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New Intel chips raise stakes

Computer vendors will be able to squeeze more performance out of the new Celerons and drop prices.

Celeron is charting its comeback.

While the first versions of Intel's processor for the low-cost market were met with hoots of derision from reviewers and tepid sales, two new Celeron processors released this morning, which were code-named "Mendocino," will likely have a fairly strong effect on the sub-$1,000 PC market, according to observers.

With these chips, computer vendors will roughly be able to squeeze the performance of a 300-MHz or 333-MHz Pentium II into a sub-$1,000 box. This will not only improve the overall capabilities of low-end machines, it will put pressure on competitors, and even PC vendors, to keep prices down. At $149 and $192, the 300A-MHz and 333A-MHz Celeron are less than half the price of their Pentium II counterparts. Retailers have dropped prices on K6-2 processors from Advanced Micro Devices running at the same speeds in the past few days.

The 300A-MHz and 333A-MHz Celerons introduced today also contain the technological blueprint for future Pentium II development.

"Mendocino is what Celeron should have been from the start," said Keith Diefendorff, editor in chief of the The Microprocessor Report. "It's significant for a couple of reasons."

The sea change in the attitude toward Celeron revolves around the once-obscure issue of secondary, or L2, cache memory. Cache memory serves as a critical quick-access data reservoir for the processor and substantially boosts performance. Standard Pentium IIs come with 512K of L2 cache that sits alongside the processor. The original Celerons did not contain cache memory and took a hit in performance. (Intel is an investor of CNET: The Computer Network).

The Celerons introduced today contain 128K of L2 cache memory integrated onto the same piece of silicon as the chip. Although ? the size of the cache on standard Pentium IIs, the secondary cache on the new Celerons run at twice the speed. The net result is a low-cost chip that is almost as powerful as a Pentium II running at the same clock speed.

"If you were to use the Celeron processor in a similar configuration as the Pentium II, all other things being equal, the Celeron processor would run about ten percent slower than the Pentium II," said Richard Dracott, director of Intel microprocessor marketing.

Although ten percent slower, the chips will be close to half the cost. 333-MHz Pentium II chips sell for $423 in volume while 300-MHz processors go for $316, although lower prices can be found in the wholesale market. Systems using the chips mostly range in price from $1,299 to $1,699.

The 333A and 300A Celeron processors sell for $192 and $149 in volume, respectively. Manufacturers today rolled out new computers with these chips ranging in price from $999 to $1,299, prices which often include modems, network adapter cards, CD-ROM drives, 64MB of memory, and/or 8GB drives.

A number of analysts, such as International Data Corporation's Roger Kay, have predicted strong sales for computers based around the new chips, mostly because they eliminate the performance gaps that existed with the first Celerons. Sean Maloney, vice president of worldwide marketing at Intel, defended the first Celerons, but admitted that Intel did miss the boat initially on the sub-$1,000 market.

"We were late to focus on the basic PC segment," he said.

While the integrated design of the new Celerons adds manufacturing costs, the chips cost less to produce than standard Pentium IIs, said Diefendorff. The integrated Celeron chips are larger. As a result, Intel can extract fewer functioning chips out of each silicon wafer. The smaller cache size, however, outweighs that cost.

"We suspect this represents a cost reduction," he said.

Integration will likely become a feature across the Pentium II line, added Diefendorff and others. Intel is due to release "Dixon" a Pentium II integrated with 256KB of L2 cache for mobile computers early next year, according to Nathan Brookwood, an analyst at Dataquest. In the second half, Intel will then likely roll out integrated chips for the Pentium II desktop segment.

Intel's Dracott did not speak on specific product plans, but said that more cache memory could be added to the current generation of Pentium II chips.