The company said it found problems with Pentium III computers containing a chip called the "memory translator hub" (MTH). The MTH is malfunctioning because of system noise, or internal computer signals. The flaw with the MTH can cause computers to freeze up or reboot. Customers can download a utility from an Intel Web site to test if their computer contains an MTH.
News of the problem drove Intel stock down more than 9 percent, or $10.69, to $106.25.
Arcane as it sounds, the MTH has emerged as a fairly important piece of silicon. The chip allows computer makers to combine Intel's 820 chipset, the company's latest and fastest, with standard memory in a computer. The 820 chipset was created to "speak" to more expensive, and often difficult-to-find, Rambus memory. The MTH, released in November, effectively allowed computer makers to cut out the expense of adopting Rambus memory.
Dean McCarron, principal analyst at Mercury Research, has estimated slightly less than a million PCs with the 820 chipset and the MTH have been shipped.
Unfortunately for Intel, the fix won't be cheap. Intel has offered to replace the motherboards inside all computers containing the MTH, as well as replace the current memory with Rambus chips.
In a worst case scenario, replacing the motherboards alone may cost $100 million, speculated McCarron. Swapping out ordinary memory with Rambus memory, however, will likely raise the cost considerably. Rambus memory costs around three times as much as standard memory. Some analysts estimate Intel has set aside reserves totaling several hundred million.
"We know that the number of PCs with this particular configuration is less than 1 million," said Intel spokesman Michael Sullivan, who reiterated that affected consumers will be able to get a new motherboard and new memory on request. It won't just be a simple motherboard swap. "If we had a different MTH today, we could do that."
Intel, which is setting aside funds related to the cost of the motherboard replacements, said the final amount of the cost reserve could be "material" to the company's financials.
System noise problems with the hub can cause some computer systems to reset or reboot as well as potentially cause data corruption, the company said in a statement. Intel said systems shipped before November are unaffected by the noise issue. Systems already containing Rambus memory, or other chipsets, are also unaffected.
The company said customers can contact PC makers for more information.
In February, Intel discovered a bug that affected some server and workstation computers using the recently released Intel 840 and 820 chipsets. Though the glitch rarely occurred, three motherboard designs were canceled in response.