Intel says began retaking China share in Q2

SHANGHAI, July 24 (Reuters) Intel Corp., the world's largest chip maker, said on Monday it began winning back market share in China from rival AMD in the second quarter, reversing two years of steady losses.

Intel is using a two-pronged strategy of lower prices and new products -- most notably a new generation of dual-core processors -- to regain share in China from Advanced Micro Devices (AMD), Ian Yang, Intel's Asia Pacific chief, told Reuters.

The strategy began paying off last quarter, with the company winning back 1.5 percentage points of share over the three months to the middle of the second quarter, Yang said, citing third-party data.

''We're on the right track,'' he said. ''The trend has been reversed by the midpoint of the second quarter. We're looking even more bullish in the second half.'' Intel last week reported an unusual 13 percent dip in second-quarter revenue from a year earlier, including a 14 percent drop in Asia, excluding Japan, as it pushed down prices to compete with AMD.

Within China, Intel -- which previously dominated the market for central processing units (CPUs), the brains of every computer -- has been losing steady share as AMD struck deals over the last two years with most of China's top PC sellers, including market leaders Lenovo Group Ltd. and Founder Group.

The company also sells in China to Hewlett-Packard Co., the world's number-two PC seller.

As AMD advanced, its share of the China market rose to 25 percent in the first quarter of this year from just 16 percent a year earlier. Intel's share, meantime, dropped to 74 percent from 84 percent over the same period, according to data tracking firm International Data Corp.

IDC has not released figures yet for the second quarter.

China is the world's second-largest PC market, with 19 million units shipped last year, and that figure is expected to grow by 18 percent this year, according to IDC. But it is also fiercely competitive, with frequent price wars.

Yang would not comment on Intel's pricing strategy in China, but said it was consistent with the rest of the world.

Analysts say Intel has cut prices on its chips by as much as 50 percent to better compete with AMD, which was once considered an Intel follower but has recently emerged as an innovator in its own right.

''You can tell from our second-quarter earnings that because of the ... competitive nature of the marketplace, that our revenue was affected because of lower average selling prices,'' Yang said.

''At Intel we need to be competitive. That's a key.'' REUTERS SBA RN1710