Chip giant Intel last week detailed plans for chips with two processor cores on one piece of silicon, a move that promises a dramatic change in system price/performance.

The development of multi-core chips is likely to accelerate take-up on volume servers of CPU-hungry technologies, such as virtualisation and business intelligence. However, software licensing could prove problematic.

Many software vendors currently charge per processor, so dual-core chips threaten to reduce their revenues. AMD last week said that Sun, Red Hat and Novell will all price by CPU socket rather than processor core. But other vendors may decide to argue that a dual-core chip should carry the same software tariff as a two-way server.

Intel expects to make a rapid transition to the new technology. "By the end of 2006, 40 percent of all our desktop chips, 85 percent of our Xeon server chips, and 70 percent of mobile chips will be dual-core," said the firm's president, Paul Otellini.

At the Intel Developer Forum last week, Intel showed a four-chip demonstration server based on a future dual-core Itanium 2 chip, codenamed Montecito. HyperThreading technology added a further doubling of processing power. Overall, this provided the equivalent of 16 processors from just four chips.

Intel also announced that it plans to release a dual-core mobile processor, codenamed Yonah, next year with a new graphics chipset and wireless support.

Experts predict that by swapping in multi-core chips firms will be able to upgrade to higher performance relatively easily.

Nathan Brookwood of analyst Insight64 said, "These chips provide an attractive path for increasing performance with little or no increase in power consumption or heat dissipation."

In a research note, Martin Reynolds of analyst Gartner wrote that dual-core demonstrations mark "the beginning of a significant increase in processing power across the entire industry".

Competition between Intel and AMD may accelerate the release of their dual-core products, Reynolds added. "AMD might well speed up its conservative [second half of 2005] release date. The release of dual-core designs from these manufacturers will alter the competitive landscape of the processor market."

IBM last week said it will use a dual-core AMD Opteron in a new version of its eServer 325, scheduled for the middle of next month. AMD demonstrated its first dual-core chips on an HP ProLiant server at the end of last month. Vice-president Dirk Meyer said it was a "milestone that changes the dynamics of the computing business".

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