Intel yesterday denied that its new Pentium 4 processor is totally manufactured in Israel, although one component is made in the company's Israeli factory. Reports said the product is made in Intel's Fab18 factory at Qiryat Gat, located on the site of the Palestinian village Faluja that was destroyed by the Israelis in 1949.

"Yes. One Pentium 4 component, wafar, is made in the Israeli factory. The microprocessor is made in another company factory and packaging in a third. The product was made in five factories actually," said Gilbert Lacroix, Intel regional general manager for the Middle East and North Africa.

"Intel produces its products in many of its factories, but we usually never know where it is fully made. Intel does not usually put its eggs in one basket." Lacroix said Intel does not get involved in politics. He did not deny that the company has two factories in Israel, but said it had chosen the location for suitability and economic feasibility. "We are out of politics. None of the Intel employees knew Qiryat Gat was a village," he said.

Lacroix said Intel plans to pump huge investments into the Arab world - mainly Egypt - and develop its ties with regional firms. "Why was Intel targeted among so many companies?" asked Lacroix, referring to products made in Israel by other multinationals.

In October, The Register, an online newsletter, said Intel's Fab18 produces all Pentium 4s and that Palestinian unrest could threaten the factory and disrupt output. Intel spokesman Chuck Malloy denied that the factory produced only the Pentium 4. It also makes microprocessors, Pentium 3s and Celerons. Mewanwhile, adequate supplies of the new Pentium 4 will be available in the Middle East in the first quarter of next year.

The P4 processors, introduced yesterday, will thus be able to meet regional demand quickly, Lacroix said. In the next few weeks, unit shipments will number in the thousands and by early next year, they will be increased in accordance with demand, he said.

Intel thus expects to thwart the grey market operators who have often capitalised on shortages to sell "re-marked" processors. The P4, targeted at the top range of personal computers and entry level workstations, offers "better Internet experience". For the broader market, Intel has the Pentium 3, launched in 1998.

"Our efforts over the recent past have brought down the availability of re-marked Intel processors to virtually nil. And by keeping a strict tab on the demand estimates from PC assemblers, grey market operations have subsided sharply from earlier levels," Lacroix said.

"Recent uncertainty in international processor pricings have also impacted on grey marketers."

Intel ships an estimated 80,000 P3 chips to the Middle East and North Africa, and holds about 85 per cent of this processor market. At 1.2 to 1.4 million, the number of PCs in the Mena region as a percentage of population (about 250 million) is still small compared to North America and Western Europe.

"This is why even at an annual 25 per cent growth, which is higher than the global average, the PC penetration levels are still relatively low.
"The Internet has also started making inroads and will grow significantly from the two million users now."

PCs using the P4 will initially cost $2,000-$2,800 (Dh7,340-Dh10,276). By the first quarter of next year prices will fall to $1,600 (Dh5,872), according to Intel.