Intel on Monday is set to launch its fastest processor to date, a 1.7GHz Pentium 4, and said it plans to greatly reduce prices on the rest of its Pentium 4 chip family later this month.
At $US352 in bulk quantities, analysts noted that the price of the new processor is unusually low for a new Intel chip. By contrast, its current fastest processor, the 1.5GHz Pentium 4, carried a list price of $US637 in March, although that price will be slashed to $US256 in an aggressive round of price cuts that will take effect April 29, Intel officials said.
The lower prices aren't unexpected, and reflect a desire on Intel's part to crank up sales of its high-end Pentium 4 products, said Dean McCarron, an analyst with Mercury Research.
"When you see [the prices] in the context of Intel really wanting to get Pentium 4 volume up there, it makes a little more sense," McCarron said.
The price reductions won't necessarily lead to cheaper PCs, but should allow end-users to get their hands on a Pentium 4-based system for about the same price they would previously have paid for a Pentium III machine, McCarron said.
"In a $US1,100 PC, when you would have gotten the Pentium III, you'll now be able to get a Pentium 4," he said.
The usual vendors are expected to offer PCs based on the newest chip, including Dell, NEC, Hewlett-Packard, Compaq, and IBM, Intel said. It wasn't immediately clear when those systems will go on sale, but some were expected to launch Monday.
In terms of clock speed, the new Pentium 4 widens Intel's advantage over its chief rival, Advanced Micro Devices, whose fastest Athlon processor available today runs at 1.33GHz. Clock speed is only one measure of a chip's performance, but it's one that many shoppers pay close attention to. AMD beat Intel to the 1GHz mark just over a year ago, but Intel has clawed back.
In other price reductions that will take effect April 29, the 1.4GHz and 1.3GHz Pentium 4s, which are priced today at $US375 and $US268, respectively, will both fall to $US193, Intel said. Putting the same price tag on the two slower Pentium 4s is Intel's way of killing off the slower chip and keeping its chip lineup lean, McCarron said.
"It's an incentive to get you to buy the new (1.4GHz) one," he said. "It basically kills off the lower-priced device really quickly."
AMD may not be forced to respond with price cuts of its own, although it's rumored to be planning such a move, McCarron said. If AMD does cut prices it will likely be only on its fastest chips, he said.
Intel downplayed the depth of the price cuts, and said the new 1.7GHz chip will help users to embrace what it calls the "extended PC." The concept sees the PC as a kind of digital hub that's used for storing, exchanging, and viewing content from devices such as MP3 music players and digital cameras, and the faster processor makes it easier to create and manage such content, Intel said.
"Each of these usage models is drawing the PC into the center of the digital world," Anand Chandresekher, vice president and general manager of the Intel Architecture Marketing Group, said at a press briefing Friday.
Chandresekher also said Intel has been enjoying "good yields" with the Pentium 4, which means its manufacturing process is doing a good job of producing the chips. The company is making Pentium 4s at five fabrication plants today, and plans to increase that number to seven by year's end, Intel said.
But in the wake of free-falling first-quarter revenue, Intel's primary strategy will be to get discounted Pentium 4 chips promptly into affordable PCs. It remains to be seen, however, whether bargain-basement Pentium 4 chips can rekindle sluggish PC sales, as both consumers and businesses have cut PC spending to weather the economic slowdown.