29-Industry Leader Preempts the Low End of the Market

Over the long term, most industry leaders are likely to fail. You can see this in analyses of the Fortune 500 or the S&P 500 over 20 to 30 years. Think of companies like GM, Sears, Howard Johnson’s, GE and others. You may wonder how this happens. Here is a story of how one dominant industry leader has failed.

Posted 6/19/08

Recently, Intel announced the Atom chips. These chips are inexpensive, built for ultra-cheap desktop or portable computers called Nettops and Netbooks. The Atom chips for Nettops cost $29 each, while those for the Netbooks will sell for $44. These are both Price Leader products.

In our analyses of price points, we have identified four separate price points in the marketplace. (See: “Why Do Leaders Lead?” in StrategyStreet.com/Tools/Perspectives) Three of these price points appear in most markets:

• The Standard Leader price points are those that command the middle of the market. They set the standards for all products offered in the market.

• At the high-end of the market, the Performance Leader products occupy the premium-end of the market, with prices starting at 10% over the Standard Leader product. These products offer more performance in the form of Features, Reliability and Convenience than do the Standard Leader products in return for a much higher price.

• At the low-end of the market live the Price Leader products. These products offer fewer benefits, lower performance, than the Standard Leader products. Their prices must be much lower to make up for that. Most Price Leader products have prices at least 25% below those of the industry Standard Leaders.

These price point categories apply to both products and companies. For example, a Standard Leader company will often offer a Performance Leader product in addition to its Standard Leader products.

By introducing a Price Leader product, the Standard Leader company, Intel preempts the low-end of the market. Its main rival, Advanced Micro Devices, Inc. (AMD), might have had an opportunity at that low-end but its unique opportunity has passed it by. AMD will inevitably introduce a Price Leader product in order to continue offering a broad product line, but it will probably not gain much market share from the introduction.

In an unusual move, Intel is ahead of its major customers on this product. Hewlett-Packard and Dell, the two leading U.S. producers of personal computers, had yet to introduce their full lines of Nettops and Netbooks. Instead, some of the industry’s followers dominate these Price Leader computers.

Intel read the tea leaves correctly. Congratulations on an astute innovation.

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Update 2022:

According to Gartner, Samsung Electronics ranked first in 2021 market share in the worldwide semiconductor market with 13.0%, followed by Intel at number two with 12.5%.  AMD ranks 10th at 2.7%.

In 2011 Intel and Google formed a partnership to provide support for Google’s Android operating system for Intel processors, beginning with the Atom.  Intel’s partnership product competed against products from Texas Instruments, Nvidia, QUALCOMM and Samsung.  In 2016 Intel discontinued its participation in that market.  In 2022 the Atom product line was still at the bottom of the Intel product family.  The product’s capabilities have improved over time.  Some can even be found in office PCs.

No industry leader who wishes to hold its leadership position can afford to leave a Price Point product opening to competitors. See what we mean HERE

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Update 10/25

The story of Intel and AMD in the market for low-end chips in the late 2010s, is one of continued Intel dominance. The last 10 years tell a very different story. AMD is surging with impressive results. Intel, on the other hand, is a fading star and is in real danger.

Intel developed the Atom chip, to serve the low-end user market, products like Netbooks and Nettops. This Atom product was successful as it rode the growth of these low-end mini PCs from 2007 until 2011. By 2011, these two products largely disappeared with the onslaught of compact PCs, iPhones, tablets and streaming boxes. The Atom chip declined with the demise of these two products but still survives as a low end component in servers and embedded systems. As expected, AMD produced its own low-end competitor to the Atom chip. AMD’s response was lackluster and gained little share. The company appeared hopelessly behind technically and resigned to being a distant number two to Intel. But then things changed… Radically.

First, Intel began to stagger. It was slow in matching the innovation cycles of the industry leaders, a Function failure. As a manufacturer, it struggled to produce the smaller nodes required for higher performance semiconductors, a Reliability failure. It began to bleed market share. In 2015, its market share was about 26%. By 2025, its share had fallen to 18 % and still carried momentum in the wrong direction.

Intel certainly caused much of its own problems, but the industry trends moved against them as well. Intel has been producing for semiconductor markets that have relatively slow growth. Today’s market sees far greater growth in the ARM-based chip architectures and in Apple’s M series chips. Much of the industry has also shifted to fabless business strategies. Asia now produces more than 50% of the modern world’s semiconductors. The dominant leader here is TSMC, which produces semiconductors for many semiconductor companies, including AMD.

AMD has taken admirable advantage of Intel’s failures. In 2017, the company introduced two products, the Ryzen and the EPYC CPUs. These two products offered very high performance for pricing below that of Intel. AMD maintained its traditional Price Shaver pricing approach with these products. It has then ridden them and new GPU products to impressive success. Its CPUs now control 25% of the x86 CPU market. Its revenue has grown with the fast-growing overall market. In 2025, it is a profitable company while Intel loses money. Its stock has grown at an analyzed rate of 58% a year over the last 10 years. Intel stock has increased at 4 ½% a year during the same time. More surprising, AMD’s market cap in 2025 is more than twice that of Intel, at $262 billion versus $105 billion. The worm surely has turned. Intel is still suffering and in trouble.

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