Let me just say at the outset that I don't disagree with your comments. I
would like to add some additional thoughts peculiar to the semiconductor
business. Again, some of this is not going to be 100% relevant to CPU's (or
to other businesses for that matter).
This is probably rare but has happened in the past. A different tactic is
used more regularly nowadays. (See Below)
Which, in general, would simply drive purchasers of that part to a
competitor.
This is a potential issue for any business, but don't forget that I'm
talking about 'end of life' parts and specifically about the semiconductor
business. There is the complication that continued support of a given part
may require continued support of an old technology. Supporting old
technologies may be more expensive, both in terms of money and resources,
than is economically feasible or prudent. Manufacturers frequently have to
move to newer technologies to keep up with customer requirements and
competitors technological advances. In fact, this happens frequently in the
semiconductor business. So much so, that manufacturers regularly notify
customers of impending manufacturing 'discontinuances'. These
'discontinuances' are often referred to as 'End of Life' notices. But your
correct in that they typically do not involve price increases per se.
(Customers are required to place final orders though.) Another complication
is that, in some instances, there is no competitor to turn to when the 'End
of Life' notice is issued. Furthermore, other manufactures may also want to
quit supporting old technologies so that they will issue 'End of Life'
notices on their equivalent parts as well. This is relevant here because I
believe that Intel will not attempt to support both cores for an extended
period. Intel wants to move all it's production capacity to the new
processes and will stop producing Northwood cores as a result of this
desire. Prescott, and the associated newer manufacturing processes, is
their future and continued production of Northwood cores wood use resources
better applied to making Prescott cores. So, you can see that making
Prescott cores less expensive may be viewed by Intel as an enticement to
get their customers to use Prescott cores. Since there are no second
sources for Northwood cores that is not an issue here. (I think they
probably disregard losses to AMD processors since they probably believe
they have a good alternative to Northwood core CPU's, namely the Prescott
core CPU's and so losses would be insignificant or none existent.)
The problem with your theory "supply dwindles while demand does not"
is that no one in their right mind is going to ramp down production
while demand remains robust and profitable. It flies directly in the
face of "supply and demand."
Very true, but again, in the semiconductor industry, supporting an old
technology may be more expensive than not. Particularly if a manufacturer
sees more profit in another (newer?) technology or part. In this case, I
believe that a manufacturer may feel that resources should be moved to the
newer technology or part. I do believe however that your argument is valid
in that some 'end of life' notices, and therefore, 'end of technology'
notices have been delayed, perhaps for years. In some cases industry
customers have managed to exert great influence on manufactures, by keeping
demand high and being very vocal in their discontent, on some very mature
technologies. Many manufacturers and industry reporters have been proven
wrong, time and again, for the very reason you state, but many mature
technologies have gone the way of the Dodo as soon as manufacturers could
get away with it.
The classic notion of supply vs demand price fluctuation is fine, and
appropriate, as long as everything else remains the same (and the
market is elastic) but, in the real world, they seldom, if ever, do.
In particular, prices can go up in a 'perfectly matched' supply vs
demand market if demand (and the matching supply) is decreasing
because the economies of scale are lost. And, just as economy of scale
often increases demand because more can buy at a lower price, losing
it can depress demand as the price increases; which is probably what
leads to the fanciful notion that it's 'purpose', rather than natural
result, is to "discourage continued use."
Good point, but how natural is it when a manufacturer decides to ramp down
production in the face of steady demand. As I said previously, Intel does
not want to support both Prescott and Northwood at the same time. Northwood
is last years model and as such is a resource drain and a hindrance to
forward progress. But realistically, I don't know if its Intel or the
retail vendors pricing choices causing the Northwood prices to be higher
than the Prescott prices. I think that it is probably the retailers
smelling a little extra profit to be had.
To wit, manufacturers would love to build the same thing forever
because it's predictable. You know how it works, how to make it, what
the costs are and all the rest whereas the 'new' thing is full of
development costs and unpredictable problems. But you can't just keep
making the same old thing because Mr. Competitor will come out with
his 'new and improved' version to take market share so you have to
have your 'new and improved' version in the works to keep even, or
maybe take HIS market share. And that means, eventually, your
manufacturing is going to transition to the 'new and improved'
version
because that's what people will be buying (unless you screwed up). In
the process you're losing sales volume (people want the 'new and
improved') and economies of scale on the fading product till it just
isn't worth making any more. In practice you try to predict the
timing
of that transition in your business plan so, as Murphy would have it,
there may be unusual, transitional, 'bumps' along the way, resulting
in price oddities, if things don't pan out precisely as planned but
you don't just arbitrarily dump a profitable product.
Of course not, but sometimes the march of technology demands resources, and
resources have to come from somewhere. You can't just keep adding a new fab
every time something new comes out; and again, Intel wants Northwood to go
away. Again, more profit may lay with the newer technologies than the old
so, 'Out with the old and in with the new.'
Now, if you folks would quit buying the 'new and improved' versions
and be satisfied with P233MMXs and 32 Meg of RAM SIMMS running Windows
for Workgroups 3.11 we wouldn't have this problem
You are so right, but I must admit I have yet to use a computer that I
thought was fast enough. Microsoft will probably make it impossible for
that to happen, bloat ware and all. At least I have stopped at a PIII-733,
for now anyway.