Intel escalates chip price war with AMD

Intel Corp., the world’s largest chip maker, plans to slash the price of some processors over the next three months to regain market share from Advanced Micro Devices Inc.

The company will cut prices of its Core 2 Quad processor 50% on July 22, according to an Intel document given to clients. The chips, introduced in November to run servers and the most expensive personal computers, sell for $530 each, according to Santa Clara, Calif.-based Intel’s website.

The move puts pressure on AMD to follow suit as the company prepares to introduce its own quad-core processors, called Barcelona and Phenom, in the second half of the year. Last year, a price war led to a 42% decline in profit at Intel and a $166 million loss at AMD.

“Intel had lost its way,” said Brian Piccioni, a Toronto-based analyst for BMO Capital Markets. “But there is a problem when you wake up a giant, which is they can become fierce competitors.”

Intel shares rose 27 cents to $22.20, and had gained 8.3% this year before Tuesday. Shares of Sunnyvale, Calif.-based AMD fell 11 cents to $13.80.

“Especially in the PC segment, price cuts, even dramatic ones, are par for the course,” Piccioni said. “So this is not particularly surprising or ominous.”

AMD Chief Marketing Officer Henri Richard said last week that he was “concerned” that Intel would cut prices of quad-core processors and drive down overall levels in the industry.

“That’s the sign that I am getting right now,” Richard said. “If they are pushing quad-core unnecessarily down because they think they can hurt us by doing that, then I don’t think there’s an optimistic view on” average prices.