Intel cuts prices and launches faster chip

The world's biggest chip maker Intel unveiled a faster version of its Pentium 4 processor on Monday, and cut prices on other chips in an attempt to stimulate demand.

The new processor runs at a speed of two gigahertz (GHz), or two billion cycles, a second.

Intel also said that demand for the company's products was showing "signs of coming back" to more normal levels.

Both chip and computer makers have struggled this year from a slump in demand for PCs.

And there was another stark reminder of the problems facing the sector on Monday, when Japan's largest chipmaker Toshiba said it was cutting nearly 19,000 jobs.

New chip

The new 2 GHz Pentium 4 processor will cost $562, and a 1.9 GHz version will cost $375. Prices of slower versions were cut to try and boost demand for cheaper computers.

In a statement Intel's vice president and general manager of the company's Desktop Platforms Group Louis Burns said the new chips were needed to meet the demands of future computing needs.

"The experience of the PC industry has proven repeatedly over the years that usage models evolve and new applications emerge" said Mr Burns.

"While innovation can sometimes be hard to predict, it is critical for our industry to drive forward-looking platform architectures that enable new capabilities" he added.

Is more speed needed?

Intel is currently battling to produce faster chips than its main rival Advanced Micro Devices (AMD).

But some people question whether the extra speed is really needed, and see the slowdown in PC sales as a sign that consumers are no longer willing to keep buying the latest product every year.

Unsurprisingly Intel doesn't believe in the argument that there's no need for faster chips.

"I think they've been saying that for probably the last 20 years " said Geoff Austin of Intel's desk-top division speaking on the BBC's World Business Report.

"There are a certain class of applications out there that will deliver a better experience with every bit of processor improvement you can give" he said.

And he said a faster processor helps computers working on several tasks simultaneously to perform faster and "minimise the hour glass".