Intel is facing one of the toughest challenges to its dominance of the global computer chip industry. It comes not from rivals on the rise but from within the corporation itself. Intel is preparing for a huge change to a new manufacturing process that should produce tens of millions of chips two, three and eventually four times faster than the chips in today's top-selling personal computers.

A successful start would give Intel critical advantages in volume, pricing and performance, but a slip-up would leave an opening for high-speed chips, recently released by Advanced Micro Devices Inc and Cyrix Corp, analysts said.

"Manufacturing technology is a very big component to Intel's success," said Mr Joe D'Elia, a semiconductor analyst at Dataquest Inc in London. "It is always critical for them to make transitions smoothly but since this one's coming with the competition snapping at their heels, it's more important."

The company recently previewed its new process for reporters in Europe, where the large production facility in Leixlip will play a significant role in the changeover.

But a trouble-free transition is not a certainty. Intel stumbled earlier this year when it brought out Pentium chips with MMX multimedia technology.

It hyped MMX, was caught off guard when customers stopped buying older non-MMX chips, then had to cut prices sharply and ended up issuing a warning about second-quarter earnings.

Analysts note that that was a product and marketing transition - not the kind of manufacturing changeover Intel has historically done well. But it shows the company isn't infallible.

"Any time Intel makes a major transition, there is a chance it could screw it up," said Mr Linley Gwennap, editor of the US-based Microprocessor Report. "Occasionally the giant miss-steps."

Intel, which reported second-quarter net income of $1.6 billion (£1.12 billion) on sales of $6.4 billion, admits a smooth process change is vital. By the end of the year, the 0.25 micron process will account for 40 per cent of its output and 70 per cent by the end of 1998.

Mr Hans Geyer, who heads Intel's European operation out of its Munich office, downplays any extra competitive pressure from AMD and Cyrix, which now have chips that, for the first time, match the performance of Intel's fastest.

"This will give us more capacity to make Pentium II processors at much higher clock speeds and at lower costs," he said.

"But this is a normal transition. I don't think the competitive situation has really changed."

The process change will enable Intel to make tinier silicon circuits than most other companies. Intel and others now use a process called 0.35 micron, which etches lines in silicon - the wires in an integrated circuit - that are 285 times thinner than a human hair.

The new 0.25 micron process makes lines 400 times thinner than a human hair. Since electrons don't have to travel as far inside a chip, a processor can run faster - 300 or 400MHz instead of today's top speed of 233MHz.

"It's highly likely we should get above 400MHz but, until we are in production, we can't say what the top speed is," said Mr Pierre Mirjolet, Intel's product manager in Europe.

The company's plans show that the next manufacturing process - 0.18 micron, due in 1999 - should bring chip speeds up to 900MHz. Based on that, analysts believe the 0.25 micron process should top out at about 600 to 700MHz.

Thinner lines also mean cheaper chips, because if the circuits are smaller, Intel can fit more on one silicon wafer. With the 0.35 micron process Intel gets 60 Pentium II chips per wafer, but 150 with the new process, Mr Gwennap said.

That could spark a jump in sales and profit. With Pentium II chips slotted to sell for $500 (£349) each next year, the new process would generate about $75,000 in sales from one wafer - up from $30,000 from the 0.35 micron process.

But getting such advanced manufacturing technology up and running is no easy task and Intel must do it on a mass scale. It controls 85 per cent of the market and will make about 75 million chips this year - 10 times AMD's capacity of Pentium-class chips.