Intel Corp., in an effort to jumpstart sales of notebook computers, is cutting prices on chips that go into "thin and light" machines aimed at consumers.
The computers, which will cost about US$600, are designed for people who want the features of a full-sized laptop in a smaller package. Intel's customers will begin shipping notebooks based on the chips this quarter, said Connie Brown, a spokeswoman for the company.
Intel, the world's largest chipmaker, is targeting a portion of the market that may account for 10% of laptop processor sales by 2013, according to Shane Rau, an IDC analyst in San Mateo, California. Intel, which had a 17% sales drop at its unit that makes chips for laptops last quarter, needs to keep out new competition from mobile-phone chip makers such as Qualcomm Inc.
"This is the next battleground for mobile computing and it is beginning to heat up," said Jim McGregor, a Scottsdale, Arizona-based analyst for research firm In-Stat.
Apple Inc. fired up interest in thin laptops last year by introducing the MacBook Air, which is less than 1 inch thick and almost twice the price of the company's most basic notebook. Intel Chief Executive Officer Paul Otellini has called such machines "executive jewelry."
Intel has typically charged more for versions of its laptop processors that need less power. Chips that use less electricity generate less heat, allowing them to be squeezed into smaller cases. Intel's Ms. Brown declined to say how much the company will charge for the new chips or which PC makers will use them.
IDC's Mr. Rau estimates that most of the current thin and light computers sell for between US$1,250 and US$1,500. Models such as the MacBook Air and Dell Inc.'s Adamo can sell for more than US$2,000. The majority of the new, cheaper machines will go on sale in early 2010, when demand is recovering, Mr. Rau said.
"They will draw some significant new volume," said Mr. Rau. "People look at the executive jewelry with some jealousy."
By cutting prices on chips that consume less power, Intel is continuing the strategy it started last year with its Atom processor for so-called netbooks, said Tristan Gerra, an analyst at Robert W. Baird & Co. in Milwaukee, Wisconsin. Netbooks are scaled-down notebooks powerful enough for basic functions such as surfing the Internet.
Demand is starting to shift from high-performance processors, which have been a "driving force" for Intel, to cheaper chips, Mr. Gerra said. While cutting prices may hurt Intel's profitability, it needs to hold off the possible challenge from phone-chip makers such as Qualcomm, he said.
"Intel is doing the right thing, it's just there are lower margins," he said.
San Diego-based Qualcomm, the largest maker of chips that run mobile phones, will begin selling a processor called Snapdragon this year. The new chip will become the basis of small computers made by Samsung Electronics Co. and other manufacturers.
Last year, Intel won sales in mobile computers from its only rival, Advanced Micro Devices Inc. Intel ended 2008 with 87.1% of the market, up from 82.3% in 2007, IDC says.
AMD began selling chips aimed at thin and light laptops in January and will offer improved models with better graphics capabilities and processors in the second half, said John Taylor, a spokesman for the Sunnyvale, California-based company.
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