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Intel Plans More Pentium 4 Price Cuts

Despite tight supplies, chip giant will lower prices on a variety of processors--so will PC prices drop, too?

Sumner Lemon, IDG News Service

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With supplies of some Pentium 4 processors running low due to higher-than-expected demand caused by a steep drop in prices, Intel plans to announce in January further price cuts of up to 20 percent for the chips.

A recent Intel roadmap, a copy of which was seen by IDG News Service, outlined the company's plans to further cut Pentium 4 prices on January 27. If Intel sticks to these plans, the 2-GHz Pentium 4 will see its price cut by 15 percent, from $401 to around $340, in quantities of 1000.

Other versions of the Pentium 4 will also see price cuts of between 12 percent and 20 percent. The 1.6-GHz Pentium 4, for example, will fall in price from $163 to around $130 while the 1.9-GHz version of the chip drops from $273 to around $240, according to the Intel roadmap.

Intel will also announce a cut in the price of the 2.2-GHz Pentium 4, which is scheduled to be released in January. Expected to be priced at $615 when it is first introduced, the price of the chip is then slated for a drop to around $560 on January 27.

Supply and Demand

Demand for Pentium 4 processors has exceeded expectations in recent weeks, with 478-pin versions of the 2-GHz Pentium 4 in particularly short supply. The 478-pin Pentium 4 is one of two versions available. The other version, which uses a 423-pin package, is being phased out in favor of the 478-pin package, which was designed to handle the electrical requirements of Pentium 4 chips running at speeds faster than 2 GHz.

Intel last cut prices for the Pentium 4 on October 28, slashing the price of a 2-GHz Pentium 4 by 29 percent from $562 to $401. Those cuts have helped reduce the cost of PCs in the run-up to the year-end selling season and, as a result, have contributed to the current shortage of Pentium 4 chips.

While the price cuts slated for January are not as aggressive in terms of percentage as those announced on October 28, they cover a broader range of processors. In October, Intel cut prices on just three versions of the Pentium 4: the 1.8-GHz, 1.9-GHz, and 2-GHz chips. The January cuts will likely cover as many as six variants of the processor: the 1.6-GHz, 1.7-GHz, 1.8-GHz, 1.9-GHz, 2-GHz, and 2.2-GHz versions.

Whether the price cuts scheduled for January will prolong the present uptick in PC demand remains to be seen, however. "The worldwide market at the moment is actually quite soft still," says Kitty Fok, research director at IDC Asia-Pacific. "It will help a little bit but [the strength of PC demand] really depends on how the economy will pick up."

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