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Q: Why is Intel charging so much? A: Because enough people pay. Q: Why do people pay so much? Why do they pay a high premium for top performance? A: Because,

Q: Why is Intel charging so much? A: Because enough people pay. Q: Why do people pay so much? Why do they pay a high premium for top performance? A: Because, considering all factors, it's worth that much for them. For many it's too much but for many others it's ok. Q: But it's the same silicon! A: Manufacturing cost plays little role when the price is not dictated by a race to the bottom between different manufactures. Instead, marketing, market segmentation and customer value are the cost determining factors.

ajross 9y ago
That's really not what the article is about at all. It's talking about the history of the tech industry and associating this kind of price motion with "peak" revenue for given hardware products. Your same answer would apply to IBM's mainframes in 1990 and Sun's servers in 2001 too, and the point of the article is to associate Intel's current position with those products, which clearly reached peaks at those moments. Personally I don't really buy it completely either, but quipping "because the market!" as an answer is missing the point. The article is about what that market desire means for future revenue.
- pjmlp 9y ago
  Another example missing in the article was the graphics workstations with SGI.
  - nwatson 9y ago
    I remember considering spending lots of student-budget money in 1993 for an SGI Indy (https://en.wikipedia.org/wiki/SGI_Indy https://en.wikipedia.org/wiki/SGI_Indy), a low-end graphics workstation from SGI. I think this was shortly before peak-SGI. I'm glad I didn't, because (a) PCs started to see impressive graphics performance improvements not so longer after; (b) I went to industry and ended up working in enterprise software instead. SGI market cap peaked in 1995, here's a HN discussion of a 1997 article of SGI's "Sad Saga": https://news.ycombinator.com/item?id=8462841 https://news.ycombinator.com/item?id=8462841 . They shifted focus to scientific/enterprise compute and storage after and dwindled away.
    - ajross 9y ago
      Exactly, and for pretty much the same reason. Once CMOS prices got to the point where 3D graphics acceleration (not SGI's only core competency, but pretty close revenue-wise) was desired at consumer volume, they were toast. NVIDIA had they beat on almost everything that mattered by 1998 or so.
      - reaperducer 9y ago
        I remember when my scientician friends started switching from SGI to multiple super-beefed-up Dells in the early 2000's. They could get five monster custom Dell machines for the price of one Octane or Indigo or whatever. And they delivered better performance. (Or so they told me.)
        bluedino 9y ago
        There was about two or 3 generations of either PC hardware or software (Windows) not being able to handle what SGI hardware could, no matter what the price.
        f2f 9y ago
        Don't forget the nail in the coffin: the windows nt-based SGI workstation...
- calimac 9y ago
  I want to introduce the factor of Intel being protected against the chinese chip manufacturers possibley having an unintended consiquense of supressing state side competition. In general, I cannot imaging running an AMD processor in a flagship. Intel is an example of superior architecture and amazing developments with, most recently, the Core i productline, more impotantly, the most amazing, brand identity positioning i have ever experienced. AMD very possibly could work well; I will never know. ... No really, i have to go buy an AMD just to keep an open mind.
- bsder 9y ago
  One thing missing from the comparison to IBM and Sun is that precisely because those companies made things so expensive people started looking for alternatives. The ES/9000's were really good machines for the time. Had IBM not raped people on those, companies might have stuck with them for a little longer. The AS/400 was priced more reasonably and people loved those. You couldn't get someone with an AS/400 to move to a Unix workstation if you used a nuclear bomb. As for Sun in 2001, the problem was that they were so absurdly overpriced and underpowered that commodity x86 simply blew it away. If I didn't have direct knowledge of the dysfunction that was Sun at the time, you would have thought they were taking kickbacks from Oracle, Cadence, Synopsys, etc. to limit performance. (Explanation: Oracle, Cadence, Synopsys, etc. all had very expensive software packages that were licensed per processor core per year and effectively only ran on Sparc. So, the lower the performance of the processor, the more cores you needed and the more expensive your license to Oracle, et al.)
  - ajross 9y ago
    Even the IBM machines were flagging in performance in 1990. That was the beginning of the RISC revolution, and all the benchmark records were being taken by MIPS (and later Alpha) boxes. It was a slower process than the Intel takeover[1] only because ECL logic was still available to expensive machines, allowing clock rates in the mainframe world to stay higher than CMOS chips even as their architectures got eclipsed. [1] Ironically on the back of a "CISC" architecture. What happened there was that CMOS density had gotten so high that the relative advantage of a RISC ISA (not architecture: every thing form the P6 onward looks like a pipelined RISC box on the inside) was just a pipeline stage or two and a 1% hit in the transistor budget for decode.
  - dom0 9y ago
    I own two SPARC servers (a 2003ish V245 and a 2007 T5120) and both are rather ridiculous ... idle power draw for a V245 is like 240 W and just 150-180 W of that are the fans. [1] A T5120 draws some 180 W idle as well. Especially the latter was also heavily marketed as green computing / efficient data centres / throughput computing. Completely ridiculous offering at the time. Needless to say, I didn't even bother to set these up lest build a rack for them (my normal rack is both full and too short). If packaging weren't so annoying with computer servers I would've sold them long ago. [1] The good stuff. High static pressure, high flow fans from Delta with ball-bearings, and of course only speed monitoring, no regulation. These Sun servers make for excellent magnet boards for holding papers just without using any magnets.
whipoodle 9y ago
I also am familiar with the concept of markets.
agumonkey 9y ago
btw it there a name for studying the value of "price" ? or is it just economics ? the history of the difference between cost (material, employees) and sale price.
- ianai 9y ago
  I've got at least one book titled price economics. Basically that's a huge area in economics. There are both micro and macro contributions to price. It's also the one communicative factor between suppliers and demanders.
- RockyMcNuts 9y ago
  Price theory. Microeconomics… which is largely how a single actor makes a decision, whether to buy something or where to set a price, and how that leads to market equilibria when many people do that in some utility-maximizing manner.
  - agumonkey 9y ago
    Also, does this include the psychological effect of price ? selling at 0$ doesn't mean people will grab it, they might assume it's crap. Thanks nonetheless to both you.
    - yllaucaj 9y ago
      I think a question like that would fall under the umbrella of "consumer behavior".
    - dieterrams 9y ago
      Behavioral economics.
mtgx 9y ago
That's not always the case. Sometimes monopolies are born and the companies charge more money out of arrogance that there isn't anyone out there that can "truly" compete with them. But that same arrogance is often what ends up bringing them down. See Nokia and BlackBerry's arrogance in relation to the rise of the iPhone. They were still charging similar or higher prices than the iPhone for their flagships a few years after the iPhone first appeared, and with no touch features to speak of or anything close to an iPhone experience. The inertia of success definitely plays a role. For instance, BlackBerry was logically concluding that they "must be doing something right" a few years after the iPhone came out because their financials still looked pretty great, due mainly to the global expansion (the iPhone wasn't in that many countries at first, and Android still had single digit market share). So that's how they rationalized keeping their high non-competitive prices. I assume something similar is going on at Intel. They continue seeing a large influx of server buyers even with AMD's EPYC being out because of inertia - customers already deciding to buy Xeons in 2017 a few years ago - like say Google which bragged so much about being the first to get a Xeon Skylake. So Intel rationalizes this as "having no reason to reduce its prices, and in fact it could even increase them since it sees so much demand!" But that logic is going to hurt them a few years from now, when AMD or perhaps some ARM competitors like Qualcomm start becoming more established in the market and they've had a few years of "people hearing good things about their products." Right now the new AMD and ARM chips are untested and the majority of companies like to play it safe.
- Paianni 9y ago
  You're not really being fair on Nokia or BB; Nokia had an iPhone competitor when they added phone functionality to their Maemo 'Internet Tablet' OS in 2009, creating the N900. Sadly it had to compete with another in-house project to add multi-touch and HW acceleration to Symbian. After Nokia announced the merger of Maemo with MeeGo, they were unable to forge a clear way forward for their smartphones ever again. Blackberry took far too long to make touch devices their numero uno, from the Storm in 2008 to the Z10 in 2013. In the meantime they had to cope with a lacklustre platform, as just about everyone did until Android came around. They should also have cross-platformed BBM far, far earlier than they did.
kazinator 9y ago
Now is the only time you can charge premium for new chips. Nobody will pay that in a year or two. In five years it's on Craigslist, and in ten, it's ancient crap you find on motherboards pulled from machines thrown into the dumpster.
- fish_fan 9y ago
  Hey, my 2003 iMac still works as a great dns resolver. Of course so does a $5 raspberry pi.
  - TomMarius 9y ago
    There's also the huge difference in power consumption.
deleted 9y ago
[deleted]
phjesusthatguy3 9y ago
You lost me between Q's 2 and 3, and then gained me back in A3. Market segmentation happens when customers think there is a difference; it doesn't matter if the difference is real or not.

ajross 9y ago

That's really not what the article is about at all. It's talking about the history of the tech industry and associating this kind of price motion with "peak" revenue for given hardware products. Your same answer would apply to IBM's mainframes in 1990 and Sun's servers in 2001 too, and the point of the article is to associate Intel's current position with those products, which clearly reached peaks at those moments. Personally I don't really buy it completely either, but quipping "because the market!" as an answer is missing the point. The article is about what that market desire means for future revenue.

pjmlp 9y ago
Another example missing in the article was the graphics workstations with SGI.
- nwatson 9y ago
  I remember considering spending lots of student-budget money in 1993 for an SGI Indy (https://en.wikipedia.org/wiki/SGI_Indy https://en.wikipedia.org/wiki/SGI_Indy), a low-end graphics workstation from SGI. I think this was shortly before peak-SGI. I'm glad I didn't, because (a) PCs started to see impressive graphics performance improvements not so longer after; (b) I went to industry and ended up working in enterprise software instead. SGI market cap peaked in 1995, here's a HN discussion of a 1997 article of SGI's "Sad Saga": https://news.ycombinator.com/item?id=8462841 https://news.ycombinator.com/item?id=8462841 . They shifted focus to scientific/enterprise compute and storage after and dwindled away.
  - ajross 9y ago
    Exactly, and for pretty much the same reason. Once CMOS prices got to the point where 3D graphics acceleration (not SGI's only core competency, but pretty close revenue-wise) was desired at consumer volume, they were toast. NVIDIA had they beat on almost everything that mattered by 1998 or so.
    - reaperducer 9y ago
      I remember when my scientician friends started switching from SGI to multiple super-beefed-up Dells in the early 2000's. They could get five monster custom Dell machines for the price of one Octane or Indigo or whatever. And they delivered better performance. (Or so they told me.)
      - bluedino 9y ago
        There was about two or 3 generations of either PC hardware or software (Windows) not being able to handle what SGI hardware could, no matter what the price.
        f2f 9y ago
        Don't forget the nail in the coffin: the windows nt-based SGI workstation...
calimac 9y ago
I want to introduce the factor of Intel being protected against the chinese chip manufacturers possibley having an unintended consiquense of supressing state side competition. In general, I cannot imaging running an AMD processor in a flagship. Intel is an example of superior architecture and amazing developments with, most recently, the Core i productline, more impotantly, the most amazing, brand identity positioning i have ever experienced. AMD very possibly could work well; I will never know. ... No really, i have to go buy an AMD just to keep an open mind.
bsder 9y ago
One thing missing from the comparison to IBM and Sun is that precisely because those companies made things so expensive people started looking for alternatives. The ES/9000's were really good machines for the time. Had IBM not raped people on those, companies might have stuck with them for a little longer. The AS/400 was priced more reasonably and people loved those. You couldn't get someone with an AS/400 to move to a Unix workstation if you used a nuclear bomb. As for Sun in 2001, the problem was that they were so absurdly overpriced and underpowered that commodity x86 simply blew it away. If I didn't have direct knowledge of the dysfunction that was Sun at the time, you would have thought they were taking kickbacks from Oracle, Cadence, Synopsys, etc. to limit performance. (Explanation: Oracle, Cadence, Synopsys, etc. all had very expensive software packages that were licensed per processor core per year and effectively only ran on Sparc. So, the lower the performance of the processor, the more cores you needed and the more expensive your license to Oracle, et al.)
- ajross 9y ago
  Even the IBM machines were flagging in performance in 1990. That was the beginning of the RISC revolution, and all the benchmark records were being taken by MIPS (and later Alpha) boxes. It was a slower process than the Intel takeover[1] only because ECL logic was still available to expensive machines, allowing clock rates in the mainframe world to stay higher than CMOS chips even as their architectures got eclipsed. [1] Ironically on the back of a "CISC" architecture. What happened there was that CMOS density had gotten so high that the relative advantage of a RISC ISA (not architecture: every thing form the P6 onward looks like a pipelined RISC box on the inside) was just a pipeline stage or two and a 1% hit in the transistor budget for decode.
- dom0 9y ago
  I own two SPARC servers (a 2003ish V245 and a 2007 T5120) and both are rather ridiculous ... idle power draw for a V245 is like 240 W and just 150-180 W of that are the fans. [1] A T5120 draws some 180 W idle as well. Especially the latter was also heavily marketed as green computing / efficient data centres / throughput computing. Completely ridiculous offering at the time. Needless to say, I didn't even bother to set these up lest build a rack for them (my normal rack is both full and too short). If packaging weren't so annoying with computer servers I would've sold them long ago. [1] The good stuff. High static pressure, high flow fans from Delta with ball-bearings, and of course only speed monitoring, no regulation. These Sun servers make for excellent magnet boards for holding papers just without using any magnets.

whipoodle 9y ago

I also am familiar with the concept of markets.

agumonkey 9y ago

btw it there a name for studying the value of "price" ? or is it just economics ? the history of the difference between cost (material, employees) and sale price.

ianai 9y ago
I've got at least one book titled price economics. Basically that's a huge area in economics. There are both micro and macro contributions to price. It's also the one communicative factor between suppliers and demanders.
RockyMcNuts 9y ago
Price theory. Microeconomics… which is largely how a single actor makes a decision, whether to buy something or where to set a price, and how that leads to market equilibria when many people do that in some utility-maximizing manner.
- agumonkey 9y ago
  Also, does this include the psychological effect of price ? selling at 0$ doesn't mean people will grab it, they might assume it's crap. Thanks nonetheless to both you.
  - yllaucaj 9y ago
    I think a question like that would fall under the umbrella of "consumer behavior".
  - dieterrams 9y ago
    Behavioral economics.

mtgx 9y ago

That's not always the case. Sometimes monopolies are born and the companies charge more money out of arrogance that there isn't anyone out there that can "truly" compete with them. But that same arrogance is often what ends up bringing them down. See Nokia and BlackBerry's arrogance in relation to the rise of the iPhone. They were still charging similar or higher prices than the iPhone for their flagships a few years after the iPhone first appeared, and with no touch features to speak of or anything close to an iPhone experience. The inertia of success definitely plays a role. For instance, BlackBerry was logically concluding that they "must be doing something right" a few years after the iPhone came out because their financials still looked pretty great, due mainly to the global expansion (the iPhone wasn't in that many countries at first, and Android still had single digit market share). So that's how they rationalized keeping their high non-competitive prices. I assume something similar is going on at Intel. They continue seeing a large influx of server buyers even with AMD's EPYC being out because of inertia - customers already deciding to buy Xeons in 2017 a few years ago - like say Google which bragged so much about being the first to get a Xeon Skylake. So Intel rationalizes this as "having no reason to reduce its prices, and in fact it could even increase them since it sees so much demand!" But that logic is going to hurt them a few years from now, when AMD or perhaps some ARM competitors like Qualcomm start becoming more established in the market and they've had a few years of "people hearing good things about their products." Right now the new AMD and ARM chips are untested and the majority of companies like to play it safe.

Paianni 9y ago
You're not really being fair on Nokia or BB; Nokia had an iPhone competitor when they added phone functionality to their Maemo 'Internet Tablet' OS in 2009, creating the N900. Sadly it had to compete with another in-house project to add multi-touch and HW acceleration to Symbian. After Nokia announced the merger of Maemo with MeeGo, they were unable to forge a clear way forward for their smartphones ever again. Blackberry took far too long to make touch devices their numero uno, from the Storm in 2008 to the Z10 in 2013. In the meantime they had to cope with a lacklustre platform, as just about everyone did until Android came around. They should also have cross-platformed BBM far, far earlier than they did.

kazinator 9y ago

Now is the only time you can charge premium for new chips. Nobody will pay that in a year or two. In five years it's on Craigslist, and in ten, it's ancient crap you find on motherboards pulled from machines thrown into the dumpster.

fish_fan 9y ago
Hey, my 2003 iMac still works as a great dns resolver. Of course so does a $5 raspberry pi.
- TomMarius 9y ago
  There's also the huge difference in power consumption.

deleted 9y ago

[deleted]

phjesusthatguy3 9y ago

You lost me between Q's 2 and 3, and then gained me back in A3. Market segmentation happens when customers think there is a difference; it doesn't matter if the difference is real or not.