Intel’s new Scalable Xeon branding is just a price increase

How to publicly justify jacking your biggest customers

Intel - logoIntel’s new Xeon branding is nothing more than an unprecedented price hike on large customers. While SemiAccurate thinks the Scalable name and the Silver/Gold/Platinum naming is pointless, it is nothing more than a distraction.

On the surface the new Intel Xeon branding, and the new Xeon pricing which they haven’t revealed yet, is not going to change much. This is because the MSRP for the line is almost meaningless, the number of Xeons the company sells as boxed parts to the public is negligible. List pricing for server products has about as much meaning as modern political promises, the two rarely intersect with reality for more than fleeting moments in time with very specific bounding conditions.

SemiAccurate told you the details on Xeon pricing for the big guys, what Intel calls the “Super Seven +1”, a few years ago. The short version is that the big players in the top volume tier all have bespoke price lists that are updated quarterly. These prices are NDA’d and the running joke is that it is to prevent the competition from knowing their costs. Instead it simply means the players can’t actually negotiate pricing but they all pay the same in any case, the end result is within a few dollars of one another. This is more because of governmental consent decrees than any capitalistic pressures.

What the big boys and girls pay is a small fraction of the list prices for Xeons. With MSRPs for volume SKUs running from $1500-$3500 or so, last time SemiAccurate looked, none of the tier 1 customers paid four digits for a CPU. Until Haswell these quarterly prices increased about 2-3% a year or about .5-.75% a quarter. The changes were steady and regular, again until Haswell. At that generation prices increased by ~8% a year and the megadatacenters were a bit less than pleased at this change.

Since made Haswell the 2-3% a year price increase cadence history, things haven’t gotten better for customers. The prices increases have gone steadily up from the 8% to heights unseen since the last bump. How bad is it? The rule of thumb is that prices go up by a percentage that is roughly half the performance increase. That is the Intel claimed price increase mind you, not what a customer actually sees. As of late Intel’s claimed performance increases seem to be more an exercise in precision selective benchmark quoting, than reality.

Customers were not happy about this progressive squeeze and the ones SemiAccurate talked to all claimed to have vocally complained over the years. Intel replied with a variant of, “What are you going to do, not buy CPUs?”. This festering sore of a relationship went on for some time until mid-Q4/2016 when Intel dropped the bomb with the new Scalable Silver/Gold/Platinum pricing. This ‘branding change’ is nothing more than a way to publicly justify a price increase that is more than an order of magnitude for many, it is unprecedented. Worse yet is the rather clever but insidious pricing mechanisms that Intel has inflicted on their customers who are actually doing something about it this time.

Note: The following is for professional and student level subscribers.

Disclosures: Charlie Demerjian and Stone Arch Networking Services, Inc. have no consulting relationships, investment relationships, or hold any investment positions with any of the companies mentioned in this report.

Note: The following is analysis for professional level subscribers only.

The following two tabs change content below.

Charlie Demerjian

Roving engine of chaos and snide remarks at SemiAccurate
Charlie Demerjian is the founder of Stone Arch Networking Services and SemiAccurate.com. SemiAccurate.com is a technology news site; addressing hardware design, software selection, customization, securing and maintenance, with over one million views per month. He is a technologist and analyst specializing in semiconductors, system and network architecture. As head writer of SemiAccurate.com, he regularly advises writers, analysts, and industry executives on technical matters and long lead industry trends. Charlie is also a council member with Gerson Lehman Group. FullyAccurate