Intel Says It Will Cut Chip Prices in Response to Stiff Competition : Technology: Analysts describe the expected cuts of up to 18% as deeper than those the company has made in the past.
Intel Corp., facing increased competition, said it expects to slash prices on its Pentium and 486 chips by up to 18% in the second quarter over the first quarter of 1994.
The cuts are steeper than the company’s average quarterly cuts of about 5% on old products and about 8% to 9% on newer products, Erik Jansen, an analyst with Alex. Brown & Sons, said. “I see the move as a vote of confidence that they can make and sell more units (of Pentium) than the world had expected them to,” he said.
The world’s largest independent maker of microprocessors said the cuts reflect the company’s goal of accelerating Pentium-based personal computers into the mainstream.
Intel said the 1,000-piece price for its 66 MHz Pentium processor will be $750 each and the 60 MHz Pentium will be priced at $675 each, down 14% from the prices in the first quarter.
The 66 MHz Intel486 DX2 processor will be priced at $360 each in 1,000-piece quantities, down 18% from prices the company expects to charge in the first quarter. Intel said it will also be lowering the prices of other 486 processors.
“We have now shipped several hundred thousand (Pentium) units, said Paul Otellini, senior vice president of Intel’s Microprocessor Products Group.
“We expect to ship millions of Pentium processors in 1994, produced at five factories, and are moving the price into a range that will make it even more affordable for use in the high-volume PC market segment.”
The price cuts follow the unveiling of a competing line of chips by Hewlett-Packard Co., the PA-7100 LC and the PA-7150, at significantly lower prices. Intel also faces increasing competition from the PowerPC chip made by Motorola Inc., Apple Computer Inc. and IBM. The PowerPC sells for about $265. The HP chips and the PowerPC chips are based on RISC, or reduced instruction set computing, technology. Intel’s x 86 family of processors are based on the older, complex instruction set computing.
In the last six months, the Pentium processor outshipped the entire year’s shipment of any RISC processor-based systems, Otellini said.
In 1994, Intel expects Pentium processors to account for about 15% of the overall PC market volume and expects that by the fourth quarter of next year Pentium processors will represent 25% of the Intel architecture processor unit volume.
By that estimate, the company expects to sell about 6 million units of Pentiums next year, Jansen said. “That is going to up most analysts’ expectations,” he said.
The timing of the cuts reflects the coming on line of the company’s factory in Ireland, “which is the only factory that really matters as far as Pentium production is concerned,” Jansen said. Intel’s Irish plant is expected to be churning out large numbers of the chip by June, he said.
The Pentium price cuts will result in the doubling of PC performance “at key price points in 1994,” Intel said.
“Once again we’re seeing a dramatic move in PC price/performance,” Otellini said. “Seven months after introduction, there are more than 100 manufacturers of Pentium processor-based systems on the market--some under $3,000. This product is on the fastest ramp in our history.”
