Intel releasing new low-cost chip

Intel has once again accelerated its road map for low-end Celeron processors, moving up the release of faster versions with integrated high-speed memory from next quarter to this one and adding a 366-MHz version of the chip in the first half of 1999.

The new 300-MHz and 333-MHz chips will follow better-than-expected progress in implementing the company's most advanced 0.25-micron manufacturing process, according to an Intel spokesman. Generally, improved production yields permit Intel to come out with faster chips earlier than expected.

Questions have arisen, however, about how Intel will market the improved Celeron, which will now pack 128K (kilobytes) of high-speed cache memory, making the chip competitive with higher-end Pentium II processors. Current Celeron chips have no cache memory, which negatively impacts performance, but Pentium II chips do have this extra memory.

Plans for the advance release coincide with market gains made by archrival Advanced Micro Devices in the low end of the consumer segment. AMD saw its processor sales increase from 1.6 million to 2.7 million from the first quarter to the third quarter.

A PC Data study touted by AMD states that the Sunnyvale, California, chipmaker captured 34.8 percent of the retail PC market in June and over 50 percent of the sub-$1,000 retail market.

Celeron is positioned to sell for $100 to $200. Standard Pentium IIs start at $200, according to Michael Slater, founder of MicroDesign Resources. Justifying price differences between these processors will increasingly become a problem for the company.

Interestingly, Intel will get around the problem in the future by introducing standard Pentium IIs with memory integrated directly on the processor, like the newest Celerons. Typically, Pentium IIs have this extra memory integrated into the chip package--as a separate chip--but not directly on the processor. The latter usually results in faster performance.

Dixon, which comes out in the first quarter of next year will have the memory integrated directly on to the processor. Intel said last week that Dixon will not be a Celeron product. This is good, said Slater, because Dixon will outperform Pentium IIs running at the same speed.

Intel will also continue with its price cuts. Intel confirmed that it will cut prices again on July 26, as reported earlier. Under the new price cuts, the 266-MHz and 300-MHz Celeron chips without cache memory will go to close to $100, according to sources. The 333-MHz version is expected to be priced at around $179 in volume.

For standard Pentium IIs, prices for the 400-MHz will drop to $550 while the 350-MHz will drop to $395. The 333-MHz version of the chip will descend to $295 and the 300-MHz and 266-MHz will sink toward the $220 and $200 marks, respectively.