Intel may have to go on the defensive

Sabil Francis

agencyfaqs!

NEW DELHI, November 22,

In the Indian computer chip market, battle has been joined. For with the launch of its Pentium 4 (P4) chip, Intel has taken on both Advanced Micro Devices (AMD) and VIA Technologies, makers of Cyrix. And the fact that the P4 chip was launched here on the very day that it was unveiled in the US indicates the importance that chipmakers attach to the emerging Indian market.

Intel will be crossing swords with AMD and, to a lesser extent, the Cyrix brand in a no-holds-barred battle for the microprocessor market. Of course, Intel has a distinct advantage as it has already entrenched itself as an upmarket chip. Slick advertising has helped position the chip in the premier segment, and since the new series will bank on the same brand name - Pentium, which is almost synonymous with Intel - the megalith has an upper hand.

The advertising for the new chip, built around the slogan ‘Go where the Internet is', will communicate the message that the new chip is the chip for the future. The advertising, to be handled by Euro RSCG, will go online in a week or so, while the offline media campaign is likely to break sometime early next year.

Initially, the P4 will be targeted at the power PC business user and the connoisseur, but Intel plans to introduce the chip into the mainstream market sometime next year. "This is the chip that you need for applications of the future. And it is on that plank that we will base our communication strategy," says Jayant Murty, general manager, marketing, Intel Asia Electronics, Inc.

At the heart of the war is claim to being the world's fastest microprocessor, after AMD began shipping its 1.2-GHz Athlon chip earlier this month. Intel claims that the P4 can run at up to 1.5 GHz. The Intel P4 (1.4 GHz) is priced at $644 in units of 1000 or more, while the P4 (1.5 GHz) is pegged at $819, in units of 1000 or more.

The relatively lower prices indicate that Intel is feeling the heat of AMD's competition. Typically, the fastest Intel processors come out at prices closer to $1,000. For instance, the company released the now-recalled 1.13-GHz Pentium III in July for $990, in volume quantities.

With the Athlon processor, AMD has managed to surpass Intel in terms of desktop processor performance and has gained considerable brand recognition among consumers. And AMD, which operates on lower profit margins, sells its chips for less. A 1.2-GHz Athlon officially sells for $612 in volume, although it can be purchased for even less. A 1.1-GHz Athlon officially goes for $460, but can also be bought cheaper.

The fact that Intel is on the back foot is evident, as it has also slashed prices on its Pentium III and Celeron products in the range of 5 per cent to 36 percent. Then there is the performance attack of AMD, with Intel emphasising that its processors are better and faster.

Preliminary reports on the Internet suggest that the P4 does not have much value addition. Although the 1.5-GHz P4 does outscore the 1.2-GHz Athlon on the "Quake III" game, some video and media editing applications and relatively theoretical tests on memory bandwidth or scientific calculations, the reports claim that the P4 is slower on personal productivity applications.

It is a criticism that the company is taking in its stride. "There cannot be much more improvement in the speed of personal productivity applications like MS Word or Excel, but what we are looking at are future applications tailored to the chip's architecture, such as applications that depend on audio or video compression," says Murty.

AMD is rapidly closing the gap in this field too. It will have chipsets to make multiprocessor computers out in the first quarter of 2001. Intel won't be able to offer a two-processor solution for P4 until the second quarter.

Another disturbing trend for Intel is the shifting away of consumer market sales from high-end systems toward less expensive PCs that come with printers and other add-ons. In fact, it is this trend that VIA Technologies of Taiwan, which makes the Cyrix range, has tapped into. The company is trying to convince the Indian consumer that for most PC applications, higher speed and higher value chips like the P4 become irrelevant.

All this could mean that Intel, which has the commanding position in the PC price war, may have to first defend its existing position before launching any new offensive.

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