Advanced Micro Devices is turning up the clock speed on its Athlon and Duron desktop chips and cutting prices on its existing chips. On Tuesday the chip maker introduced a new 1.2GHz Athlon processor for high-performance desktops and a new 800MHz Duron chip for low-cost PCs. Gateway is already taking orders on PCs with the 1.2GHz chip. Its new PC, the Gateway Select 1200, starts at about $2,499 (around £1,725). Compaq is also expected to offer the chip within the quarter in a Presario 7000-series PC; although that news is yet to be officially announced. HP is also expected to announce a 1.2GHz Athlon PC. The 1.2GHz Athlon, which has been expected for some time, is easily the fastest desktop PC processor available. However, what's more relevant to customers, especially those buying lower-cost Athlon systems, are the deep price cuts AMD made along with the introduction of the new chips. Chip price cuts, in general, equate to more bang for the buck for the consumer, as PC makers pass on the savings or hold prices steady, but offer a faster chip for the same amount of money. With the new chips, AMD announced deep price cuts on its high-end Athlon chips. AMD nearly halved 1,000-unit pricing on all of its Athlons. The 1.1GHz was slashed by 46 percent, falling from $853 to $460. The 1GHz Athlon chip was cut by 43 percent from $612 to $350, and the Athlon 950 dropped 39 percent from $460 to $282. The new Athlon 1.2GHz will cost $612. The 1GHz Athlon, by way of comparison, was priced at $1,299, last March. The pricing move seems to add fuel to the argument for a coming price war between AMD and rival Intel. However, AMD officials say that the company is not reducing prices at a faster rate or by larger amounts than it would normally. "I wouldn't call it a price war," said an AMD spokesman. "We are producing larger quantities of higher frequency chips. The benefit of that is that we can move more aggressively on price." Chip pricing, he explained, is set with a system price in mind. Historically, Intel reduces its chip prices in October as it works to clear inventories and set up for the coming new year. Intel, this year, is also making way for its new Pentium 4 chip. Intel reduced prices by a small amount on its 600MHz, 650MHz and 667MHz Pentium III desktop chips this week. The company, sources said, is planning a much larger round of price cuts for the end of the month. Sources say Intel will reduce its $669 1GHz Pentium III to $465. The 933MHz Pentium III will fall from its current $508 price to $348, and Intel will reduce the rest of its Pentium III chips, not reduced already this month. The new Intel prices don't do much to compete with Athlon. The 933MHz and 1GHz Pentium III chips will end up being about $66 and $115 more, respectively, than their AMD counterparts. Intel, however, appears to be targeting the higher-end Athlon chips with its Pentium 4 pricing. Sources say the 1.4GHz Pentium 4, for example, will cost about $644 or only about $32 more than the 1.2GHz Athlon. It will be some time, however, before Intel introduces the Pentium 4, which is expected November 20. Prices could change again between now and then. Intel officials could not comment on pricing due to the company's earnings quiet period. AMD's 800MHz Duron is expected to be available in systems from PC makers, such as HP. Pricing on the new chip is $170. What do you think? Tell the Mailroom. And read what others have said. To have your say online click on the TalkBack button and go to the ZDNet News forum. See Chips Central for daily hardware news, including an interactive timeline of AMD and Intel's upcoming product launches.