29-Industry Leader Preempts the Low End of the Market
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 market place. (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.
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.
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 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.
THE SOURCES FOR STRATEGYSTREET.COM: For over 30 years we observed the evolution of more than 100 industries, many hostile. We put their facts into frameworks applicable to all industries and found patterns. Strategystreet.com describes the inductive results of these thousands of observations and their patterns.