cutting prices on its Celeron chips by roughly 30 percent this month and
releasing a new, even cheaper version of the chip earlier than expected. The
unscheduled, unannounced price cuts, which took place on December 6, mean that
the fastest Celeron chips can be bought for between $85 and $105 in retail
outlets today, or about $40 less than in November, according to dealers. And,
while AMD did not officially respond with a price cut of its own, chip dealers
note that the market has effectively lowered the price of K6-2 chips to close
to the same level.
The December price cuts will be followed by further cuts across Intel's Pentium
II line as well as the rollout of new, faster Celeron chips in the first week
of January, sources said. The circumstances surrounding the stealth price cuts
further indicate that a deeper battle is shaping up in the low-end computing
segment. Despite the December discounts, retailers are selling Celeron
processors for less than the official Intel wholesale price. Dealers have also
said Celerons are in fairly ample supply, especially in comparison to
hard-to-get Pentium IIs. Typically, wholesale-retail price imbalances, healthy
supply, and soon-to-come chip releases mean more chip price cuts. More Celeron
cuts could come next week with the other price drops. In turn, this would
likely mean a wider variety of Celeron-based computers for $1,000 and less.
Intel lowered the price on the Celeron line on December 6 with the introduction
of the new PPGA "370 Pin Socket" version of the chip, according to an Intel
spokesman. 370 Pin Socket refers to the packaging that surrounds the
microprocessor itself. Until recently, Celeron chips have come in a "Slot
1"-type package that is cheaper than the packaging that comes with the Pentium
II but is more expensive than the packaging that comes with AMD processors.
The Socket package, announced earlier in the year, cuts the manufacturing cost
of the chip but otherwise does not change how it operates, the Intel spokesman
said. Celeron chips in the Slot 1 package, however, are also still available.
The company shipped the Socket chip in December to allow computer makers to
build systems around the chip for the new year, said the Intel spokesman.
Earlier in the year, sources inside and close to Intel said the Socket version
of the chip would not come out until 1999.
Under the December price cuts, the 333-MHz Celeron in the Slot package dropped
28 percent, from $159 to $115. The Socket version of the chip, which sells for
$107, represents a 33 percent discount. The price of the 300A-MHz Celeron in
the Slot package dropped 32 percent from $138 to $94. The Socket version, which
sells for $90, represents a 35 percent discount. The prices above are wholesale
and are offered to computer manufacturers and distributors that buy chips in
1,000-lot quantities. Both the 333-MHz and 300A-MHz versions contain 128KB of
secondary cache memory.
Despite these discounts, more cuts are likely, according to retailers, because
they are selling the chips in retail for even less than Intel's wholesale
prices. A survey of retailers conducted by CNET News.com found that the 333-MHz
Celeron in the Slot package sells for between $95 and $105 with a 30-day
warranty, less than even the wholesale price for the Socket version. With a
three-year warranty, the chip goes for $123. The 300A-MHz in a Slot package
goes for $85 and up. Most dealers have yet to pick up the Socket-style chips,
but they expected these to be cheaper.
Healthy inventory of Celerons
The lower-than-wholesale prices are largely attributed to fairly healthy
inventories of the chip. Celeron chips are selling fairly well, but they are
also easy to get. By contrast, Pentium II chips are selling for $225 and up and
are more difficult to find. "A lot of our resellers are building systems around
the 300-MHz Celeron. Even Intel is surprised, I think, about how they are
selling," said one chip dealer. Still, despite demand, Celerons are fairly easy
to get. The timing of the price cuts also seems to portend more competition.
Other news outlets erroneously reported last week that these Celeron price cuts
were slated for January, two weeks after Intel already quietly lowered the
boom. The slightly early release of the cheaper Socket 370 package would also
seem to indicate that Intel is trying to put more pressure on competitors.
Intel lost market share to AMD and others in 1997 because of the rise of cheap
computers, according to Nathan Brookwood, an analyst with Insight 64. The
company is still catching up. "Intel clearly has its work cut out for it at the
low end," he said.