Intel ready to intensify chip price war

Intel is expected to drop a price bombshell on rival AMD later this month as it attempts to win back market share from its smaller rival.

So says Dan Niles, an analyst at Lehman Brothers. He predicts that on 26 August, Intel will cut its 1.8Ghz Pentium 4 chips by more than 50 per cent, and other Pentium 4 chips by around 40 per cent.

In July, analysts said that AMD hadn't been ready for fierce competition from Intel after it issued a profits warning. Now, Intel is set to up the stakes.

Niles says: "For those who thought the price war was already aggressive, you haven't seen anything yet..."

Niles said that AMD had increased its market share from 13 per cent to 21 per cent at Intel's expense, but that Intel price cuts would win back market share.

Financial analysts reacted to the research note by reducing their estimates of Intel earnings for the third quarter, believing that such an aggressive move would hit Intel's bottom line.