Intel will discount its fastest chip

EARLY SHOPPERS BE warned: Intel plans to drastically reduce the price of its new 1.7GHz Pentium 4 processor shortly after the chip debuts this month, according to a spokesman for the Santa Clara, Calif.-based company.

The 1.7GHz Pentium 4 will likely hit the market around the $750 mark for quantities of 1,000 chips, then drop in price substantially.

Price reductions will follow across all speeds of the Pentium 4 chip family as well.

Intel will aggressively discount its new 1.7GHz chip down to a mainstream price point before the introduction of a 2GHz Pentium 4 later this year.

For Intel, a mainstream price point for a Pentium 4 chip is a price low enough for manufacturers to build a $1,200-$1,500 PC around it.

Intel wants the upcoming 2GHz Pentium 4 at a mainstream price point before Christmas.

"[Intel has] the goal to bring the Pentium 4 to all the key mainstream price points this year," said spokesman Seth Walker, who added that one way to do that would be to drop the floor on all Pentium 4 pricing.

Because Intel's chip prices tend to drop as the chips move further into the design cycle, the entry cost of the 2GHz Pentium 4 will likely be less expensive than the $750-per-1,000-units 1.7GHz chip. Intel's 1.5GHz chip debuted at $819 per 1,000 chips last November.

Discounting the Pentium 4 processor could reduce Intel's profit margin.

The Pentium 4 chip has a relatively large die size, which increases its cost over Pentium III chips and limits production. The chip is also only available with Rambus memory, which is expensive and in short supply, according to Ashok Kumar, an analyst at U.S. Bancorp Piper Jaffray, in Menlo Park, Calif.

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