Foremost, the announcement hopes to take the wind out of AMD’s recent advances in the market as its share moved from 16.8 per cent to 20.8 over the past one year. Between Intel and AMD, they control almost the entire chip market, making what is being called a duopoly. While they had at one stage announced they would not get into a price war, that’s just what Intel has done by launching the first salvo. AMD has responded to that by announcing the company will bring down prices across its range to match Intel for corresponding chips. Now that would be a bonanza for the consumer for obvious reasons.

Intel claims it has technology that would bring down its production costs by about 30 per cent from the present cost of producing Pentium 4 chips. Also, it has much bigger production capacity as compared to AMD, which also might contribute to price reduction and regular supply.

According to the latest announcements, the price of the new 1.7 gigahertz chip is going to be $352, which would mean something below the Rs 20,000 mark after the relevant duties in India. However, no dealers were ready to hazard a guess at the time of going to press as to what the implications are going to be for prices in India after this cut announcement. The prices of the rest of the range of Pentium 4 are going to be similarly cut, though the effect of it would be seen in India only by the end of this week. The 1.4 gigahertz chip would be sold by Intel at $193, which is a price cut of 54 per cent. In India this could translate to around Rs10,000. (The prices are of the chip alone, motherboard and RAM not included). Given the scene, what would happen to Pentium III prices could be anybody’s guess. All this could mean that buyers in India get a loaded 1.4 gigahertz assembled PC for below Rs 60,000 while the 1.3 gigahertz PC could come down to Rs 50,000.

The market for PCs has been in dumps during the last quarter. Sales in the USA are down for the first time, and so are they in India, where a lot of assemblers have even closed shop for want of customers. This slowdown in the market is also what Intel intends to tackle with the price cut, causing a general excitement and creating a demand for something that seemed out of reach for the common man by bringing it down to his level, even if with a slight stretch.

Pentium 4 till now has almost failed in India. The argument generally revolves around: "The chip might be good, but given the price, no." This is just what Intel now expects to fend. When informed of the new prices (taken in only with a pinch of salt), a few assemblers did see hope for Pentium 4 in a market that is even otherwise doing badly.

While the dotcoms were the first to down, or even out, at the stock markets, hardcore businesses like Intel have also felt the pinch. Its stocks had been going through a downward movement with the PC market shrinking. To counter this, the first cut in prices came about in the third week of April with the aim of boosting PC sales. The market did look up, but not enough. The profit margin loss due to the price cut might be more than the gain from higher sales, say market analysts. Well, maybe that’s the price Intel pays to stay in the lead. However, what the final outcome is going to be at the stock markets only time can tell, right now its only launch time for the new strategy.

Apart from the price, Pentium 4 has faced other criticism too. Its said to be not all that better than Pentium III. (See the April 9 issue of Login…. Tribune). In fact, in certain tests it fared even poorly as compared to Pentium III. But this is not exactly correct and that’s what Intel plans to prove this time around with an aggressive and complete market strategy. Most software had till now been designed for Pentium III. They have not been optimised to take advantage of the new architectural features of Pentium 4 and this makes Pentium 4 look slower than it is.

Pentium 4 is entirely of a different breed than the whole line of Pentiums that Intel has produced since 1995; it, accordingly, needs software made keeping its processes in mind. This Intel plans to get done aggressively. It has kept a budget of $ 500 million to promote Pentium 4 with software producing majors. To counter the negative air created about the new chip over the past year, it has planned new publicity campaigns and notified an advertising budget of $300 million!

Once new software that run best on Pentium 4 come to the market, not only will users be impressed with the new chip on the block, they will also be forced to go for it even if they are not impressed. The reason being that it would seem as if their Pentium III or even AMD chips have become slower than earlier as the software would now be optimised for Pentium 4. The tables would stand turned. Clever.

With this change in applications, Intel plans to get aggressive on selling the chip to the corporate markets, too. The home market front would be tackled more easily as the new features that are offered by the chip attract the home buyer first—better gaming, music and video-streaming.

Intel has meant to put the ongoing ding-dong battle over chip speeds with its arch rival AMD behind once and for all with the latest big dong. The 1.7-gigahertz Pentium 4 is the fastest PC chip on the market today. AMD was the first to come out with a production-level chip (Athlon) to touch the one gigahertz mark, which was then countered by Intel with the one gigahertz Pentium III and then by another 1.13-gigahertz PIII that failed miserably. For once it seemed Intel was losing ground—Intel lost about 4 per cent of the market share to AMD over the last one year.

But now, with the 1.7-gigahertz Pentium 4, Intel seems to have taken a daunting lead in the race. AMD plans to come out with a 1.5-gigahertz chip in a few months, but by then Intel is scheduled to touch the next round figure of two gigahertz. By the time AMD plans to come out with an all-new micro-architecture to match Pentium 4, Intel plans to have flooded the market with its chip, what with the massive promotion campaign and incentives for software developers. The present cost cut is going to be matched by AMD too. But Intel plans to offset it by using 0.13 micron process technology, which allows more transistors to be put on a single chip and, thus, reducing production costs. At present Pentium 4 chips are made from a larger piece of silicon than PIII, which is keeping the costs high.