Intel Announces CPU Price Hikes, Hopes to Spur Near-Term Purchases

News
By Aaron Klotz
published

Intel wants to reduce its current oversupply

Core i9-13900K QS tested
(Image credit: Intel)

According to a report by DigiTimes, Intel is having an oversupply problem with its best CPUs and wants to reduce supply as quickly as possible. As a result, Intel announced plans to raise CPU prices in the near future. This appears to be an attempt to push PC vendors into purchasing more CPUs now, in advance of the price increases, which would reduce the oversupply.

This strategy isn’t new and has been used quite often to accelerate sales when needed. However, the side-effect of this strategy is a noticeable reduction in sales later in the year, since PC vendors will have already bought up more supply than they need. Nonetheless, this strategy should theoretically allow Intel to reduce its oversupply issues, which seems to be the top priority for Intel right now.

DigiTimes sources note that Intel’s success with this strategy is unclear, but prices are believed to be rising for both consumer and server processors, as well as Wi-Fi chips later this fall. Success will depend on each vendor's requirements, and how many additional CPUs each vendor will need or can use.

It's unclear if Intel’s CPU price hikes will affect both the OEM market and the DIY market, but DigiTimes has not made a distinction between the two, so there is a chance it will affect both. That’s not all, as Intel also indicated it will be raising prices on its mobile processors to combat inflation and it has already notified its customers about the price changes. As a result, we could see notebook prices increase slightly in the near future.

Despite this, DigiTimes estimations say notebook volume in the 3rd quarter will increase by 14.3% quarterly thanks to reduced demand in the second quarter due to COVID restrictions in China, not to mention the impending back to school shopping season. This will especially impact Apple and HP, with expected 43% and 25% shipment increases thanks to a rebound from material shortages in Q2.

Intel’s price hikes have taken a bit of time to arrive. AMD reportedly considered increasing prices for its customers in late 2021, similar to what Intel is doing right now, but it backfired and vendors refused to comply with the higher prices. That also perhaps influenced Intel and led to it keeping CPU prices at low levels.

Now it looks like Intel will execute a price increase on all its processors near the end of 2022, despite material shortages evaporating. However, there’s also a chance it won't happen, according to DigiTimes sources. These plans are projections and potential options, in other words. If anything, we will probably see a temporary price hike with Intel CPUs in the early fall, but then prices would drop into discount territory — just in time for Black Friday and the Christmas season.

Also note that upcoming Intel Raptor Lake processors are slated to launch in the near future. It's not clear whether these reported price increases also apply to Raptor Lake, but logic would suggest that Intel will mostly want to clear out existing Alder Lake inventory in advance of Raptor Lake's launch.

Aaron Klotz
Aaron Klotz
Freelance News Writer

Aaron Klotz is a freelance writer for Tom’s Hardware US, covering news topics related to computer hardware such as CPUs, and graphics cards.

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18 Comments Comment from the forums
  • LastStanding
    Upcoming back-2-school deals you say? About that, if parents, students, etc. did not take advantage of the most recent Prime Day Deals (all major retailers drop prices doing this event), these upcoming b2s deals will be weak by comparison unless you need a bunch of stationery products. 🤣
    Reply
  • InvalidError
    If people aren't buying current-gen stuff at current prices, they aren't going to buy next-gen stuff at higher prices especially if they just bought something current-gen.

    With the number of people who had out-of-cycle purchases and upgrades due to covid, I wouldn't expect people to be rushing for upgrades now that covid is (at least presumably) mostly over.
    Reply
  • waltc3
    A smart retailer will wait and see if indeed Intel does raise prices, and if so, by how much and for what, etc. I would certainly like to see a link to the actual Intel announcement...;)
    Reply
  • shady28
    Their (AMD, Intel) big problem this year is two fold.

    One is the obvious crypto collapse, which will affect primarily GPU but to some degree CPU sales. Combined with rising energy prices, many mining farms are likely to get shuttered.

    The other is the pull forward effect where purchases people would have normally made in the future, and in some cases would not have made at all (laptops for school kids remote learning for example), they pulled forward those purchases in 2020 / 2021 due to covid. I saw this happen a lot. A great deal of pull forward happened to electronics in general (TVs, game consoles, stereo / home theater speakers, media boxes like AppleTV / Roku etc.).

    Intel's oversupply issue reflects that they weren't prepared for this. It should have been pretty obvious, that pull forward effect is well known and happens in many industries.

    I seriously doubt Intel's strategy is going to work out here. If there isn't demand there isn't demand, the OEMs they're trying to unload on aren't going to want to get stuck with old inventory either. Especially not with product cycles as fast as they have been with Intel (Gen 10 / Rocket Lake / Tiger Lake/ Alder Lake / Raptor lake in 24 - 30 months - 4 desktop gens and at least 3 laptop gens).
    Reply
  • TerryLaze
    shady28 said:
    Their (AMD, Intel) big problem this year is two fold.

    One is the obvious crypto collapse, which will affect primarily GPU but to some degree CPU sales. Combined with rising energy prices, many mining farms are likely to get shuttered.

    The other is the pull forward effect where purchases people would have normally made in the future, and in some cases would not have made at all (laptops for school kids remote learning for example), they pulled forward those purchases in 2020 / 2021 due to covid. I saw this happen a lot. A great deal of pull forward happened to electronics in general (TVs, game consoles, stereo / home theater speakers, media boxes like AppleTV / Roku etc.).

    Intel's oversupply issue reflects that they weren't prepared for this. It should have been pretty obvious, that pull forward effect is well known and happens in many industries.

    I seriously doubt Intel's strategy is going to work out here. If there isn't demand there isn't demand, the OEMs they're trying to unload on aren't going to want to get stuck with old inventory either. Especially not with product cycles as fast as they have been with Intel (Gen 10 / Rocket Lake / Tiger Lake/ Alder Lake / Raptor lake in 24 - 30 months - 4 desktop gens and at least 3 laptop gens).
    Don't confuse the articles click baiting with intel strategy, there is no strategy here, prices are going up and intel is not going to cut into their margins all that much, that's all there is to this.
    TSMC already increased prices by 10% last year and is going to increase them by another 6% in 2023. Prices are going up for everybody.

    https://www.tomshardware.com/news/tsmc-to-hike-chip-prices-in-2023
    The world's largest contract maker of semiconductors plans to increase prices for most of its fabrication processes by 6% starting from January 2023, reports DigiTimes. Last year TSMC increased prices on chips made using its N7 and N5 process technologies by 10%, while prices of older N16 and thicker nodes grew 20%. Earlier this year, it was reported that TSMC was considering increasing chip prices by up to 9% starting from 2023, but it looks like the company won't be quite that aggressive with its price hike.
    Reply
  • InvalidError
    TerryLaze said:
    Don't confuse the articles click baiting with intel strategy, there is no strategy here, prices are going up and intel is not going to cut into their margins all that much, that's all there is to this.
    Intel's margins don't exist in a vacuum. Raising prices only work when demand exceeds supply. Right now though, due to the sales slow-down, AMD, Nvidia, Apple and others are looking for companies to dump their excess TSMC wafer allocations onto in order to avoid paying penalties or end up with heaps of excess chips in warehouses. Intel won't have much success raising prices when everyone else is taking a slice of humble pie out of their profit margins to recover capital tied up in wafers.
    Reply
  • TerryLaze
    InvalidError said:
    Intel's margins don't exist in a vacuum. Raising prices only work when demand exceeds supply.
    Are you living on Mars or something?!
    Everything has increased in price without demand increasing.
    It's called inflation.
    InvalidError said:
    Right now though, due to the sales slow-down, AMD, Nvidia, Apple and others are looking for companies to dump their excess TSMC wafer allocations onto in order to avoid paying penalties or end up with heaps of excess chips in warehouses.
    So everybody tries to dump excess TSMC product but TSMC still raises prices but intel is the one in trouble?!
    At least the (almost) only client of intel FABs is intel, they might reduce production if they have to but that's all, they aren't going to loose clients/orders/whatnot.
    InvalidError said:
    Intel won't have much success raising prices when everyone else is taking a slice of humble pie out of their profit margins to recover capital tied up in wafers.
    There is no "everyone else" the only other FAB is TSMC and they also increased prices.
    Reply
  • InvalidError
    TerryLaze said:
    Are you living on Mars or something?!
    Everything has increased in price without demand increasing.
    It's called inflation.
    When a company is making a monopoly-sized 60+% gross and 25+% net margins on most of its product portfolio, it can afford to eat the inflation to maintain sales.

    Companies that are operating near-cost at ~10% net raising prices to remain viable is understandable. Companies like Intel already making exceedingly large profit margins raising prices some more just because of their quasi-monopoly position is a different story, this is entirely greed for greed's sake assuming the market can cope with it, which it very well may not in a recession following a pandemic period where most people who needed new equipment already got it and won't be back on the market again for another 3-5 years.
    Reply
  • shady28
    TerryLaze said:
    Are you living on Mars or something?!
    Everything has increased in price without demand increasing.
    It's called inflation.

    So everybody tries to dump excess TSMC product but TSMC still raises prices but intel is the one in trouble?!
    At least the (almost) only client of intel FABs is intel, they might reduce production if they have to but that's all, they aren't going to loose clients/orders/whatnot.

    There is no "everyone else" the only other FAB is TSMC and they also increased prices.


    In 2020 \ 2021, the demand curve shifted up, towards the top right in the graph below (D2) from a stable baseline (D1). The covid environment stole demand from the future in this space.

    Here in 2022, that demand curve is rapidly shifting down towards the lower left (D3), while supply is rising as production increases. This means either supply has to be reduced for current demand, or prices have to come down.

    TSMC has also implied they are reducing capital expenditures for new plants and equipment. While I was writing this, ASML came out with great earnings but are reducing future revenue projections, which implies TSMC / Intel / Samsung are not buying as much from them as originally thought.

    TSMC, AMD, Intel all have huge gross margins. If they over-produce, they will have to lower prices at some point. The only other option is to warehouse chips, but that simply kicks the can down the road - and in an environment where they are introducing new architectures this rapidly that road is not a very long one.

    I don't agree with Intel raising prices because they seem to want the OEMs to eat the negative effects of a demand curve shift. OEMs are unlikely to do that, for the same reason Intel doesn't want to. They are all in a cycle of likely flat or maybe even negative growth for a year or so IMO, depending on how the economy shapes up.


    Reply
  • shady28
    And here is that supply / price curve in action, from stockx.

    Notice how there were no sales in Apr-May. That's not just on this card. People simply wouldn't buy them, the curve moved and the sellers were not on that curve anymore and refused to lower prices. They are likely losing even more money now.

    Reply