This spring, Intel unleashed its fastest processor yet, a 1.7GHz Pentium 4 processor. Although the release of ever-faster processors isn't a surprise, the chip's price is: Intel is offering this barn burner for only $352 per processor in volume, a price that's far less than the more than $1000-per-processor price that most new high-end chips command. Analysts see this pricing scheme as a swipe at rival Advanced Micro Devices (AMD), whose latest Athlon CPUs compete with Intel's Pentium chips.
However, Intel claims that the processor's low price simply results from the company's production efficiency and isn't an attempt to begin a price war with its smaller competitor. By pricing the new chip low, Intel is also attempting to resuscitate the sagging PC market; Intel's chips power the majority of today's PCs. To date, Intel's fastest chips, which are part of its new Pentium 4 line, haven't sold especially well because of perceptions that the Pentium III and low-end Celeron processors, which are far less expensive than the Pentium 4 line, are almost as fast as the new processors.
The low-price scheme can only bolster Intel's position. Although the company is dominant, Intel has seen its market share decrease from more than 82 percent in 2000 to 77.5 percent early this year as a result of strong sales of AMD's Athlon. AMD holds 20.8 percent of the market, leaving the remaining 1.7 percent to other companies such as Motorola.