Yahoo Finance Intel's Gaming Chip Shortage Seems to Be Easing
Intel (NASDAQ: INTC) announced its first 9th Gen Core processors for the gaming desktop PC market back on Oct. 8. This lineup consisted of three chips: Core i9-9900K (which Intel touted as the "world's best gaming processor") as well as the lower-end Core i7-9700K and Core i5-9600K parts.
It's no secret that, at least in the do-it-yourself market, these parts -- particularly the Core i9-9900K and the Core i7-9700K -- have been difficult to find for a while. The tech website Tom's Hardware pointed out in an Oct. 23 article that "[the] new 9th generation Intel Core processors have been plagued by high prices and a lack of stock at major computer hardware retailers around the U.S."
Image source: Intel.
The website further noted that "[consumers] who want to pick up a new Core i9-9900K or Core i7-9700K today have no alternative but to pay a hefty premium over Intel's recommended customer pricing."
A recent check of several online retailers shows that while street prices of these parts are still significantly above Intel's recommended customer pricing (RCP), those prices have come down a bit, and availability appears to be much better. Amazon.com, for example, has the Core i9-9900K in stock for $534.99 now. Newegg.com has the part for $569.99 (although the site is limiting sales to one per customer.)
Now that availability of these parts seems to be more consistent (and pricing is improving), the Core i9-9900K is the third-best-selling desktop CPU on Amazon -- and its cheaper sibling, the Core i7-9700K, is the fourth. (The best-selling product is actually Intel's last-generation Core i7-8700K, which is selling for $1 shy of the high end of the company's RCP for the product.)
Here's why this improved availability situation is a good thing for the chipmaker.
These are high-value products
It's no secret that Intel has been forced to deal with a situation wherein total demand for its processors has exceeded its available supply. To cope with that, CFO and interim CEO Bob Swan said on the company's most recent earnings conference call that "we're prioritizing the production of our Xeon and Core processors so that we and our customers can serve the high-performance segments of the market."
The idea here is simple: In a situation where demand for Intel's silicon outstrips supply, it makes sense for the company to focus on producing its highest-value products. Intel's gaming-oriented processors clearly fall into that category (since these chips are sold under the company's Core i5, Core i7, and Core i9 branding), so it's good to see that these parts are getting the attention they deserve.
Indeed, as a result of that prioritization, Swan told investors that in the fourth quarter, "We expect [average selling prices to be better], and that's going to be a little bit of a function of the prioritization of Xeon and Core processors, which are higher [average selling price] mix, so we expect that to benefit us."
Better to have the revenue than not
This one might seem obvious, but since the availability situation is improving, this suggests that the company's supply of these products is increasing. That, quite simply, translates into greater revenue and, ultimately, profits for the company's biggest business, the client computing group (CCG).
Another thing to keep in mind is that as supply further improves, street pricing should continue to converge on Intel's RCP. If we assume that the relatively high street pricing on these parts is due to Intel's partners jacking up prices in accordance with the current supply-to-demand situation, then greater supply should mean lower street pricing for these parts, ultimately leading to an improvement (all else being equal, of course) in Intel's shipments of these parts.
Ultimately, if there are people ready and willing to hand you cold, hard cash for your products, it's better to be able to meet that demand than to not.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.
