AMD Price Adjustment Not Expected To Affect Sales

Advanced Micro Device’s slight upward adjustment of prices for its desktop processor earlier this month is viewed by many as a show of strength as it enters what is traditionally a slow period for desktop sales.

The Sunnyvale, Calif., chip maker confirmed that it increased prices by $2 to $3 on many of its high-end Athlon64 processors. At the same time, AMD cut prices on some of its high-end Opteron server processors.

Glen Coffield, president of Cheap Guys Computers, a system builder and AMD partner in Orlando, Fla., said AMD has raised prices in small amounts before. “This one, I’m pretty sure, is due to new packaging,” Coffield said. “AMD had to redo its retail boxes because some environmentally-friendly materials inside were degrading,” he said. “The new packaging is probably a little bit more expensive.”

Coffield said the price increase has no meaningful impact on his business. But he noted that AMD would not be willing to raise prices at any level if it weren’t confident about the sales potential of its chips. “Demand for their chips is strong,” he said. “They have 20 percent market share and growing.”

AMD declined to state a specific reason for the increase. But a company spokeswoman said, “We price products according to the value they deliver.” She added: “More and more OEMs are responding positively to AMD’s desktop processors.”

AMD is known to have a tight supply of desktop processors in the past. At an earnings conference call last week, AMD executives acknowledged occasional inabilities to fulfill supply but said overall capacity is steady. It recently started volume production from its second fab in Germany. That fab currently is producing Athlon64 and the low-cost Sempron desktop processors.

AMD also has contracted with Singapore-based Chartered Semiconductor Manufacturing later this year to produce processors if needed.

During the call, executives said average selling prices of its desktop processors had increased, though they didn’t say by how much. In its outlook for the second quarter, AMD Chairman and CEO Hector Ruiz said the second quarter is a historically slow quarter. The decision to reduce its server prices was “[an] offensive [play],” as AMD works to grab more share of the corporate market, executives said. Average selling prices for its server CPUs have dropped, they added.

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