05 January 2006

More on Intel Mac pricing...

Paul Guinnessy posted a comment on the "Pricing" Myth/Reality earlier this week which pointed out the difference in R&D spending between Apple and Dell. His view on pricing was not to expect any reduction at all.

As CES proceeds this week, Apple fans have much more to watch than usual. Intel have announced prices and specific availability for Yonah chips (nicely summarised here, but without pricing on older chips). And, as a comparison to what Apple will be offering we have the first specifications of a Yonah-powered laptop from Acer - the Acer Travelmate 8200.

Now, there's lots you can draw upon here if you believe as Paul and I do that Apple is not about to become a low-margin computer company. Forget for a minute the absolute price listed. It's not what Apple or any mainstream manufacturer will be paying. Instead look at the relative price of the chips within the new family and also compared to older chips. Then let's take a look at a manufacturer like Acer who use many of the chips today, and see how they price up their machines.

The cheapest chips I could find in Intel's list were the following:
Intel Celeron M mobile 350/350J. These run at 1.3GHz and are listed at $86, moving up to the 370 running at 1.5Ghz and listed at $107. These chips are used in many low-end machines today. The cheapest Yonah-based chip is the T1300 single core listed at $209. The first dual core is listed at $241, and the the first low voltage variant (dual core) is at $284.

I then looked around the Acer catalogue for machines which used some of these chips. Remember, Mac mini pricing starts at £306 with the iBook at £595 today. I came across the following models (though the catalogue is large and this analysis is cursory):

1. Aspire 3610 range starting at £449 using the 370series chip (listed at $107)
2. Travelmate 2403 14.1" starting at £469 and again using the 370 series chip
3. Aspire 5500 a 14.1" model using the M740 chip starting at £749
4. Aspire 1652 a 15.4" model using the M740 Centrino starting at £649 (Intel list price $268)

I couldn't find any 12" displays from Acer, so most models are either 14.1" or 15.4". Nevertheless, using a ratio of Final list price to Intel chip price gives a ratio of between 4.2 and 7.4. i.e the list prices range between 4.2 and 7.4 times the price of the chip used. The higher ratio tends to fall on the cheaper machines not surprisingly. But let's apply those same ratios to the current iBook pricing of UK £595. That gives a possible chip budget of between $141 and $248. So, unless Apple has some other big economies that Acer doesn't (highly unlikely) the best that we can expect is a chipset costing around $248, but most likely less.

The only chip that falls in that category is the T1300 at $209. And that's not in the Centrino format which costs $274. The cheapest dual core chip is the T2300 at $241 but again without Centrino. Note also these are not the LV (low-voltage) or ULV (ultra low voltage) chips. The LV chips are more expensive and not available (yet) as single core.

So, on that basis, if we get an Intel-based iBook it will most likely be a single core variant even just to preserve today's pricing ratio. Not only that, because it will not be a LV variant, we shouldn't expect this machine to be significantly smaller or with much better battery life than today's model - just faster.

Now an alternative approach to this bottom up method is to look at the Acer Travelmate 8200 spec. Here we see a fairly bulky machine - at 6.6lbs. It's got a very good spec indeed and it uses the T2500 chipset - around $488 list. So, this is a pro machine in pro-pricing area. I have not been able to find list price for this machine as it is not formally announced, but I would expect it to be in Powerbook territory. An iBook using a similar chipset or the LV dual-core chipset will be similarly expensive.

Looking at the other parts of my myth/reality series, this actually fits together nicely. The new iBook will be a good machine indeed benefiting from the improvements in Yonah chips over predecessors and in Mac OS X being faster on Intel. But it will NOT be a dual-core performance star that decimates the Powerbook quite yet. It will however put even more pressure on the PB range (after all the GHz difference today is just 1.33 to 1.5 - historically low). And, Apple's competitors will be in a position with dual core machines to heap further pressure on that range. So, I still think there is a chance we can either have an iBook+ or a new mid-range notebook that does use dual core and tides most people over until Merom chips arrive later in the year and provide a dual core 64bit Powerbook. Perhaps if Apple also made use of the low-voltage dual core (L2300) this would allow a smaller form factor and new design to be introduced.

As for the Mac mini, well, the conclusion is little different. Today's machine runs chips (and indeed the whole motherboard) similar to the iBook. Expect nothing more than the T1300 single core in the low end models, and even that is a squeeze price wise. Perhaps there'll be a larger range allowing dual core chips to be used. But here again, I wonder if the mini form factor will require the low-voltage chips if it is to remain quiet. Perhaps a super-mini aimed at media centre usage would utilise this model.

And finally, my thoughts on Firewire on these machines for what it's worth. The mood recently seems to have swung against firewire being dropped from any model. I've predicted the death of firewire, and I still do. Though I should perhaps be specific - this will be a drawn-out affair. I do not expect Apple to drop Firewire from all Intel machines. But I do think they would be wise to drop it from the base mini and iBook models if they can squeeze a couple more USB ports in, and offer something else and/or reduced pricing. With the imminent arrival of wireless USB, firewire will offer little advantage to the target market (with the exception of those with certain camcorders, older iPods, and iSight cameras). They will get no credit in mainstream reviews for having Firewire, so why bother except to incur the wrath of those who can't see when is the right time to let go (and who mostly buy the higher end machines anyway)?

In conclusion, this analysis is not exhaustive and does not benefit from either insider knowledge of factors or indeed any expert knowledge at all! The primary assumption is that Apple operates in a competitive hardware market in which it is governed by most of the same forces as its competitors (chip prices, LCD prices, RAM, disk etc). These are the best guesses I can make based on what is publicly available. But if I am even remotely correct on these points, I maintain that the hype level has already exceeded what can and will be delivered, and the famous SJ "Reality Distortion Field" will need to operate in hyperdrive to satisfy the troops. Can he pull something out of the hat that no one is expecting? Personally, I think these are solid steps for Apple on a complex and tricky migration on which they already seem to be ahead of what they publicly announced. But I'm not so sure everyone else will feel so positive.

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