Intel's latest chip faces hot competition

A significant battle is set to break out in the computer industry next week when Intel, the world's largest chip-maker, launches its latest product.

The much-anticipated Pentium II processor, which comes out on Tuesday, enables information to be dealt with much faster than its predecessors. However, the rival manufacturer AMD has already slipped its K6 product, which is thought to be comparable with the Pentium II, on to the market and other products are expected shortly.

Richard Baker, UK marketing manager with AMD, said the company hoped that the encouraging reception given to its product so far would enable it to strengthen its position in the market.

The arrival of this kind of competition is leading some industry observers to predict a challenge to Intel's hitherto dominant position, which currently amounts to about 80 per cent of the personal computer market. "For the first time, people have a choice," said one.

Others are not sure that Intel's position will be seriously threatened. Roy Howitt, sales and alliances manager with Business Systems Group, a systems integrator specialising in serving the City, said the various chip makers were always leapfrogging each other with faster products.

He pointed out that Intel's strength came from its close relationships with Microsoft and other software producers. "It's not just speed, it's partnership. It's the close coupling of the processor with the operating system."

Moreover, Intel says that the Pentium II is the first business processor to apply the Multimedia Extension, or MMX, technology launched by the company earlier this year. So far, this has primarily been used to operate computer games because it offers much better graphics.

However, the increasing popularity of such features as video-conferencing on office computers has created a huge demand for the product, said a spokeswoman.

AMD, whose processor division is based in Austin, Texas, recently announced that Digital would be incorporating its chips in its products, while it is understood that Hewlett-Packard is planning to fit both AMD and Intel processors to the equipment it offers.

Industry observers point out that others are continuing to stick with Intel, indicating that the California-based company is still felt to have the edge in a fiercely competitive industry.

A sign of the significance of the latest development is the fact that Intel - which, according to the latest Fortune 500 rankings, saw revenues rise more than 28 per cent last year to $20.8bn (pounds 12.8bn) - is sending senior executives to the London launch.

Computer manufacturers such as Hewlett-Packard and Gateway will be demonstrating products fitted with the chip, while BA will be revealing how the new processor has helped it create a three-dimensional computer model of Heathrow Airport's Terminal 5.

Intel anticipates that computers fitted with the new chip will sell for less than pounds 2,000. However, regardless of whether AMD gains the bigger share it is seeking, there will be a boost for consumers who - unlike the corporates - are prepared to settle for second best.

As always happens when a new product of this sort is launched, the immediately preceding technology becomes cheaper.