Intel, AMD Cut Chip PricesIntel, AMD Cut Chip Prices

Chipmakers Intel and Advanced Micro Devices Inc. both cut prices for several processors--a trend that won't let up anytime soon, analysts say.

Intel's biggest price drop was the 1.6-GHz Pentium 4, reduced 18%, from $163 to $133. The 1.8-GHz Pentium 4, dropped from $225 to $193--a big decrease from April, says Technology Business Research analyst Brooks Gray, when the 1.8-GHz chip was selling at $562 in 1,000-unit quantities. "Mainstream buying behavior continues to shift from performance to value," Gray says. The leading-edge processor price range continues to slide even though speed has been enhanced substantially, Gray says, pointing out that Intel is expected to reach the 3-GHz range with the Pentium 4 by the end of the year. Expect price cuts on the Pentium III mobile chip, too--Intel plans to bring out the Pentium 4 mobile in the first half of this year.

Other price cuts revealed Monday include the 1.9-GHz Pentium 4 chip, from $273 to $241, and the 1.7-GHz chip, from $193 to $163. Xeon and Pentium III processor prices also dropped: the 2-GHz Xeon, from $455 to $396; the 1.7-GHz Xeon, from $256 to $224; the 1.26-GHz Pentium III, from $241 to $202; and the 1.13-GHz Pentium III, from $202 to $170. "It's part of our typical pricing activity throughout the year," says an Intel spokesman, adding that the alignment takes into account manufacturing yield, competitive environment, and product demand.

AMD introduced the Athlon 4 processor 1500+, which runs at 1.3 GHz, and cut prices for other chips. The 1600+ chip dropped nearly 20%, from $160 to $130. The 1700+ dropped 17%, from $190 to $157, and the 1800+ fell 16%, from $223 to $188.

Street pricing will be affected first by direct vendors, Gray says: "It gives Dell and others an advantage because they have a more flexible model and can cut their prices immediately."