Additionally, introduction of a low-low power 500-MHz Pentium III for notebooks, which effectively will compete against processors from Transmeta, has been moved up from the middle of the year to the first quarter. New versions of the XScale chip will make their debut as well. The early-year chip onslaught comes on the heels of a difficult year for Intel. In the first half, Intel lost sales because of a dire processor shortage. And in the second half, dropping PC demand forced the company to scale back earnings expectations twice.

Intel also had to recall a number of products. For 2001, company executives say they are intent on avoiding further shortages and beefing up quality control.

"We are going back to the 100 percent everywhere testing," said Jeff McCrea, marketing director for Intel's desktop products group. Regarding a 1.13-GHz Pentium III that was recalled, he said, "In a little bit of our haste, we didn't go through all of our traditional product validation." The 1.3-GHz chip is being put in the lineup to fill a price and performance gap between Intel's aging Pentium III 1-GHz chip and its new brand-new, high-end Pentium 4. Currently, prices of PCs with Pentium 4 chips start at about $1,900 to $2,100. PCs with 1-GHz Pentium III chips, however, cost about $1,400 to $1,500. The 1.3-GHz chip would appear in PCs priced between $1,500 and $1,700, a market segment that is becoming the home turf of advanced micro devices. PCs containing a 1.1-GHz Athlon chip, for example, start at about $1,800, with 1.2-GHz chips selling for slightly more.

AMD executives at last month's Comdex trade show in Las Vegas discussed how the company plans to exploit the gap between Pentium III and Pentium 4 prices. Intel executives declined to comment on unannounced products but broadly hinted that a cheaper Pentium 4 was coming. "You can expect to see us expand the (Pentium 4) product line throughout the year," Mr McCrea said. "It might make sense to expand (Pentium 4) both up and down." Slowing demand for PCs has freed up manufacturing capacity so that Intel can afford to dedicate factory space to the chip, said Mr Mike Feibus, an analyst at Mercury Research. "If you look back a year ago, Intel's thought at the time was that P4 was big and expensive to make, so it would fill the gap with Pentium III," Mr Feibus said. In arrangement with India.CNET.com