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1) Athlon XP performs better than the Pentium 4 in many applications, especially engineering and number crunching apps.
2) Intel is selling every Pentium 4 they make - manufacturers turn to the XP to help fill that demand, resulting in higher XP sales. If AMD sells the XP at a Pentium 4 price, manufacturers will still have to buy AMD chips and AMD will make a ton more money.
3) Issues like the thermal diode are being resolved. Quiet'n'cool technology on the new cores should put any further doubts to rest.
4) Non-enthusiasts equate price with quality. A higher priced Athlon will put AMD up there with Intel. It's high time AMD stopped marketing Athlon XP like a friggin' K6. :| >>
How about an argument more like this:
Here are top-of-the-line AMD prices picked randomly about 1 year apart.
"AMD-K6/233 processor is priced at $289" -
AMD July 1997
"AMD-K6/300 processor ... priced at $246 " -
AMD April 1998
"The 750MHz AMD Athlon processor is priced at $799 in 1,000 unit quantities." -
AMD November 1999
"The 1.1GHz, 1GHz, 950MHz, 900MHz, 850 MHz, and 800 MHz AMD Athlon? processors are priced at $853, $612, $460, $350, $282, and $215 respectively" -
AMD August 2000
"The 1.4 GHz AMD Athlon processor ... is priced at $253 in 1,000-unit quantities" -
AMD June 2001
AMD had great profits in 1999 and 2000 with processors selling around $800. AMD did not make much profit in 2001 with processors selling around $250.
Conclusion: AMD needs to raise prices.