Intel to slash chip prices, some up to 40%

Chip-making giant Intel is expected as early as this weekend to announce price cuts of up to 40% on some of its desktop chips and sizable cost reductions for its mobile processors.

          Chip-making giant Intel is expected as early as this weekend to announce price cuts of up to 40% on some of its desktop chips and sizable cost reductions for its mobile processors, a source familiar with the company's pricing road map says.

          The move is believed due to sluggish PC sales and efforts to move Intel's Pentium 4 chip into a more prominent position in the desktop market. One chip analyst yesterday said he was not surprised by the apparent plan given current market conditions.

          "We may see some larger-than-usual price cuts because demand is weak," says Linley Gwennap, principal analyst at the Linley Group. "What Intel is doing, in large part, is slowing production in Pentium III and increasing production of Pentium 4."

          Intel will not talk about any price cuts on chips until they are formally announced, says spokesman Seth Walker. But, in general, Intel lowers its prices on chips about once a month and those drops are based on market conditions and making way for new products, he says. Intel announced in its financial earnings report last week that it was continuing to ramp up production of its Pentium 4 chip, Walker says.

          Intel is expected to drop the price of its 1.5GHz Pentium 4 to $US644 from $US819. Similarly, it will cut its 1.4GHz Pentium 4 to $US440 from the current $v575 mark, says the source who asked not to be named.

          The chip maker is expected to knock 43% off the price on the 1GHz Pentium III, reducing its price to $268 from $465.

          Other price cuts include: 933MHz Pentium III's price drops to $US241 from $US348; 766MHz Celeron's price dips to $US112 from $US170; 733MHz Celeron goes to $US88 from $US112.

          In the mobile space, Intel is expected to announce: 850MHz Pentium III for $US508 down from $US722; 800MHz mobile Pentium III drops to $US342 from $US508; 750MHz Pentium III goes to $US268 from $US401; 700MHz Celeron to $US123 from $US181; 650MHz Celeron to $US96 from $US134, and the 600MHz Celeron goes to $US75 from $US96.

          Intel and other chip manufacturers work in advance to map out their chip pricing with PC and other manufacturers, Gwennap says. Key customers may know the chip maker's plans six to nine months ahead of time, he says.

          "It (the price cuts) may seem like a sudden thing to outsiders, but it was probably discussed well in advance for customers," he says. On average, Intel cuts its chip prices about 20% to 25% a fiscal quarter, Gwennap says.

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