The cost of a Pentium 4 PC could fall by as much as £300 by June.

Intel has just granted the first licences allowing manufacturers to make Pentium 4 chipsets – components which make the processor talk to the rest of the motherboard. The move is likely to cause a drop in the price of chipsets and therefore the overall cost of P4 PCs. Previously, Pentium 4 processors have used Intel’s own 850 chipset.

The deal is being referred to by PC manufacturers as an 'unscheduled' price drop: Intel has already lopped £200 from the cost of its Pentium 4 processors this week. With a greater volume of chipsets on the market, more manufacturers will make Pentium 4 motherboards and the price of systems will fall.

The motherboard and processor currently comprises about 60 percent of the cost of a PC.

Sources at one UK PC manufacturer explained: "If you reduce the price of the chipset, you reduce the price of the complete system. It could cause high-end P4 systems to drop by about £200-£300."

Industry sources said Intel is acting to win back system builders who have opted to buy AMD’s successful Athlon and Duron processors. AMD this week announced that its sales were up nine percent in the first quarter of this year.

Intel has been actively meeting with motherboard manufacturers and system builders. One motherboard manufacturer said it planned to produce cheaper P4 motherboards in six months.

Intel said it has signed bus licences with two chipset manufacturers: ALI and SIS. This will give the two companies access to Intel’s bus interface for the Pentium 4 processors allowing them to make chipsets for the processors.