks are very thin and light notebooks that are powered by Intel chips, are less than 0.8 inches thick and come in at less than $1,000.
They will offer the performance of traditional laptops and features found in tablets, from instant-on to, eventually, touch capabilities.
Some vendors – including Asus, Acer and Lenovo – already have promised ultrabooks this year. However, other OEMs reportedly are taking a cautious approach and are willing to see what happens with Asus’ UX21 – due out in September – before committing to the form factor.
A concern has been about the ability to bring the asking price of an ultrabook to less than $1,000. Intel already has made several efforts to help OEMs start building ultrabooks, from cash incentives to reference designs to a $300 million (£182m) investment fund. If DigiTimes’ sources are correct, all that might not be enough.
Oak Trail Outpriced By Tegra 2
Intel already is seeing some concerns around its “Oak Trail” Atom platform for tablets, which sells for about $95 (£58) – about 40 percent of the tablet price.
“Even with a 70 percent to 80 percent discount, the platform is still far less attractive than Nvidia’s Tegra 2 at around US$20 [£12],” DigiTimes wrote. “Although players such as Asustek Computer and Acer have launched models with the platform for the enterprise market, their machines’ high prices still significantly limit their sales, the sources noted.”
At a 20 percent discount, ultrabook CPUs run as much as $317 (£193) for a Core i7-2677, down to $250 (£152) for a Core i5-2557. Intel officials’ concerns reportedly are that by cutting the price of the CPUs in half, the company would have difficulty maintaining gross margins around 60 percent and maintaining the pricing.
However, keeping the price of ultrabooks under $1,000 (£600) will be key, particularly given that some MacBook Air systems go for $999. Beau Skonieczny, an analyst with Technology Business Research, said in a July research note that the ultrabook’s future would be tied to pricing.
“Intel anticipates Ultrabooks will achieve about a 40 [percent] mix in the consumer market by the end of 2012,” Skonieczny wrote. “However, the success will be dependent on a quick ramp of volume sales to translate to lower prices for consumers.”