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Intel slashes chip prices

Pushing to blanket the market with Pentium II technology, the chipmaker announces discounts across the board.

Intel, pushing to blanket the market with Pentium II technology, announced price cuts today across its line of chips.

"Continued strong acceptance of Pentium II processors enables Intel to aggressively ramp these products into higher volume price points," the company said in a statement.

After Intel introduced its "market segmentation" strategy--which targets chips for specific markets--earlier this year, price cuts are occurring on a monthly basis, an Intel spokesman said.

In other words, prices for chips in different markets are reduced at varying times, or staggered throughout the year. This, in general, results in one chip line being reduced one month and another the following month.

"Before it was a monolithic market segment...[before] we cut prices every three months...but now price changes happen at different times," he said.

Intel cuts processor prices
Processor Aug. 98 Price Sept. 98 price % Decrease
400-MHz Pentium II $589 $482 18%
350-MHz PII $423 $299 29%
333-MHz PII $316 $234 26%
300-MHz Celeron $112 $95 15%
266-MHz Mobile PII $444 $391 12%
233-MHz Mobile PII $262 $209 20%
266-MHz Mobile Pentium $241 $159 34%
233-MHz Mobile Pentium $134 $95 29%
Source: Intel
Some of the steepest price cuts announced today come in the meatiest part of Intel?s chip lineup. The 400-MHz Pentium II drops from $589 to $482, an 18 percent price decline.

The 350-MHz chip was slashed 29 percent from $423 to $299.

Intel said that PC manufacturers can take advantage of these prices starting today.

Both the 350 and 400 chips are now used in high-volume products. Compaq Computer, for example, uses the 350-MHz chip in its Compaq Presario 5170 which sells for $1,599 with a 10GB hard drive and 128MB of memory at resellers such as Computer Discount Warehouse and CompUSA, a major retailer.

Also, IBM, via resellers, offers an Aptiva consumer model E5D with a 400-MHz chip and an 8GB hard drive and 64MB of memory for $1,799 currently.

But new chip pricing could help to drive prices on systems like this down.

Prices for the Pentium II for notebook PCs, meanwhile, were also cut. The 266-MHz version was discounted to $391 from $444. This chip is now appearing in many midrange and higher-end notebook PCs, which are typically priced from $3,000 and up.

The 300-MHz Pentium II, just announced last week, is now used in top-of-the-line notebooks. These systems generally go for more than $3,500.

The Celeron processor, also based on the Pentium II architecture, stayed the same, except for the older, slower 300-MHz version which was cut from $112 to $95. The improved, faster 300A and 333 Celeron versions did not change in price.

The venerable Pentium MMX chips, still found in notebook PCs, were also slashed. The 266-MHz version fell from $241 to $159, a drop of 34 percent.

All in all, the price cuts indicates that pricing is getting increasingly aggressive.

"We believe the imminent improvements in the price/performance of PCs may represent the most aggressive increase in the history of the PC market," wrote Mark Edelstone, semiconductor analyst at Morgan Stanley Dean Witter. Strong demand, combined with changes in how computer vendors carry inventory, in fact, could lead to an end-of-the-year backlog of orders for PCs for the first time since 1994.

Intel is an investor in CNET: The Computer Network.