Intel will announce an aggressive round of price cuts on some of its microprocessor chips next week in an attempt to spur demand in the sluggish personal computer market.

The world's largest producer of semiconductors, which employs more than 3,500 people in Leixlip, is thought to be preparing price cuts of up to 40 per cent on some chips.

US media reports yesterday claimed the company was considering reducing the price of some of its chips by between 2040 per cent. This is above the 15-30 per cent range expected by analysts.

The reports suggested the price of Intel's Pentium III one gigahertz chip would be slashed from $465 (€504) to $270, while Pentium 4 chips, low-cost Celerons and Pentium III mobile chips also are being reduced.

All the price cuts are expected to be effective from this coming Sunday, according to the reports.

The decision to introduce an aggressive price-cutting strategy is an attempt by Intel to stimulate demand for its processors, which are the main computing engines inside desktop and portable personal computers.

The economic slowdown in the US has undermined demand for computers and several research consultancies have forecast weak demand in the PC sector. Intel has said it expects its own sales to fall 15 per cent in the first quarter of 2001 from the fourth quarter of last year.

An Intel spokesman would not comment on the expected price cuts but said the company made price reductions on a regular basis to provide better value to customers.

Ms Rita Sfeir, technology analyst with IDC, said the price cuts would affect Intel's competitors and would be a blow to the sector.

Intel shares fell back 5 per cent on the Nasdaq last night to close at $34.44. The negative sentiment surrounding semiconductor stocks comes despite upbeat comments on the sector from a senior equity strategist at Merrill Lynch.