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Chipmakers lower processor prices

Intel and AMD enact their first sweeping desktop processor price cuts of the year in an effort to make way for new chips and encourage customers to buy new PCs.

PC chipmakers Intel and Advanced Micro Devices this week enacted their first sweeping desktop processor price cuts of the year.

Intel reduced the prices on all its desktop Pentium 4 processors by as much as 21 percent Sunday. Meanwhile, AMD cut prices on select Athlon XP desktop chips by as much as 32 percent Monday.

The companies regularly cut prices on their PC processors to make way for new chips and encourage customers to buy new PCs. The companies also use price cuts as a way to stay competitive. The companies employed all three tactics in 2002, bringing down prices quickly through the middle part of last year. But it's been several months since either company made a widespread price cut on desktop chips. Intel, which reduced notebook Pentium 4 prices in January, dropped desktop prices the last time in November. AMD hasn't done any price cutting since last August, when it reduced desktop prices and in September, when it lowered prices on its mobile processors.

But analysts say that, despite the pause, the two companies' price cuts are arriving on schedule.

"Ordinarily, they look at cutting prices about once per quarter and this is about that," said Dean McCarron, an analyst with Mercury Research.

Show me the money
Intel kicked off its latest round of cuts by nipping the price of its flagship 3.06GHz Pentium 4. It lowered the chip's list price by 8 percent, from $637 to $589. Intel also sliced 6 percent off the list price of its 2.8GHz Pentium 4 chip--from $401 to $375.

Intel also dropped the list prices of its 2.4GHz, 2.5GHz, 2.53GHz, 2.6GHz and 2.66GHz chips by 21 percent each.

The 2.6GHz and 2.66GHz chips were reduced from $305 to $241, while the 2.5GHz and 2.53GHz chips went from $243 to $193 and the 2.4GHz from $193 to $163.

The price cut moves the 2.4GHz Pentium 4 down to the low end of Intel's pricing range for the Pentium 4. There, it can take over as the entry-level Pentium 4 chip for manufacturers, because, even though Intel still sells 2.2GHz and 2.26GHz chips, the list price for the 2.4GHz chip is the same as that of the slower chips. Intel lopped the prices of all three chips by 16 percent, lowering each of them from $193 to $163. Intel's 2.53GHz Pentium 4 is a small increase in price from there.

(Intel has several pairs of Pentium 4s, such as the 2.5GHz and 2.53GHz and the 2.6GHz and 2.66GHz, which are similar in clock speed and priced the same, but different in bus frequency. The 2.5GHz offers a 400MHz bus--a pipeline that transmits data between it and the rest of the PC--while the 2.53GHz has a higher-performance 533MHz bus.)

Meanwhile, Intel is making room for a new flagship processor by trimming the price of its midrange chips. It's expected to launch a 3.2GHz Pentium 4 next quarter and follow with a second round of price cuts. The combination of the two price cuts should push down prices for all of Intel's current desktop Pentium 4s, sources familiar with Intel's plans said.

For its part, AMD's kept prices on its new Athlon XP 3000+ and 2800+ chips the same at $588 and $375, respectively. The chipmaker dropped list prices on several desktop Athlon XP processors with the aim of making them attractive to customers, a representative said.

The Athlon XP 2700+ moved from $349 to $267, a 23 percent drop. AMD dropped its Athlon XP 2600+ processor from $297 to $241, a 19 percent reduction. Its Athlon XP 2400+ saw a 27 percent decrease, from $193 to $141. AMD's 2200+ chip dropped the most, 32 percent, from $157 to $107.

Prices on its 2100+ and 2000+ processors stayed nearly the same, dropping only a dollar, to $92, and two dollars to $81, respectively.

Prices on AMD desktop chips aren't likely to move until it brings out an Athlon XP 3200+ chip, which is expected at midyear.

Though the prices set by Intel and AMD apply to chips purchased in lots of 1,000, the chips often appear at retail distributors for different prices. These street prices can be higher or lower than the list prices, depending on supply and demand.