Intel paves the way for cheaper Pentium 4 PCs

New chipsets oust Rambus memory in favour of cheaper SDRAM, aiming to please business buyers. Can the new products rev up lacklustre Pentium 4 sales?

Intel is expected to officially debut a new chipset for the Pentium 4 on Monday, considered an important move to bring systems based on the flagship processor down to a mainstream price point.

The 845 chipset will enable Pentium 4 processors to use SDRAM memory, the inexpensive standard used by most PCs. Currently the only Pentium 4 chipset available from Intel is the 850, which can only accept significantly more expensive Rambus Direct memory (RDRAM).

Virtually every major computer company will unveil budget-class Pentium 4 computers for the business market at the beginning of next week using the 845. Hewlett-Packard, for instance, will release the Vectra VL 420, which will contain a 1.6GHz Pentium 4, 128MB of memory and a 20GB hard drive for $899. Gateway, Dell, IBM and others have similar plans.

According to sources, the machines will all cost around £70 less than their Rambus-based counterparts.

The new chipset comes at a time when Intel, like most high-tech companies, is struggling with slack demand from businesses and consumers alike. Intel has pursued a policy of heavy price reductions on Pentium 4, as well as subsidising the cost of the RDRAM that comes with it, in order to make the platform attractive to the mainstream market.

However, the subsidies are taking a toll. In a press conference with analysts yesterday, Intel chief financial officer Andy Bryant admitted that the 45 percent to 50 percent Pentium 4 price cuts at the end of August will cut gross profit margins for the third quarter slightly below the 47 percent originally predicted.

He said that gross margins for the full year of 2001 will, however, still hit the 49 percent mark originally estimated.

The 845 chipset could well help Intel sell Pentium 4 systems, according to analysts. Some industry observers say, for example, that businesses may have been holding back purchases of Pentium 4 PCs until the 845 chipset is available.

Many business buyers were turned off by Rambus memory following a series of production glitches last year around Rambus-compatible Intel products, according to analysts. Though the production problems have been resolved, some business buyers are still wary.

Rambus executives dispute these contentions. "The price difference will be more like $30 to $50," said Avo Kanadjian, senior vice president of worldwide marketing at the Los Altos, California-based company. "There were some reservations in the past, but we've had two years of mass production that show that an RDRAM system is highly reliable and stable."

In the meantime, Taiwan's Via Technologies, the No. 2 chipset maker after Intel, has already released its P4X266 chipset, which allows Pentium 4 to use not only SDRAM but also double data rate (DDR) SDRAM, a next-generation standard that is much faster than SDRAM but less expensive than Rambus-based memory.

According to reports, Via has already signed up three Taiwan motherboard makers to use the P4X266: Chaintech, Shuttle and Tyan. All three were reported to be showing Via-based Pentium 4 motherboards at this week's Via Technology Forum in Taipei, Taiwan.

The Via chipset is controversial because it is being manufactured without a licence from Intel. Via claims the chipset is covered by a licence owned by graphics company S3, which Via acquired last year.

Most of the Intel-based PCs to be released next week will sell for around $899 and save business buyers around $100 or more. The basic configuration of Gateway's upcoming E-6000 desktop, for example, will feature a 1.5GHz Pentium 4, a 20GB hard drive, and 128MB of SDRAM for $1,139. A similar computer with RDRAM would be priced $100 higher, said sources close to the company.

Dell's Dimension 4300 will feature a similar configuration and cost about the same. Compared to other, similar Dell desktops, the Dimension 4300 will cost anywhere from $90 to $220 less, depending on the configuration and the amount of memory used.

Intel has not yet officially released the 845 chipset. Company executives, however, were upbeat about its prospects at the Intel Developer Forum last week. "We believe the 845 is going to be the next high-volume chipset," said Jeff Austin, marketing manager for Intel.

Intel declined to confirm the chipset's release date.

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