Intel Corporation's New Core i7 Gaming Chip Shoots to Top of Sales Charts

By Ashraf Eassa Markets Fool.com

On January 3, microprocessor giant Intel (NASDAQ: INTC) released a new family of computer processors, branded seventh-generation Core, aimed at desktop and notebook personal computers. Among the new chips were three chips targeted explicitly at gamers and personal computer enthusiasts: Core i7 7700K, Core i5 7600K, and Core i3 7350K.

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Image source: Intel.

Although the Core i3 7350K isn't widely available yet, the Core i5 and Core i7 models are. The new Core i7 7700K is off to a strong start among those who build and upgrade their own computers, topping the best-selling processor lists on Amazon.comand Newegg.com.

The lower-end 7600K occupies the second-place spot on Newegg's best-sellers list; it's eighth on Amazon's, but Amazon is currently out of stock of those chips, which is likely artificially depressing its ranking on Amazon's list right now (it's updated hourly).

What does this mean for Intel? Let's take a closer look.

Business as usual

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One thing that has helped Intel combat declining industrywide personal computer sales has been aggressive segmentation actions designed to convince consumers to buy higher up in its product stack. This means even in a market in which people are buying fewer personal computers than they did last year, they're buying computers packed with more expensive processors than they did before.

This phenomenon hasn't always been enough to completely offset the unit declines, though. In 2015, for example, Intel saw notebook processor shipments plunge 9%, but average selling prices grew just 2%. Desktop processor shipments dropped by 16% in 2015 -- a huge decline -- but average selling prices were up 6%, partially offsetting that decline.

Year to date, Intel is seeing a similar phenomenon in a stronger unit environment: Notebook platform volumes have dropped 1% as average selling prices rose 2% (so in that time, notebook chip revenue for Intel is actually up); desktop platform volumes declined by 5%, partially offset by a 2% increase in average selling prices.

The fact that the $350 7700K seems to be off to a better start than the $250, less powerful 7600K suggests that demand -- at least among those individuals who build and upgrade their own computers -- continues to shift to higher-end chips.

There is a limit to this mix-up among enthusiasts, though

Interestingly, although the 7700K is at the top of the best-seller list, with the 7600K right behind it (at least on Newegg.com) -- suggesting a consumer affinity for higher-end chips -- Intel's high-end desktop chips don't seem to be enjoying anywhere near that level of success.

For example, the Core i7 6800K -- Intel's cheapest six-core desktop processor at $424 -- is way down on Newegg's best-seller list, at position 20. The higher-end six-core, as well as the eight- and ten-core Intel desktop processors (which sell for about $1,100 and $1,650, respectively) are much further down the list.

Part of the problem for Intel, here (aside from the fact that these chips are simply pricier), is that these higher-core-count chips require more expensive motherboards, and memory modules need to be bought in packs of four, rather than packs of two for the mainstream 7700K and 7600K chips.

The high-core-count Intel chips also utilize previous-generation processor architectures and run at slower clock frequencies out of the box, meaning per-core performance on these higher-core-count chips is lower than on the lower-core-count chips.

In other words, for applications that can't take advantage of lots of cores (like most consumer applications), the cheaper 7700K and 7600K chips are simply going to be better solutions -- both in absolute terms (for those workloads) and in terms of performance per dollar.

It would be interesting to see what impact, if any, Intel would see on its desktop chip product mix, particularly when it comes to sales of chips directly to consumers (not through personal computer sales, which represent the bulk of chip sales), if it were more aggressive in driving up the per-core performance of its high-core-count chips.

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The author(s) may have a position in any stocks mentioned.

Ashraf Eassa owns shares of Intel. The Motley Fool owns shares of and recommends Amazon.com. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.