Expect microprocessor prices to rise
The increase will occur after prices fell 8% on average in 2009
By James Carbone -- Purchasing, 11/19/2009 2:00:00 AM
Microprocessor prices will end the year declining about 8%, but greater computer demand in 2010 will result in prices increasing by about 1%. Prices will also rise 1% in 2011 and 2% in 2012 as healthy demand for computers continues, according to researcher IC Insights.
This year's 8% drop in prices is the highest since 2007 when the average price of a microprocessor fell 9%, says Rob Lineback, senior analyst with researcher IC Insights, based in Scottsdale, Ariz.
"The price drop in 2007 was the result of intense competition between Intel and AMD when they were cutting prices left and right to try to take market share," he says. "That has diminished to some extent."
"Pricing competition now is being driven by the form factor rather than competition between Intel and AMD," Lineback says. Small, lightweight netbooks, which use microprocessors that can cost less than $30, are selling well and Intel and AMD are competing for share in that segment of the PC market.
Netbooks have sold well during the recession because they are low cost with some priced less than $300. They are small and weigh only 2–3 lb.
AMD and Intel will likely face competition from other processor suppliers that will enter the netbook market.
While netbooks will help drive processor revenue in 2010 and beyond, there will also be strong growth for notebook computers and servers, which use higher-priced processors.
That will result in greater demand for microprocessors which will impact processor prices.
"Our feeling is demand is going to be strong enough to stop downward price pressure and the average price will rise," says Lineback.
Increased sales of servers will contribute to revenue growth because microprocessors used in servers are priced higher than processors used in desktops and notebooks.
"The server market will be fairly good," says Lineback. Businesses will make investments in IT hardware and that will help drive server sales.
The trend toward cloud computing will also help drive server and microprocessor sales.
Cloud computing services provide common business applications online that are accessed from a web browser, while the software and data are stored on the servers.
"Cloud computing is very server intensive," says Lineback. And servers use high-end microprocessors, costing hundreds of dollars, which will contribute to microprocessor revenue growth.
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