Price cuts ahead for mobile Pentium 4

Intel's flagship chip for notebooks will likely experience the same sort of dramatic price cuts that the company applied to the desktop Pentium 4 last April, according to analysts and other sources. The notebook Pentium 4 will still command a premium over its desktop counterpart, but the gap will be reduced.

Increased competition from Advanced Micro Devices and the torpid state of the economy will prod Intel to stimulate demand by price cuts, sources say. Just as important, though, are the unusual circumstances surrounding the chip. Unlike previous notebook chips, the mobile Pentium 4 is finding most of its initial customers in the consumer market, where price rules, rather than in the corporate market, where customers are more focused on a portable computer's size and weight.

"A lot of things conspired to undermine the development of the P4 market," said Dean McCarron, principal analyst for Mercury Research. "My sense is that Intel will bring mobile CPU pricing more in line with its desktop products."

Mobile products can be more expensive to develop and manufacture than desktop chips, and the price difference is fairly large. The 1.7GHz mobile Pentium 4 sells for $508, slightly more than three times the $163 price of the 1.7GHz desktop P4. Only the 2.2GHz Pentium 4 desktop sells for more.

The chip also has to elbow for attention on Intel's product line. The company continues to make notebook Pentium III chips, which are both cheaper and more battery-friendly, at the same time it is touting Banias, a new mobile chip coming in the first half of 2003 that Intel has already said will be its mainstay in notebooks.

"This is different than normal," said Don MacDonald, director of mobile platforms for Santa Clara, Calif.-based Intel, who noted that in typical circumstances, the company would begin to phase out the older product and remain relatively quiet about the coming product. "The Pentium III is still a very viable product. We aren't going to take any moves to cannibalize it."

The mobile Pentium is even being forced to compete against cheaper desktop parts. PC makers have been experimenting with equipping notebooks with a low-power, fairly inexpensive version of the Pentium 4 for small desktops.

Toshiba has already incorporated a low-power, and less expensive, version of the Pentium 4 into a notebook. Compaq Computer and Gateway, meanwhile, are evaluating the chip for notebooks that could come out this year.

"We're seriously looking at it," said a Gateway representative.

While the batteries in these notebooks might last only 1 to 1.5 hours, compared with 2 to 4 hours on a notebooks with chips optimized for portables, they could cost hundreds of dollars less.

"Consumers don't have high mobility needs. I expect it to be more commonly used," said Alan Promisel, an analyst at IDC, who believes PC makers will use the desktop part to cut costs. "Consumers like (low) price points and high performance."

Power and weight
Like nearly everything else in the processor world these days, the fate of the Pentium 4 seems inextricably linked to power consumption. Although Intel managed to reduce the power consumption on the mobile Pentium 4 beyond most expectations, the chip still consumes more power than the mobile Pentium III or the upcoming Banias processor.

As a result, most PC makers are incorporating the chip into so-called desktop replacement notebooks. These machines typically weigh 7 to 8 pounds and can include recordable DVD and CD drives. The larger size allows manufacturers to insert more fans and other insulating components.

Most of the machines are being sold to consumers, especially those moving away from desktops for the first time. Intel's MacDonald said some 85 percent to 90 percent of the notebooks in retail fit in this category, which, to the surprise of many, continues to thrive.

"There is a hell of a lot of first-time notebook buyers coming into the market," MacDonald said. "The world's first small-form-factor desktop is a large notebook."

Pentium 4 notebooks, however, are competing against far cheaper alternatives. Notebooks with the new chip are priced at $1,850 and up, while notebooks with different chips are selling for $999 and $899.

According to sources, Intel will help move the market along by introducing 1.4GHz and 1.5GHz versions of the mobile Pentium 4 in late April. These chips are expected to allow PC makers to offer mobile Pentium 4-based notebooks closer to the $1,500 mark.

The other growing segment in the notebook market is the "thin and light" category. These notebooks weigh 5 pounds or less and measure 1.4 inches thick or less. About 60 percent of the notebooks sold to corporations fit this category, MacDonald said.

Although the Pentium 4 will begin to enter this realm later in the year, most companies are currently using Pentium III notebooks, MacDonald acknowledged. The question, then, is whether these customers will move next to the Pentium 4 or wait for Banias in 2003 or 2004.

"The Pentium 4 is in an awkward position. It is sort of stuck between the Pentium III and Banias," said Mercury Research's McCarron. "If they want to stimulate Pentium 4 portable processor sales, they are going to have to do something more."