These days, microprocessor giant Intel (NASDAQ: INTC) forces gamers and other personal computer enthusiasts to make a tough choice when picking out desktop processors. Intel offers PC gamers chips with four incredibly fast processor cores ("mainstream desktop"), and it also offers them chips with between six and 10 processor cores ("high-end desktop"), but each of these cores is much slower than the four-core chips.
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The six- to 10-core chips also cost much more than the four-core chips do, as well.
Although Intel does not provide sales data by individual chip model, I have a strong suspicion that even gamers with very deep pockets often opt for the super-fast quad-core chip rather than go for one of the more expensive chips.
Image source: Intel.
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After all, since most games can’t really take advantage of more than four cores, why should a gamer pick a chip with a lot of slower cores when the one with fewer but faster cores for cheaper will enable a superior user experience?
This is one of the reasons that Intel’s high-end desktop product lineup (the expensive six- to 10-core chips with relatively slow cores) has usually been somewhat of a "niche" among gamers.
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Going forward, considering a recent announcement from the chipmaker, I believe that Intel’s high-end desktop processors will become much more attractive by remedying the problem that I outlined above.
Data center first could mean high-end desktop first
Intel’s previous product development methodology was "personal computer first, data center second." Since Intel’s mainstream desktop chips are designed first and foremost as personal computer chips (the same basic designs are used in high performance notebook computers as well as desktop computers), they have historically gotten all the technical goodies first.
Indeed, the mainstream desktop chips have generally had Intel’s most advanced processor cores built using the company’s most advanced chip manufacturing technology. The high-end desktop chips, which are based on the chips that the company designs and sells into the data center, tend to not represent Intel’s best — at least in ways that matter to consumers.
The data center parts have generally been a generation behind in both processor architecture and manufacturing technology relative to the mainstream desktop/notebook processors. Now that the situation is going to reverse going forward, the high-end desktop chips should have the best processor cores and be built using the best manufacturing technology.
Once Intel’s product development methodology change flows through to products in the marketplace, then I wouldn’t be surprised to see enthusiasts and gamers gravitating more to the high-end desktop products, as they will represent Intel’s best, while the mainstream desktop chips will represent older, less desirable technology.
Potential impact on Intel’s business
If what I expect to eventually play out does in fact happen, it would probably manifest itself in Intel’s financial results as a mix shift to higher-performance/higher-priced gaming products.
To the extent that Intel can drive a richer mix of products, the company should see both revenue (same number of units sold, but the ones that do sell are higher priced, on average) and profit improvements (even at fixed gross profit margin, higher revenue means higher gross profit dollars).
This transition isn’t going to happen overnight, though. Remember that Intel said that its data center products won’t take the manufacturing lead from its traditional client personal computer products until it rolls out its third-generation 10-nanometer manufacturing technology.
Considering that, don’t expect Intel’s high-end desktop products to become the company’s unequivocally bestproducts in terms of core performance and manufacturing technology until, perhaps, the middle of 2019.
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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.
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