Intel yesterday gave visitors to the CeBIT technology trade fair a glimpse of the high-powered technology chips it is relying on to sustain the firm's profit as semiconductor prices slide.

At a news conference at the Hanover event, the computer-chip maker demonstrated a Pentium processor running at about 800 megaherz - 60 per cent faster than the new Pentium III Xeon chip it had unveiled the day before.

The demonstration chip "is like a race car that you build to go as fast as possible even if it's only going to be on the test track", Mr Pat Gelsinger, general manager of Intel's desktop products group, told Reuters in an interview.

"It's not a product we are going to sell tomorrow but it shows where we are going," Mr Gelsinger said.

Intel needs to get to higher speeds quickly because the rapid declines in chip pricing show no sign of easing even though some key competitors struggle to maintain profitability.

The 500MHz Pentium III Xeon chip, designed to power mainframe-class computers, has list prices of $931 (€845) to $3,692 - giving Intel a much fatter profit margin than the $200 Pentium II processors now used in $1,500 home PCs.

"The profits here are good," Mr Gelsinger said. "That is why we have committed 50 per cent of our engineering to the workstation and server market even though it is less than 20 per cent of our revenue stream now."

Intel also said it favours the idea of giving away free entry-level personal computers to promote wider use, but added that prices must fall below $500 to make such a move viable.