Chip manufacturer Intel yesterday released its 1.7GHz Pentium 4 processor – its highest performance processor for desktop computers.

The new chip, which will feature in PCs made by several manufacturers, costs significantly less than Intel's recent offerings. Bulk buyers of the 1.7GHz chip (at least 1,000 chips) will be able to buy them for $352 (£244) each. When it was released this time last year, the 1GHz chip alone cost around $1,200.

Desktop systems powered by 1.3, 1.4 and 1.5GHz Pentium 4 processors are expected to drop in price by as much as a third.

The move promises to fuel a price war with rival chip manufacturer AMD, which has promised to meet Intel's competitive pricing.

"Our new processor will be affordably priced to offer customers choice between products," said an AMD spokesperson.

AMD's dual-processor is to be demonstrated at next week's US National Association of Broadcasters Show.

Intel claims its Pentium 4 processor delivers high performance, making it suitable for processing video and audio facilities.

"The Pentium 4 processor is destined to become the centre of the digital world," said Louis Burns, vice president of Intel desktop platforms group. "Whether encoding video and MP3 files [or] experiencing the latest internet technologies, the Pentium 4 processor is designed to meet the needs of all users."