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Intel follows the increase in the price of processors

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After years of watching its PC processor market share be eaten away by its rival Advanced micro-systems (AMD -1.16%), Intel (INTC 1.14%) were released in late 2021 and 2022. The company’s Alder Lake chips, the company’s first with a mix of high-performance and efficient cores, began rolling out in late 2021. These powerful and affordable chips generally beat out the Ryzen 5000 series from AMD. chips in terms of performance and value.

Intel capitalized on this advantage last year with its Raptor Lake chips, which featured the same mixed-core architecture along with significant performance improvements. “Intel’s 13th Gen Raptor Lake processors deliver explosive generational performance increases that beat similarly priced AMD Ryzen chips in gaming, single-threaded and multi-threaded work at all price points,” said Tom’s Hardware reviews.

These latest-generation Alder Lake chips are still available, but they’re about to get more expensive. Intel indicated last July that it would increase the price of some processors towards the end of the year to offset the cost inflation it was experiencing.

A historically weak PC market may have delayed those plans — global PC shipments fell nearly 20% year-over-year in the third quarter, prompting companies across the PC supply chain to reduce their inventory. But as we enter 2023, Intel is now pushing ahead with those price increases.

Testing its pricing power

Intel has increased the recommended customer price on a wide variety of its Alder Lake processors by approximately 10%. The top-end i9-12900K, for example, is now listed in the $648-$658 range, up $59 from previous prices.

Oddly enough, this decision puts Alder Lake prices above Raptor Lake prices in some cases, at least on paper. Intel’s price range for the i9-13900K is currently $589-$599, despite performing better than its predecessor.

These prices don’t necessarily match what potential buyers of these chips currently see at retail. At Amazon, the i9-12900K is currently selling at a heavily discounted price of $409, while the i9-13900K is priced as per Intel’s listing at $599. It’s possible that discounts were used on Alder Lake chips to deplete inventory, and now that the inventory situation has improved, Intel feels comfortable raising prices.

It seems likely that Intel will eventually impose price increases on its Raptor Lake chips as well, as it wouldn’t make much sense to charge less for premium products.

How does this change things

Although AMD hasn’t announced any official price cuts, its latest-gen Ryzen 5000 chips and current-gen Ryzen 7000 chips are selling at what appear to be permanent discounts. The big discounts for the Ryzen 5000 chips are likely an attempt to eliminate excess inventory. AMD’s customer segment saw revenue fall 40% year over year in the third quarter as the PC supply chain struggled with too much inventory.

The discounts for the Ryzen 7000 chips, on the other hand, are necessary for them to be competitive against Intel’s Raptor Lake. At MSRP, Raptor Lake is the clear winner based on third-party reviews. Once you factor in more expensive motherboards and no support for cheaper DDR4 memory, AMD’s latest Ryzen chips are at an even greater disadvantage.

If Intel raised prices for Raptor Lake chips, AMD’s Ryzen 7000 chips would be more attractive, especially at the current discounted prices. This could allow AMD to raise prices a bit itself, which would help margins. Although if Intel is feeling inflationary cost pressures, AMD is likely feeling them too.

Intel’s line of PC processors is the most powerful in years. While weak PC demand will continue to put pressure on the company’s bottom line, it is clearly confident enough in its chipset value proposition to pass on some costs to its customers.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Timothy Green holds positions at Intel. The Motley Fool holds positions and recommends Advanced Micro Devices, Amazon.com and Intel. The Motley Fool recommends the following options: $57.50 long calls January 2023 on Intel, long calls $45 January 2025 on Intel, and short $45 calls January 2025 on Intel. The Motley Fool has a disclosure policy.

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