Intel to slash chip prices, some up to 40 percent

ITworld.com –

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

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 on Wednesday 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," said 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, said 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 said. Intel announced in its financial earnings report last week that it was continuing to ramp up production of its Pentium 4 chip, Walker said.

Intel is expected to drop the price of its 1.5GHz Pentium 4 to US$644 from $819. Similarly, it will cut its 1.4GHz Pentium 4 to $440 from the current $575 mark, said the source who asked not to be named.

The Santa Clara, California-based chip maker is expected to knock 43 percent 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 $241 from $348; 766MHz Celeron's price dips to $112 from $170; 733MHz Celeron goes to $88 from $112.

In the mobile space, Intel is expected to announce: 850MHz Pentium III for $508 down from $722; 800MHz mobile Pentium III drops to $342 from $508; 750MHz Pentium III goes to $268 from $401; 700MHz Celeron to $123 from $181; 650MHz Celeron to $96 from $134, and the 600MHz Celeron goes to $75 from $96.

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

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

Intel, in Santa Clara, California, can be reached at +1-408-987-8080, or at http://www.intel.com/.

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