Intel slices and dices chip prices

The weekend price cuts came, as expected, after the company last week began shipping its new 2.8GHz Pentium 4 processor for desktop PCs and cut the price of its 2.53GHz Pentium 4 chip.

Intel regularly cuts prices, and its dealers and distributors have been selling Pentium and Celeron chips at a discount to help get rid of excess inventories during the summer sales doldrums.

But this week's round of cuts includes more than just Pentium 4s. It touches nearly all of the company's chips, ranging from the mobile Pentium 4 to Xeon chips for workstations and servers.

Intel's largest price cut came on the 2.4GHz desktop Pentium 4, but other chips were reduced by as much as 45 percent.

Intel lowered the 2.4GHz processor price by 52 percent, from $400 to $193. It dropped the price of its 2.2GHz and 2.26GHz Pentium 4 chips by 20 percent, from $241 to $193 each. Meanwhile, the 2GHz Pentium 4 dropped 16 percent from $193 to $163, and the 1.8GHz went from $163 to $143.

Chipmakers often wield price as a tool to stimulate demand or to move older chips along when preparing to introduce new ones.

Intel often charges the same price for two chips, such as the 2.4GHz and the 2.2GHz/2.26GHz Pentium 4 processors. The company, in this case, uses price to move PC makers up the ladder to higher clock speeds, since they can buy an extra 200MHz for the same price.

Intel's Pentium 4-M chips also received price cuts of as much as 45 percent, likely making way for 2.2GHz and faster Pentium 4-M versions due later in the year.

The 2GHz Pentium 4-M was slashed by 45 percent, from $637 to $348, along with the 1.9GHz Pentium 4-M, which dropped 40 percent from $401 to $241. Intel also sliced the price of the 1.8GHz Pentium 4-M by 43 percent, from $348 to $198. The 1.7GHz Pentium 4-M dropped 29 percent from $241 to $171.

Intel also adjusted the prices on its Celeron chips for low-priced desktop and notebook computers.

The largest Celeron price drop came on the 1.5GHz mobile Celeron. It was reduced by 44 percent from $170 to $96. Intel also cut prices on its relatively new 1.8GHz and 1.7GHz desktop Celeron chips. The 1.8GHz fell 19 percent from $103 to $83, while the 1.7GHz went from $83 to $69, a 17 percent price cut. Intel cut prices on various other Celeron chips by between 14 percent and 36 percent.

Intel's price reductions on Xeon chips were somewhat more modest. The chipmaker sliced as much as 19 percent from the prices of its Xeon chips for workstations and servers. The 1.8GHz Xeon, for example, fell 19 percent from $192 to $156; the 2.2GHz Xeon went from $262 to $224.

Intel also chopped the prices of some of its Pentium III-S processors for servers. The 1.4GHz Pentium III-S, for example, dropped 33 percent from $294 to $198.

Intel's chip arch rival, Advanced Micro Devices, had already cut its prices on Aug. 21, the same day it announced new Athlon XP 2400+ and 2600+ processors for desktop PCs.

The two new Athlons list for $297 and $193, respectively. AMD's Athlon XP 2200+ now lists for $183, after the price cuts.

Though the prices set by Intel over the weekend and by AMD in late August apply to chips purchased in lots of 1,000, they often show up at retail distributors for lower or higher prices, depending on supply and demand.

AMD lists prices for 1,000-unit lots of chips, but it negotiates individually with parties that purchase larger amounts. This practice causes prices from distributors to vary, enabling buyers who are looking for one or two chips to find them for less than the list price.

Though Intel controls the pricing of its chips more tightly, street prices on its chips vary as well.