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Tech Babble #7: Intel and High Prices

Updated: Mar 16, 2020

This time I think I will succeed in typing a small Tech Babble (editing note: Lol) on my thoughts because I really want to play Fallout 4 and/or Warframe. So here we go. By the way, this isn't a rant so the risk of jimmy rustling should remain quite low for now.

This post is something that a lot of people (myself included) often overlook when accusing Intel of charging really high prices for their products. So much so, that after all the shit I've given Intel over these past few days I thought I'd just get this one out and set that straight. Keep in mind, like all my babbles this isn't because I have inside information or concrete data, it's an opinion piece at heart so take it as such. But I think it makes a lot of sense.

I typed something a while back, about my thoughs on Intel over the last decade or so. You can read that here. I would like to draw your attention to the bottom of that post, where I added a small but still very valid 'defence' for Intel and their high prices. So you should probably read that as this post is basically about that.

It's not entirely greed and gouging

This title basically summarises what I'm going to type in this mini Tech Babble. I have to look at this objectively, and this can be brought down to the fact that profits, in the long-term, are not just about your Bill of Materials (BOM) when you fab a complex item like a processor.

Take a look at the Intel Core i9-9900K and recently, the KS version. These chips are quite small, under 200mm², about ~180mm² from what I read. That is in fact, smaller than AMD's Ryzen 7 2700X which is just over 200mm², and signficantly smaller than the TU106 graphics processor used in NVIDIA GeForce products that launched with rough price parity with the Core i9-9900K . TU106 is about 445mm².

I'm not going to sit here and type that Intel hasn't forced prices up to make more money at the consumer's expense over these past many years, because honestly I believe they have. With no competition, Intel has had free reign to essentially gough the prices of consumer processors and people will still buy them - because there is no alternative...

... However, now that we have Ryzen, and especially in the 3rd Generation with Zen2 - there isn't just 'competition' for Intel; they have essentially lost desktop processor leadership and AMD is stronger than ever before. For Intel, being competitive now is about reducing prices, because, well, they have nothing else to offer. Intel has reduced prices, significantly. If you take a look at what the price of an 8-core was in 2014, back when AMD was not competing in high-performance desktop processors - compare that to the price of 8-cores now. You get a more than halving of price, and an increase of performance around 30%. (Keep in mind the CPU I am comparing is the $999 i7-5960X, this has more transistors allocated to I/O, so it's not quite a like-for-like comparison, but it's close enough).

Anyway, I'm kind of getting off topic here so back on topic. That is a significant price reduction and of course, the thing that occurred smack-bang in the middle of those two product releases is AMD's Zen architecture. So you can see that made a difference. Also, if you take a look at the recently announced Cascade-Lake processors, Intel has lopped almost a thousand (!) dollars off their asking prices compared to the previous generation. That's pretty huge and I bet it really hurt their bottom line for the reason that I am finally (lol) going to explain.

Intel spends a significant amount of money and resources on R&D and maintenance of Lithography technology and foundries

Okay so here it is. And would you look at that, I already typed a huge amount. *Sigh*. Anyway, this is a true statement. At the beginning of the section prior to this one, I stated that profits in the long-term are not just your Bill of Materials (BOM) when creating a processor. Well, this actually applies for a lot of things. Especially complex products like microprocessors. I think I have a cool example here:

Because I like Cola and I am currently not allowed to drink Cola, Cola is on my mind so I am going to do a Cola-based analogy. Okay? Here it is:

Coca-Cola is really expensive. Around where I live it's about £2 for a 2L bottle of Coca Cola Zero Sugar. I won't involve original, because the UK Sugar Tax jacks up the price of that to pretty high levels, so much so that Coca-Cola doesn't even ship a 2L bottle anymore (that I am aware of, at least not around here).

So it's £2 for a 2L bottle. Pepsi Max is about £1.50 for a 2L bottle, on average. (I prefer Coca-Cola, unless it's Regular vs Regular, then they are both about equal, oh god Cola just hijacked this tech babble~). The Super-market own-branded cola is about 50p a bottle for their 'premium' stuff and 17p (!) for their industrial waste, erm, cheap stuff.

Ugh. To the point, Ashley. What I am trying to say is that the super market doesn't spend anywhere near as much on flavour research and development as the big brands like Pepsi and Coca Cola. This is fact, as a result they can mix up some okay-tasting recipe and charge a lot less for it, like a lot less. Now, I am absolutely not comparing AMD's Ryzen to super-market own-brand cola (lol), but the principal is the same. While 2L of Coca-Cola no doubt costs the same to make as a 2L of Supermarket stuff - the BOM is likely almost the same), Coca-Cola charges a lot more for it because they spend a lot more time and resources in developing it. (There's a reason that recipe is a trade secret).

Okay back to processors. I am not saying, at any point that AMD didn't spend as much talent in designing Zen as Intel did with Skylake, because I think it is quite clear they did - you just have to look at the current CPU market situation to see that. What I am trying to say is:

Intel designs its own lithography processes. It builds and maintains its own foundries. It spent, and still spends an absolutely enormous amount of money on R&D for technology like its 14nm and its iterations, and of course the sort of failed 10nm process.

In laymans terms, this essentially means that the total, long-term profit for Intel on each processor sold is much lower than AMD's Zen, if they are priced similarly and have a similar costing BOM. I actually typed about just how cost-effective Zen is in a another post. Basically, the fact that AMD is fabless and simply buys wafers from third-party foundries like TSMC and GlobalFoundries, means they don't have to shoulder all of the enormous costs of developing that technology. Because other companies buying wafers from those foundries are also paying the costs and of course the foundry itself invests heavily into its own development.

What this means is, all things equal (die size, transistors, rough process technology): AMD can make Zen not-insignificantly cheaper per chip than Intel can make Skylake or one of its many iterations. So that brings me to my conclusion...


Intel is 50% responsible for their position right now. They shot themselves in the foot by being complacent and 'biting off more than they could chew' with the 10nm process. I am almost certain Sunny Cove cores are ready to go into high performance designs, but they simply weren't feasible on 14nm++ technology because of power/die size limitations - especially with regards to long term profits.

In a nutshell, AMD cought Intel with its metaphorical underwear down and well, yeah. But Intel will likely struggle to be competitive in pricing, not entirely because they are greedy (though I don't entirely rule this out) but because they would simply be making a loss on each processor sold if they waged a price-war with AMD's Ryzen.

And that is the true Silver Bullet of Zen: it's very competitive on absolute performance, yes, and now it is even the dominant design in performance per watt, but the biggest advantage I think Zen has is cost-effectiveness.

At the end of the day, Tiger tanks were very powerful but Shermans and T-34s won the war. Oh look, a Tank analogy. That gets my point across, because both Sherman and T-34 were excellent tanks, but their biggest advantage is in economics and mass production. T-34 also had some excellent sloping armour but I digress. With Ryzen 3rd Generation and Zen2, AMD has the technological advantage, too.

I wouldn't put it down to luck; more so dedication and talent from the team who worked on Zen, and Dr. Lisa Su for keeping everything together, otherwise the phrase "AMD Struck Gold" with Zen might have been appropriate.

Welp, I was originally going to title this one a "mini Tech Babble" but I had to omitt that because, oh look, I typed an essay again. -_-"

If you took the time to read it all, thanks! Love you <3

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