Intel denies 50% Ultrabook CPU cut to aid matching MacBook Air prices
Sources within the notebook industry allege that Intel has rejected a request from PC makers for a steep 50 percent discount on CPUs designed for its Ultrabook specification, even as manufacturers struggle to compete with Apple's MacBook Air on price.
Notebook player insiders said that partners for Intel's new thin-and-light initiative had demanded a 50 percent price cut, but Intel has agreed to provide just a 20 percent discount to "first-tier notebook players," DigiTimes reported on Tuesday.
The sources went on on to say that the high CPU price, attributed to Intel's insistence on maintaining its "leading position in the supply chain," will impede progress and stymie efforts to put forth the Ultrabook standard as a counter to competing devices, such as Apple's MacBook Air.
According to the report, Intel's Oak Trail chips for tablets cost $95 and are "far less attractive" than Nvidia's Tegra 2 processors, even after a 70-80 percent discount. "Although players such as Asustek Computer and Acer have launched models with the platform for the enterprise market, their machines' high price still significantly limit their sales," the sources were noted as saying.
As for Ultrabook CPUs, Intel has agreed to provide marketing subsidies in addition to its modest discount. The 20 percent price cuts reduce the Core i7-2677 to $317, Core i&-2637 to $289 and Core i5-2557 to $250. Intel is said to be concerned that further reductions in price would affect its 60 percent gross margins.
Intel has taken a more involved role in helping manufacturers reach the sub-$1000 goal for new entry-level Ultrabooks. Earlier this month, the company produced a set of reference bills of materials ranging from $475 to $710 to show that lower price points are possible. The chipmaker has even backed the Ultrabook standard with a $300 million fund from its investment arm that will invest in Ultrabook-related technologies.
But, Ultrabook makers have reportedly struggled to compete with Apple's stream-lined supply chain. For instance, competitors have had to search for alternatives to the magnesium-aluminum chassis that Apple uses in its MacBook Air notebooks. According to one report last month, some companies have found that actual production costs for Ultrabook laptops are roughly the same as MacBook Air retail prices.
Asustek Computer is hoping to release two Ultrabook models, an 11.6-inch UX21 and 13.3-inch UX31, later this year. While the UX21 will reportedly retail for $1000, the UX31 will cost $1600, a $300 premium on Apple's $1,299 13.3-inch MacBook Air.
Intel first announced the Ultrabook specifications in May, noting "tablet-like features," form factors less than 20mm thick and the sub-$1000 price target. The company hopes to achieve a 40 percent consumer laptop market share by the end of 2012. However, some analysts were less than impressed by the standard, calling it simply a "makeover" of the faltering netbook category.
Meanwhile, Apple continues to see success with its ultra-thin MacBook Air. Last October, the company added an 11.6-inch model and dropped the starting price to $999. In July, Apple again updated the line, adding Sandy Bridge processors, Thunderbolt I/O and backlit keyboards. Like its predecessor, the new MacBook Air was an instant hit.
Notebook player insiders said that partners for Intel's new thin-and-light initiative had demanded a 50 percent price cut, but Intel has agreed to provide just a 20 percent discount to "first-tier notebook players," DigiTimes reported on Tuesday.
The sources went on on to say that the high CPU price, attributed to Intel's insistence on maintaining its "leading position in the supply chain," will impede progress and stymie efforts to put forth the Ultrabook standard as a counter to competing devices, such as Apple's MacBook Air.
According to the report, Intel's Oak Trail chips for tablets cost $95 and are "far less attractive" than Nvidia's Tegra 2 processors, even after a 70-80 percent discount. "Although players such as Asustek Computer and Acer have launched models with the platform for the enterprise market, their machines' high price still significantly limit their sales," the sources were noted as saying.
As for Ultrabook CPUs, Intel has agreed to provide marketing subsidies in addition to its modest discount. The 20 percent price cuts reduce the Core i7-2677 to $317, Core i&-2637 to $289 and Core i5-2557 to $250. Intel is said to be concerned that further reductions in price would affect its 60 percent gross margins.
Intel has taken a more involved role in helping manufacturers reach the sub-$1000 goal for new entry-level Ultrabooks. Earlier this month, the company produced a set of reference bills of materials ranging from $475 to $710 to show that lower price points are possible. The chipmaker has even backed the Ultrabook standard with a $300 million fund from its investment arm that will invest in Ultrabook-related technologies.
But, Ultrabook makers have reportedly struggled to compete with Apple's stream-lined supply chain. For instance, competitors have had to search for alternatives to the magnesium-aluminum chassis that Apple uses in its MacBook Air notebooks. According to one report last month, some companies have found that actual production costs for Ultrabook laptops are roughly the same as MacBook Air retail prices.
Asustek Computer is hoping to release two Ultrabook models, an 11.6-inch UX21 and 13.3-inch UX31, later this year. While the UX21 will reportedly retail for $1000, the UX31 will cost $1600, a $300 premium on Apple's $1,299 13.3-inch MacBook Air.
Intel first announced the Ultrabook specifications in May, noting "tablet-like features," form factors less than 20mm thick and the sub-$1000 price target. The company hopes to achieve a 40 percent consumer laptop market share by the end of 2012. However, some analysts were less than impressed by the standard, calling it simply a "makeover" of the faltering netbook category.
Meanwhile, Apple continues to see success with its ultra-thin MacBook Air. Last October, the company added an 11.6-inch model and dropped the starting price to $999. In July, Apple again updated the line, adding Sandy Bridge processors, Thunderbolt I/O and backlit keyboards. Like its predecessor, the new MacBook Air was an instant hit.
Comments
The Wintel vendors always used to mock Apple for charging customers so much for computers with equal or less features than what the Wintel computers offered. Now, I guess the tables have turned and they're begging to be helped to undercut Apple still. I thought the whole idea of an "open" platform was to be able to build less expensive computing devices than closed ones. Every time Apple goes after some segment of the consumer market, the PC boys always have to try to beat Apple when they could just go after a different type of consumer than Apple.
Besides, if others build These Ultrabooks, won't they be in the same position they are now with the iPad? Too late to market with crappy software? Seems to me a lot of effort to catch up will just be history repeating itself for these PC makers.
But I am sure that smarter people then me have already figured out how to overcome this, or will sink their companies trying.
I guess this will demonstrate the value of the short term thinking vs. The long view.
These companies better learn how to build higher-quality, higher-cost notebooks and be able to get consumers to buy them just as Apple does. Intel isn't in the subsidy business. They have to make profits just like any other company. I'm sure these Wintel PC companies can't threaten Intel to give them processors at a lower cost unless they're buying them in bulk quantities.
I'm not so sure.
This isn't an Intel-vs-MacBook Air story, it actually has very little to do with the MBA.
This is actually all about Intel-vs-ARM.
Intel are trying to get all of the OEM's to get in line behind these x86 reference designs so that by the time Windows 8 hits Intel will be closer to having a competitive ultra-portable/tablet offering.
This is mentioned in the article. There needs to be a reason for an OEM follow Intel's reference design where they could otherwise build something from an ARM supplier for much less.
As computing gets more mobile Intel will need a lot of the OEM's following their reference designs in order to get the economies of scale to be competitive against ARM.
So I'll say again, I'm not so sure. Something has to give here, and I have a feeling it might end up being Intel's margins.
Odo - the problem is that they won't sell any if they have to price them higher than Apple does.
They are still in a no win situation. Even if they sold them for 50% less than Apple they won't sell any. Well not enough to gain traction. They will always look like netbooks to the consumer.
I'm not so sure.
This isn't an Intel-vs-MacBook Air story, it actually has very little to do with the MBA.
This is actually all about Intel-vs-ARM.
Intel are trying to get all of the OEM's to get in line behind these x86 reference designs so that by the time Windows 8 hits Intel will be closer to having a competitive ultra-portable/tablet offering.
This is mentioned in the article. There needs to be a reason for an OEM follow Intel's reference design where they could otherwise build something from an ARM supplier for much less.
As computing gets more mobile Intel will need a lot of the OEM's following their reference designs in order to get the economies of scale to be competitive against ARM.
So I'll say again, I'm not so sure. Something has to give here, and I have a feeling it might end up being Intel's margins.
I'm running tiny ARM based systems that are disk-less, fan-less and run Ubuntu. No good for gaming though great for data acquisition.
I have spent some time with the latest MBAs. Can thoroughly recommend these where previously I would have passed for a MBP. Beautifully built.
All the best.
Eventually, Apple will likely ditch intel altogether to have the entire Mac lineup running on Apple system-on-a-chip ARM. It's really inevitable, this is the direction Apple is headed.
Hear me out right now, this is going to happen and Apple is already working on it. I wouldn't be surprised if Apple already had a version of iOS/Mac OS X in development and testing that is coded for ARM and running on ARM processors. (and I mean for desktops and laptops, not iPhones and iPads)
And Apple will be switching the whole MacBook Air line to ARM processors in the not-to-distant future, probably with A7 and A8.
Eventually, Apple will likely ditch intel altogether to have the entire Mac lineup running on Apple system-on-a-chip ARM. It's really inevitable, this is the direction Apple is headed.
Hear me out right now, this is going to happen and Apple is already working on it. I wouldn't be surprised if Apple already had a version of iOS/Mac OS X in development and testing that is coded for ARM and running on ARM processors. (and I mean for desktops and laptops, not iPhones and iPads)
ARM needs to improve a LOT faster than Intel over the next 5 years for that to happen - especially at the high end. Furthermore, until Windows gets some traction on ARM, it won't happen even if ARM gets close to Intel in performance - the ability to run Windows natively is a key part of Apple's marketing benefits.
Odo - the problem is that they won't sell any if they have to price them higher than Apple does.
I don't get it. Unless the PC vendors are counting on getting a big discount that Apple doesn't get, a discount won't help them to match or beat Apple's price. If they can't match Apple today, then Intel drops the price of the CPU by 20% (or 50%. Or 85%), Apple still has a significant advantage.
And I don't see Intel offering everyone else a discount but not Apple.
What happened to that "Apple Tax" they were always complaining about?
Maybe it's built into the CPU?
Of course, as Apple probably pays the same price as other top-tier laptop manufacturers, I can't see how lowering the cost of the chips will give any other manufacturer an advantage that Apple wouldn't also get.
This isn't an Intel-vs-MacBook Air story, it actually has very little to do with the MBA.
I agree. Apple is entitled to the same discounts as any other PC vendor (if not higher
As for Ultrabook CPUs, Intel has agreed to provide marketing subsidies in addition to its modest discount. The 20 percent price cuts reduce the Core i7-2677 to $317, Core i&-2637 to $289 and Core i5-2557 to $250. Intel is said to be concerned that further reductions in price would affect its 60 percent gross margins.
Are these really discounts? These are the same prices that Wikipedia lists, and presumably the prices that Apple negotiates from.
http://en.wikipedia.org/wiki/Sandy_b...ile_processors
I agree. Apple is entitled to the same discounts as any other PC vendor (if not higher
Apple will in no way help Intel fight off ARM once Windows 8 is released.
So in the context of Ultrabooks... no, they're not. There is no strategic advantage in Intel giving the same discount as the combined PC OEMs following Intel's reference designs.
Is there any reason why Apple didn't go with edge-to-edge glass even on the MBA?
Still, considering the fact that I paid almost twice as much for the MBP than the MBA I guess it has to look sleeker... you know, agressively sleeker!
There is no strategic advantage in Intel giving the same discount as the combined PC OEMs following Intel's reference designs.
Actually, there is - if you consider keeping executives out of jail to be a strategic advantage.
Intel is in a difficult position having the dominant market share for CPUs (and an even greater share of the market for laptop CPUs). There are legal requirements to setting pricing. If it appears that you are arbitrarily favoring one customer over another, you can get into a lot of trouble. You need good business reasons.
Now, Intel can argue that they have a vested interest in seeing the reference design adopted and that this constitutes a valid business reason - and they might even win. But it's not black and white and I really doubt that they want to invite DOJ investigation - especially when it would involve alienating a major customer who is doing a great deal to lead the market to the ultra-low voltage (read high margin) products where Intel has a big advantage over AMD.
Actually, there is - if you consider keeping executives out of jail to be a strategic advantage.
Oh come on!
What happened to that "Apple Tax" they were always complaining about?
apple's supply chain for MBA +iPad/iTouch (iPhone has to large a margin for this) allows them to make a product that costs less.
the "Apple tax" still exists, just it only applies to the MBP and the desktop Macs (even the mac mini.)
Apple *probably* could drop its prices on any new products that use
1- SSD
2- any other iPad/iPhone/iTouch components
to match the price of any competitors WHILE having a higher margin.
OFF OF THAT POINT.
I hope Intel invests more into the ultrabooks, maybe 3 billion. than they might match MBA's price (maybe even profit margin) until AMD 28nm fusion comes along.
Also even though the ultrabooks will probably cost more than the MBA, a few will probably cost less (cough DellAcer cough) and Apple *might* add in more features sooner than they planned (to keep sales up) and a better MBA is better for most of us
Oh come on!
Totally different situations? Nonsense.
Apple goes in front of the judge and jury. They show the judge and jury the MacBook Air and the Intel reference design. Pointing out how they're nearly identical in almost every way. They then point out that Apple sells to the same markets and even uses most of the same distribution channels as Asus, HP, Dell, etc. It would be VERY difficult for Intel to prove that they were 'totally different situations'.
It is clearly going to look like discriminatory pricing to any jury with more than half a brain-cumulative.
It's not going to happen. Intel has had enough antitrust problems that they're not going to go there - you can count on it. Whenever they DO offer different prices to different customers, it's going to be based on solid data and legitimate reasons (volume, for example).
And, in fact, there are times when even WITH legitimate reasons for price discrimination, it can be illegal.
http://www.newrules.org/retail/antiprice.html
"The Federal Robinson-Patman Act prohibits manufacturers and suppliers from providing price discounts and other forms of preferential treatment to some buyers and not to others, if the effect of such discrimination is to lessen competition or injure individual competitors."
Clearly, charging everyone but Apple a better price would have the effect of injuring an individual competitor and therefore be illegal.
Well, quit whining and do something to fix it. How about building tablet products around ARM processors instead (like many others are doing). If the Tegra parts are cheaper than Intel parts, then use them!
How about seeing what kind of CPUs are available from AMD? I'm sure they would be happy to provide better price points on chips.
Who says you have to follow Intel's reference design at all?
As for the "Apple Tax", now you see that it doesn't really exist. All of a sudden, when you can't undercut the price by using cheap sub-standard components and terrible build quality, you suddenly find Apple really is competitive.
Look, if you want to continue to undercut competitors like Apple on price (race to the bottom), you'll have to stick with plastic. Ultra thin notebooks can still be made with plastic. It's been done for years. Forget a metal frame covered in plastic - that's too bulky. Use a mold to make the chassis a unibody piece for strength, and use polycarbonates instead of cheap plastics so as to reduce flex, weakness, and warping. You might not be able to get as thin as you could with aluminum, but it can be reasonably close. Use AMD chips instead of Intel. Drop all the legacy ports & parts that nobody really needs anymore. That'll save you some $.
And for goodness sake, try doing some engineering instead of just slapping off-the-shelf parts together. How about starting with those big bulky power bricks? If you engineer a better power supply, you can reduce the size and therefore the amount of material that goes into it, saving a few $.
Here's another thought - get the wires out. Engineer new circuit boards where all connections are directly on the motherboard so you don't have to worry about running a bunch of little wires all over the place inside the laptop. This saves space, material costs, and assembly costs.