Next month, Intel will cut the list price of a 300MHz Celeron chip from about $160 (£98) to less than $100 (£61), according to sources. As recently as last month, Intel's plan was to cut the price by only $20 (£12), to $140 (£86), the sources said.
Intel officials declined to comment on future pricing, but analysts said the company may have come under fire from PC makers for charging a premium on a chip whose performance has been widely criticised.
"I'm not surprised,'' said Mark Specker, an analyst at SoundView Financial Group, in San Francisco. "PC makers can't make margin on those [systems] anymore because there is other stuff out there that's cheaper and just as good.''
Next month's price cut will set the stage for higher-performance 300MHz and 333MHz Celeron processors with 128KB of integrated cache, both of which are due in September.
The 300MHz version will cost about $150 (£92), while the 333MHz version will cost about $190 (£117), sources said. By November, they will cost $140 (£86) and $180 (£110), respectively, they added, although prices could plummet further if yields and/or market conditions warrant it.
Analysts are bullish on the forthcoming Celeron models and systems built around them. They expect them to have more appeal in the corporate sector because of the increased performance.
Intel is also seeking to boost demand at the high end. Next week at the Siggraph trade show, it will announce specifications for standard workstation designs, called WTX. Intel will also announce the specification for AGP Pro, which is a superset of the 4X AGP spec and is due next year.
WTX is similar to earlier Intel efforts in the PC space in which it defines a standard motherboard size and placement of connections and slots. Adhering to the spec, according to Intel, will make it easier, faster and cheaper for OEMs to develop and sell workstations because they don't have to design a board and chassis from the ground up.
"WTX will accelerate adoption,'' said Andre Wolper, director of industry marketing in Intel's Workstation Division. "Currently, OEMs have by and large developed their own Xeon systems, but these redundant development costs can be borne by Intel.''
Often Intel will build motherboards based on its system spec and populate the board with its chip set and other components, then sell that directly to OEMs. This leaves OEMs with minimal research or development work to do and, ultimately, products that sell high volumes but are often classified as commodities.
While Wolper didn't come out and say so, he indicated that Intel would build workstation motherboards.
"The WTX specification doesn't necessarily mean that Intel will do a [workstation] motherboard. But it's a logical thing to do and I wouldn't be surprised if we did it,'' he said.
As for AGP Pro, it is expected to manifest itself in midrange and high-end workstations next year.
A higher-performance bus than even 4X AGP, AGP Pro requires a rearchitecture of core logic. Third-party graphics companies are expected to build powerful graphics cards for AGP Pro.
The WTX specification supports the AGP Pro bus and has physical space for AGP Pro graphics cards, as well as future 32-bit processors.