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Intel cuts prices to pave way for new chips

The company slashes prices on Pentium 4 and Pentium III chips for desktops and on several low-voltage mobile chips. Not to be outdone, AMD cuts prices too.

Intel cut prices on Pentium 4 and Pentium III chips for desktops and on several low-voltage mobile chips on Sunday by up to 32 percent to make way for new processors that will appear over the next few weeks, the company said.

The Santa Clara, Calif.-based chipmaker slashed prices on the 2.2GHz Pentium 4 by 25 percent, dropping it from $562 to $423, while it cut the price of the 2GHz Pentium 4 by 22 percent, sliding it from $364 to $284. The 1.2GHz Pentium III for desktops went from $241 to $163, a 32 percent decline.

In notebooks, the 866MHz and 850MHz "low voltage" Pentium IIIs dropped 24 percent to $241 each, while the 800MHz version dropped 18 percent to $198. Intel also cut prices on low-voltage Celerons.

Further cuts across Intel's desktop and mobile line are expected in the coming weeks, according to sources.

Rival Advanced Micro Devices also cut prices, but the official discounts have yet to be posted, a spokesman said. Like Intel, AMD will be unveiling new chips to the public soon.

Intel's cuts precede a major refresh to the Pentium 4 desktops. On May 6, the company will come out with a new version of the Pentium 4 as well as a new chipset for high-performance desktops. One chipset, the 850(e), will feature a 533MHz system bus--the main conduit between the processor and memory--that will deliver higher performance than the 400MHz system bus found on Pentium 4 computers today.

Intel and AMD have been running neck and neck in terms of performance, but the faster bus could provide Intel with a more sustainable advantage, analysts have speculated.

A second chipset coming soon, the 845(g), will beef up budget PCs. The chipset will feature integrated graphics, which will shave computer manufacturing costs, and integrated functionality for USB 2.0. Most PCs now come with USB 1.1, which lets consumers plug printers, cameras and other devices into PCs.

USB 2.0 transfers data at 480 megabits per second, while its main competitor, FireWire, moves information at a rate of 400mbps. To date, though, only a few PC makers have incorporated USB 2.0 into PCs because it requires additional chips. Chipset integration will likely speed adoption.

Notebooks are getting a makeover too. In New York on April 23, Intel will show off new low-voltage chips for notebooks. Gateway and Dell will be releasing new notebooks that include the chips. Dell's notebook, which will weigh around 3 pounds and cost about $2,000, will mark the company's first foray into the mini-notebook segment.

Not to be outdone, Sunnyvale, Calif.-based AMD will soon release Thoroughbred, a souped-up version of the Athlon XP chip. Unlike current Athlons, Thoroughbred will be made on the 130-nanometer manufacturing process, which means the chips will be smaller, cheaper and faster. The chips are shipping to computer manufacturers but have yet to be sold publicly in PCs.

Spring price cuts are a sort of annual ritual for Intel and AMD. At this time last year, the companies were piling up serial cuts that dropped some chip prices by more than 50 percent. The cuts helped Intel meet its earlier-stated goal of putting the Pentium 4 into many different kinds of desktops.

In desktops, the ability to slash prices comes in part from improvements in manufacturing. Intel shifted the Pentium 4 line to the 130-nanometer manufacturing process earlier this year. In addition, it is now producing chips on 300-millimeter wafers. These wafers, sporting more than twice the surface area of conventional 200-millimeter wafers, allow Intel to produce far more chips without much of an increase in costs.

Major price cuts are also expected on the Pentium 4 for mobile computers to stimulate sales and bring the chips more in line with their desktop counterparts. Some PC makers have adopted the cheaper Pentium 4 desktops for mobile computers.