The changes should bring larger quantities of faster Pentium IIs into the market than previously expected, which in turn may mean cheaper Intel-based desktops over the ensuing months and a tougher competitive environment for Advanced Micro Devices.
Processor prices, in fact, already are falling. A chip oversupply has led to retail pricing that is below posted wholesale prices. (See related story) Intel also will drop the price of its processors once and possibly twice over the next two months, according to analysts.
Word of the advanced Katmai rollout comes as Intel's share prices are falling in anticipation of second-quarter earnings and in the wake of last week's announcement that the chipmaker will delay the introduction of its first 64-bit chip until 2000.
The initial Katmai chip, which will run at 500 MHz, will now come out in the first quarter of 1999, rather than the second quarter, according to an Intel spokesman. Katmai will offer improved performance of multimedia applications, including 3D graphics and full-motion video.
Katmai is a set of new processor instructions that many have referred to as "MMX 2."
Later this year, the company will also add a 300-MHz version of an enhanced Celeron processor, supplemented with critical extra "cache" memory to speed up performance. The current Celeron doesn't have this extra memory and has received negative reviews because it doesn't deliver better performance than older Pentium chips. One of the chief reasons for this is a lack of cache memory.
The enhanced chip will also come out as a 333-MHz version. A 300-MHz of the current Celeron chip will also ship. Celeron was announced in May.
Although the company delayed the release of its 64-bit Merced chip for servers last week because of manufacturing difficulties, Intel's current manufacturing technology, which is based around the 0.25-micron process, is producing more chips than expected. (Intel is an investor in CNET: The Computer Network.)
Last September, Intel began to produce processors on the 0.25-micron process, a finer manufacturing process that also cuts costs because it yields more processors per silicon wafer than the old 0.35-micron process. The chip giant first adopted the process for mobile processors and started using it for server and desktop Pentium IIs earlier this year.
Because manufacturing yields with the new technology are better than expected, Intel is both moving up the release date of future chips and producing more of existing ones.
Linley Gwennap, editor in chief of The Microprocessor Report, said that Intel is getting more chips out of the new technology than expected, but added that some of the additional volume comes as a result of a market shift. PC demand is slower than expected. Consequently, Intel is producing fewer of the 233-MHz and 266-MHz Pentium IIs, which were made on the 0.35-micron process, to concentrate on the more cutting-edge chips.
"They are doing better than they thought" with the 0.25-micron process, Gwennap said, noting "they were expecting the PC market to be bigger than it is."
The shift to the new process is likely to ripple across the competitive turf of the semiconductor industry. By concentrating more on these chips, Intel will be able to undercut competitors more easily with faster, or cheaper, microprocessors at a variety of price points. Accelerating the Celeron calendar also will help the company recover ground lost in the sub-$1,000 market.
Intel's manufacturing prowess is unrivaled in the industry, and the company has the capability to outproduce and undercut AMD and Cyrix on price, practically at will.
Both AMD and Cyrix have started to produce chips on the 0.25-micron process, but are not producing them in the same volumes. Chips from these companies currently top out at 333 MHz.
Intel also fleshed out a number of details about its product road map that have been previously reported, but not officially discussed, by the company.
The first Xeon "Slot 2" processors for servers and workstations will come out in the near future. The premier version of the chip will run at 400 MHz and contain 512K of cache memory. Sources have said the official release date is June 29 and that the chip will cost $1,050 in volume.
Intel will follow the release with 450-MHz versions of the chip with 512K, 1MB, and 2MB of cache memory in the second half. The official release will occur in September, sources say.
In the first quarter, the company will come out with "Tanner." The chip will be a 32-bit Katmai chip that fits into the Slot 2 package, the spokesman said. Several sources, however, said that the chip will also fit into the "Slot M" package being prepared for Merced. Tanner will act as a bridge between the two platforms.
By the third quarter, Intel will begin to release chips based around the 0.18-micron process.