Intel's P4: Volumes Must Wait

Market response in the country to the launch of Intel's
Pentium 4 has varied from lukewarm to indifferent. Genuine Intel dealers (GIDs)
and manufacturers have brushed off the launch of the chip as "not of much
consequence just now". But surely it will make a difference eventually, as
Sandeep Nair, country manager, Acer Peripherals India, says, "Anything from
Intel cannot be ignored".

Industry players are unanimous on two counts: first, as far
as requirements are concerned, the chip is not a necessity given the bandwidth
constraints. In fact, even the speed of Pentium 3 has not been harnessed to its
full extent. Second, the price of P4 is too high to make an immediate impact in
the country, given the fact that India is a very price-sensitive market. Another
key factor is the transition time. Unlike the quick transition from P2 to P3,
the transition from P3 to P4 will take at least a year. The major reason for
this is that the architecture of P4 is completely different from P3. While P3
uses SDRAM, P4 will use the RDRAM which is yet to become an industry standard.
It is also based on Intel's new 850 chipset. Compare this to the transition
from P2 to P3, which involved only the change in the processor-in effect only
an upgradation.

But that is hardly surprising, since Intel has also stated
its intention to make P4 a mainstream product only by Q4, 2001. The company has
clearly stated that the chip is currently being positioned to target the power
users, multimedia and animation professionals and, of course, computer
enthusiasts.

What then was the need to launch the product now? Was it due
to the pressure to launch a product in response to AMD's Athlon? According to
analysts, the AMD factor was compelling enough to spur Intel to do a similar
launch.

Industry experts also state that Intel's launch was aimed
at a two-pronged strategy to stem the growth of the AMD market. While P4 is
expected to compete with Athlon at the high-end, Intel will undercut P3 prices
to an extent which would enable it to compete with AMD's competitive pricing.

However, GIDs and OEMs are not ready to go to the market with
the P4 chip. Manish Agrawal, director, marketing, Vintron Informatics, said,
"We do not expect P4 to generate any demand now. We have no plans in the
next two quarters to launch products based on P4 although we plan to include one
in our product portfolio during the next quarter." Ditto for AK Pandey,
Miraj Marketing, another GID, who said that he does not expect any demand to
come for P4 but will keep the P4 kit "only because it is a
compulsion".

Yet, some vendors are not taking chances. Like HCL
Infosystems, which has launched its Infiniti Challenger workstations with a P4
chip and Delhi-based GID, RR Systems, who says it will make CPUs with P4 for the
stray customer.

Acer has also launched a product called Veriton 9100, which comes with a P4
chip. "It is not available in the

country as yet, but will be shipped into the country in
response to demand," revealed S Rajendran, GM, marketing and product
management, Acer India.

On the acceptability of the product, Aditya Pant, head,
research operations, IDC India, said, "We shall see the acceptance of the
P4 among the target customers by next quarter, but for it to become a mass
product will take at least a couple of quarters."

At the end of the day, it is price alone that will determine
the acceptance of P4 in the market. Again, as far as requirements go, P4 is not
necessary. Therefore, if Intel slashes P4 prices to a level, which is
competitive to P3, the transition will occur and Intel intends to do that by Q4
of next year.

Besides, the P4 processors are not available as stand-alones
but will come as kits consisting of the processors, RAM and the chassis at an
approximate cost of Rs 85,000.

Meanwhile, customers are in for a good time. Previous Intel
exercises have shown that with the launch of new products, the company effects
15—20% price cuts on the older products to phase them out. So, many expect a
price cut in P3 that will in turn bring down the prices of computers.

Simultaneously, the new product is also positioned to become
an entry-level product. So the market expects a price cut to be announced in
Intel P3 chips soon. According to market feedback, Intel is likely to begin
slashing prices of P4 by Q2 of 2001, and by Q3 of 2001, the product is expected
to be at the entry-level.

BALAKA BARUAH AGGARWAL

in New Delhi