In the world of controller microprocessors for PCs, there are only two real players, Intel and AMD. Intel has roughly four-fifths of the market, while rival Advanced Micro Devices (AMD) has around one fifth, they almost monopolize the whole microprocessor industry and the other new firms are difficult to entry. Over the past years, AMD’s share has risen by several percentage points and Intel’s has declined correspondingly.
The Intel official website (2006) has detailed that Intel Corporation was founded in 1968 as the world’s largest semiconductor company. Intel is the best known for its PC microprocessors and it maintains roughly 80% market share. Intel is one of the largest and most successful businesses in the world. The company currently has nearly 100,000 employees and 200 facilities worldwide. Its revenues for 2005 were $38. 8 billion. Its Fortune 500 ranking is 50th.
The AMD official website (2006) provides the information of AMD, which is known as Advanced Micro Devices, Intel’s biggest competitor is an American manufacturer of integrated circuits, it is the second-largest supplier of x86-compatible processor, and a leading supplier of non-volatile flash memory, it was founded in 1969 by a group of defectors. AMD is the 15th among the worldwide top 20 semiconductor sales leader with revenues in 2005 of US$3. 9 billion Up until now, Intel has been able to charge a little more for its chips, while AMD has charged less.
Perceived differences in technology have faded over the past few years, and AMD has started to win the performance comparison. 2. Main products of each company Intel AMD Product (Processors) Description Product (Processors) Description Intel(r) Core(tm)2 Processor Its dual-core technology rewrites the rules of computing, delivering optimized power efficient computing and breakthrough dual-core performance with amazingly low power consumption. AMD Turion(tm) 64 X2 Product
It’s AMD’s most advanced family of dual-core processors made for mobility-delivering outstanding multi-tasking performance in thin and light notebook PC designs Intel(r) Celeron(r) M Processor Based on an architecture designed specifically for mobile computing, the Intel(r) Celeron(r) M Processor delivers a balanced level of mobile processor technology and exceptional value for sleeker, lighter laptop designs. AMD Athlon(tm) 64 FX Processor It features innovative technology to provide extraordinary performance and a gaming experience without parallel.
The AMD Athlon 64 FX processor runs on AMD64 Technology, a revolutionary technology that 1) allows the processor to run 32-bit applications at full speed while enabling the coming wave of powerful, 64-bit software applications, and 2) provides Enhanced Virus Protection when supported by the OS*. Intel(r) Pentium(r) Processor Extreme Edition The Intel(r) Pentium(r) Processor Extreme Edition, with the processing capabilities of four threads, delivers more computing capabilities that enable you to explore new ways to accomplish and enjoy performance-intensive tasks on PC.
AMD Turion(tm) 64 Mobile Technology product It’s the most advanced family of simultaneous 32- and 64-bit Windows(r)- compatible processors made for mobility (* above information comes from Intel and AMD official website) 3. Product differentiation Intel and AMD have different market strategies. From long time ago, Intel has been in the dominate place in CPU area. Therefore, Intel CPU has better compatibility since many computer devices manufacture need to along with Intel which may enlarge their share of market in their own field.
In the new product development, Intel will think more about the system and platform, which may give advantage to continue in the leadership. Intel products are more mature in server and laptop use. AMD is younger than Intel in the CPU arena. AMD has a very strong research and develop team in order to catch up with Intel. Their product is more powerful than Intel’s in recent years and the price is lower. They first developed physical dual core CPU, and 64 bit CPU.
These two most advanced technologies won lot of market share for AMD. Now AMD is trying to promote 4-core CPU which leads CPU competition into a new era. 3. 1 Kinked demand curve Until now, the competition between Intel and AMD becomes more and more severity, in order to avoid antitrust challenges, both companies compared with each other’s price (AMD less to do so) and competed with discretion. But Intel with sagging results and loss of market share has decided to challenge AMD pricing with cut its own.
In the US News& World Report there is an article named “chipping away at Tech price” which written on 7/16/06 notes: ‘In an attempt to stem a slow loss of market share, Intel has deeply discounted what computer manufacturers pay for many of its existing processors. AMD has been forced to cut prices as well. And further cuts could be coming, analysts say. That means consumers in the market for a new computer could soon get even bigger bargains’. In discussing the issues in relation to the oligopoly (oligopolywatch. com 2006) the price cuts are lower by 17% to 53% compared to the prices earlier this year.
some price sparring is common in this market, but most commentators think that these cuts are extraordinary and damage to both firms and cutting price is hurting both companies’ bottom lines. Both AMD and Intel seem intent on racing to the bottom, and their share prices are taking a beating. The great advantage of an oligopoly is the ability to have an unspoken gentleman’s agreement about price levels, with no desperate wild card small player being able to disrupt the equilibrium. Finally the one who benefits the most from the price war between Intel and AMD are their product users, as Intel and AMD both cutting their product price.
Price is one of the important elements of the demand and supply, when the price is lower the customers’ demand will increase. Thus, the demand curve will shift to the right. 4. Conclusion As Samuelson&Nordhaus defined oligopoly, one of the four major market structures, which is an intermediate form of imperfect competition in which an industry is dominated by a few firms. Like the competition between Intel and AMD is imperfect, both companies are facing the challenges of price, quality of products, etc which are hurting both parties’ bottom line.
But because of the competition between Intel and AMD, both companies put their best effort on research and development to launch the new and high quality products within shortest cycle time. However their competition benefits a lot to the customers, as the two companies provide more competitive and high quality choices of their products and offered the lowest price in the price war to attract the market. The competition between two companies helps to push the development of economic accordingly.