Intel has introduced higher performance microprocessor chips that are expected not only to boost the performance of personal computers but also to fuel rapid declines in PC prices.
With significantly lower than expected prices, the new Intel Pentium II and Celeron microprocessors are expected to lead to lower PC prices in both the "basic" home computer segment and the "performance" desktop segment by the end of this year.
Intel's new Celeron chips, for use in "basic PCs" that currently sell for about $1,000 (£719), represent a second attempt by the industry leader to defend its turf against recent incursions by competitors such as Advanced Micro Devices and National Semiconductor.
The first Celeron chips, introduced in April, underperformed similar devices from rivals, but Intel has now added on-chip memory to boost the processing speed and make the chips more competitive.
Intel surprised the industry by undercutting the prices of its rivals in a bid to achieve greater share in the fastest growing segment of the PC market.
Intel also introduced its latest Pentium II microprocessor - used in a broad range of computers including those widely used in offices.
The new chip, which runs at 450MHz versus a previous speed of 400MHz, costs $699. This is significantly lower than Intel's prices for new high-end chips of $800-$900.
Basic PCs selling for as little as $500-$600 may appear within a few months, industry analysts predicted. Already some PC manufacturers are talking about a "sub$800" price category.
Intel said its new chips were "priced for value" in each PC market segment. Although the cost of chip production might vary only slightly among different types of chips - depending upon the size of the chip and its complexity - selling prices differ significantly.
The new Celeron chips, for example, will sell for under $200. This represents approximately a $50 reduction from the price of similar performance Pentium II chips.
Reduced chip prices will lower Intel's average selling price by about 33 per cent over the next five years, Mr Tom Kurlak of Merrill Lynch predicted last week, downgrading the stock.
But Mr Ashok Kumar of Piper Jaffray upgraded the stock, saying the new chip will displace competing chips in the basic PC segment.
