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Intel cuts chip prices

The chip giant also rolls out its fastest processor to date and will speed up price reductions in the coming year.

Intel (INTC) today rolled out its fastest processor to date, but more importantly for the PC industry, the company is expected to speed up price reductions on processors in the coming year.

During 1997 Intel cut processor prices fairly steadily. But this year the pace may well accelerate as Intel rolls out new products to fill the

Intel processor pricing 1st quarter 1998
333-MHz
Pentium II
$722
300-MHz
Pentium II
$530
266-MHz
Pentium II
$375
233-MHz
Pentium II
$268
233-MHz MMX
Pentium
$193
200-MHz MMX
Pentium
$123
166-MHz MMX
Pentium
$95
233-MHz MMX
Pentium (mobile)
$359
200-MHz MMX
Pentium (mobile)
$230
166-MHz MMX
Pentium (mobile)
$134
150-MHz MMX
Pentium (mobile)
$95
Source: Intel
need for processors that can be used in popular sub-$1,000 PCs. Even before next quarter's full round of price cuts, Intel is expected to reduce the price on its newest processor, according to analysts.

"What's unusual is that the 333-MHz Pentium II introduced today at $722 will drop around 22 percent in four weeks. Typically, Intel tends to do just price cuts once per quarter," according to Ashok Kumar, a financial analyst at Loewenbaum & Company. "Intel is basically increasing the speed of the technology treadmill. Product life is shrinking more rapidly," he noted.

The 333-MHz chip is the first of the second-generation, "Deschutes" Pentium II processors from Intel. Deschutes chips will be made under the 0.25-micron process, which means that the circuits will be 0.25 microns thick, resulting in smaller, faster, and less expensive processors than those made under the current "fatter" 0.35-micron process. The width of a strand of hair is about 100 microns.

The price cuts for chips will result in lower PC prices all around. At the low end, for example, $999 PCs from some vendors will now become $899 or $799 boxes. At the high end, 266-MHz Pentium II machines, for example, will dip to $2,000 or below.

The accelerated price cuts are made possible by Intel's decision to quickly move more of its products to the 0.25 micron process, Kumar says. Kumar expects pricing of the 333-MHz Pentium II to be at $583 before the end of the first quarter, and $490 by the second quarter, a reduction of 32 percent overall.

Meanwhile, prices on the 300-MHz Pentium II will drop 28 percent to $375 and a 266-MHz version should go for $250, a 33 percent reduction. The 233-MHz Pentium II is expected to hit the $200 price point, Kumar estimates.

Intel today reduced the price of the 300-MHz version of the chip to $530, less than one-third of its original cost, while the 266-MHz version will sell for $375. The 233-MHz version is currently priced at $268. Prices were also reduced on Pentium MMX processors by up to 25 percent, as previously reported.

Prices in mobile processor came down too, typically between 40 and 50 percent. The mobile 233-MHz Pentium MMX falls to $359, while the 200-MHz version drops to $230. A 166-MHz mobile Pentium MMX chip now goes for $134, while a 150-MHz MMX chip goes to $95.

Intel today introduced a 266-MHz Pentium MMX chip for notebooks, which will cost $466.

All prices are for purchases in quantities of 1,000. Volume purchasers are typically able to command a 2 to 3 percent discount.

Intel is an investor in CNET: The Computer Network.