Demand for mid-level processors shrinking

CPU Update

Demand for mid-level processors shrinking

Converge Market Insights reflects back on past year and look forward to what 2009 markets may bring for the microprocessor market

Friday, December 19, 2008

USA: In this month’s CPU update, Converge Market Insights reflects back on the past year and look forward to what 2009 markets may bring for the microprocessor market.

In 2008, we saw the usual variability of shortages and savings and the never-ending march toward smarter, faster and less expensive models. Proving more interesting were the emergence of new markets, the blossoming of the service microprocessor industry and some alarming price trends.

Low-cost devices reign
The dilemma with chip manufacturers making their parts better and cheaper is that customers may no longer require the mid- and higher-level parts to perform their day-to-day computing functions.

As Intel and AMD have fought bitterly for market share, the resulting price war has left consumers with far more computing power for their CPU investment. In 2008, we witnessed the market being split, with demand on one end for high-end gaming machines and on the opposite end for everyday computers. This resulted in a shrinking demand for mid-level CPUs. The high-end market, while lucrative, is not built based on a high-volume model.

Lower-end Intel models such as the E2140-80, E2220 and T3200-T5900, priced between $50 and $100, have become mainstream, taking over for the $150+ midrange P8400/E8400 models as our best sellers. Demand has remained healthy. However, OEMs now need to sell more CPUs to match their previous revenue streams. For 2009, it has yet to be determined how the emergence of mini computers with low-cost, low-voltage CPUs will affect the market.

At the other end of the market, the new Intel i7 gaming models are bringing a new dimension to the gaming market. It will be interesting to watch how these devices trade in the open market.

Second life
Service and repair CPUs have always been staples of Converge’s CPU offering, and this past year has seen a broadening of demand and supply across all regions of the world. CPUs once considered yesterday’s technology have seen a resurgence in the service repair market.

These CPUs are circulating in greater numbers to meet emerging market and service repair demand. While economic conditions remain a concern, we can expect the growth of the service market to continue as system refresh rates are extended.

Identifying cost savings
Slowing demand for some components combined with excess inventory entering the spot market at year-end has created an opportunity for potential cost savings. Manufacturers looking for CPU components can find opportunities in the spot market.

©CIOL Bureau