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More Intel price cuts coming

The chipmaker will slash prices on its Celeron and notebook chips in June as AMD will counter with the K7 and more.

Intel will cut prices on its Celeron and notebook chips in June while AMD will counter with the K7 and possibly a 500-MHz version of its K6-III chip.

The Celeron cuts, which will range as high as 20 percent and come on June 6, will serve to continue to lower the price tag on PCs as well as keep pressure on competitors. A week later, Intel will also make cuts on its Celeron and Pentium II mobile processors, according to sources.

Further Celeron cuts, along with a 500-MHz version of the chip, will take place in August, sources added.

Cross-freeway rival AMD, however, will try to counter with moves of its own. The company is expected to release a 500-MHz version of the K6-III, said chip dealers. The 500-MHz chip, which many analysts say is the limit for this chip until AMD shifts to a more advanced manufacturing process, will sell for around $439 at retail and come out in mid-June, sources said.

An AMD spokesman refused to comment on any K6-III releases but stated that the official K7 announcement is slated for the end of June.

Processor price cuts have become a monthly affair in 1999, largely because both Intel and AMD are seeking to gain market share at each other's expense. The segmentation of the chip industry has also helped. Aggressive price cuts helped Intel gain back retail market share in April, according to studies from PC Data. By the same token, AMD has made inroads into the mobile market.

Intel has fallen into a pattern where it staggers its price cuts by product lines. Earlier this month, for instance, Intel cut prices on Pentium III, Pentium II, and Xeon prices, but did not cut Celeron prices. Celeron prices were last cut in April.

Looking forward, Intel is expected to cut prices on the Pentium III, Xeon, and Pentium II lines again on July 18, but only tweak Celeron prices. Celeron will be cut again in mid-August, while major price cuts across the other chip lines will come around Labor Day with the arrival of the "Coppermine" Pentium III processors.

Under the upcoming cuts, the 466-MHz will drop from $169 to $147 in volume, a 13 percent drop. The 433-MHz will drop 21 percent from $143 to $113, while the 400-MHz will drop from $103 to $93, a 7 percent drop. The 366-MHz chip will drop from $73 to $69 while the 333-MHz will stay at $67 and be phased out of the product line.

Although AMD may adjust its prices, the company will not likely make major cuts on the K6-2 line, which competes directly with the Celeron. AMD cut prices on these chips on May 14 in anticipation of the June 6 cut from Intel, the spokesman said. Under the current AMD pricing schedule, K6-2 prices appear to be comparable to Intel's upcoming prices.

And while AMD will roll out the K7 in June, the new processor may not hit in volumes for some time. Few chip dealers have seen samples of the chip or have been given pricing, which indicates that the chip will not be readily available in volume next month. One source said that general availability may not occur until late July or August. Most of the early production is likely being taken up by one or more large computer vendors.

Even then, the first K7 chips will be more of a token effort, according to Ashok Kumar, semiconductor analyst at US Bancorp Piper Jaffray. The K7 won't become an interesting platform to many computer makers until AMD moves to the 0.18-micron manufacturing process until toward the end of the year. Then, AMD will be able to squeeze 256KB of secondary cache memory onto the same piece of silicon as the processor.

Integrated cache memory vastly improves the performance of chips. Current Celeron and K6-III chips contain integrated cache. By September, Intel's Coppermine Pentium III will contain 256KB of integrated cache.