When it comes to buying PCs, speed is everything, even if you’re in the market for a budget PC. It’s a fact Intel seems finally ready to accept as it prepares to reintroduce its Celeron processor, aimed at meeting increasing demand for PCs in the US$1,000 to $1,500 price range.
On Monday, Intel (INTC) will take off the wraps of two new additions to its Celeron low-end processor line, which should boost the chip’s performance to more palatable levels for consumers. In addition to ramping clock speeds on the new chips from 266 MHz to 333 MHz, Intel has reverted to the integrated cache design used to make its higher-performance, Pentium II processors.
Intel is also expected to introduce a faster, 450 MHz version of its Pentium II chip. The company hopes to use that in targeting customers with fatter wallets — primarily developers, game enthusiasts, and other processor-hungry users.
“Our [OEM] customers are excited about differentiating between chips and articulating those differences to end users,” said Tom Garfinkel, marketing manager at Intel in Santa Clara, California. “The goal is to provide a measurably different computing experience” with each processor line, he said.
In fact, Intel fell under criticism for meeting that goal when its Celeron debuted last April. The chip got a lukewarm reception from budget shoppers who were looking for better performance, even in low-end chips.
“Intel’s original strategy for competing in the budget PC space was to take things out of the processor package to make it more affordable,” explained Nathan Brookwood, microprocessor analyst for Dataquest, a division of GartnerGroup in Santa Clara, California.
Unfortunately, taking out cache made the Celeron processor a lot slower, he said. “The performance was way below the curve.”
Now, however, Intel’s redesigned Celeron chip is expected to deliver performance almost identical to that of Pentium II chips with the same clock speeds. The chip’s improved design and competitive price will put Intel in a better position to contend with Advanced Micro Devices and Cyrix, two chip manufacturers that have aggressively pursued the growing budget PC market.
Intel recently dropped its processor prices by 30 percent across the board in anticipation of the new Celeron and speedier Pentium II chips. In July, for example, prices for Intel’s Celeron 266 MHz dropped from $106 to $86 per 1,000 units. However, Cyrix’s comparable M2 300 MHz chip is already down to $85 per 1,000 units. And Advanced Micro Devices is expected to announce price reductions next week for its K6-2 333MHz processor, now priced at $237 per 1,000 units.
“We see Intel’s announcement as a validation of this market space,” said Stan Swearingen, vice president of desktop products for Cyrix in Richardson, Texas. Swearingen added that Cyrix now devotes 100 percent of its business to the budget PC market.
“The market is definitely moving in that direction,” said Dataquest’s Brookwood. “People are basically using the same types of applications they used two or even three years ago.
“Nobody wants to buy really fast machines anymore.”
Brookwood said he doesn’t anticipate that will change until a whole new set of applications emerge.
Applications geared to go out and do comparison shopping on the Web while running in the background are examples of the types of applications Brookwood has in mind. But until such apps become widely available, the pressure for manufacturers to deliver lower-cost systems remains.
Dataquest anticipates systems priced under $1,500 will constitute 60 percent of the worldwide PC market by 2001. In 1997, such PCs made up 32 percent of the PC market. By contrast, systems priced higher than $2,500, which constituted 40 percent of the PC market in 1997, are expected to drop to 20 percent in 2001.
“However, there is always going to be a group of people who can’t have enough power,” Brookwood said. “People who need more headroom will pay for it.”
