Intel's low-power processor, code-named Diamondville, will initially be available as a single-core processor, but the company is planning a dual-core version, said a source familiar with Intel's plans.

The dual-core Diamondville will deliver better performance than the single-core version and will be for low-cost desktops, the source said.

The dual-core Diamondville chip takes Intel into the low-cost desktop market to compete with vendors such as Via Technologies, which is providing low-cost processors in desktops priced at less than US$300 (£150 plus VAT) being sold by Everex.

The single-core Diamondville will initially be included in fanless low-power notebooks, the source said. The chips, which will be available around the middle of this year, will be manufactured using the 45-nanometer process and will likely contain 47 million transistors. It will include a 1.60GHz processor and 512K-byte cache.

Though processor pricing hasn't been set, the single-core Diamondville chip will be for laptops in the US$250 to $300(£125 to £150) price range, the source said.

Diamondville is based on the Silverthorne chip architecture, which has a small die size and is designed for ultramobile devices. Although they are for different product segments, the Diamondville and Silverthorne processors fall under a single processor family that will receive an official brand name soon, the source said.

Diamondville will most likely be included in Intel's next version of Classmate PC, the source said. Micro-Star International is already working to introduce an ultra-low-cost notebook PC based on Diamondville to compete against rival Asustek Computer's Eee PC.

Intel intends to include Diamondville processors in a new product category the company terms Netbooks – low-cost, low-power notebooks designed for basic computing such as Internet use. Classmate PC is an example of a Netbook, the source said.

This low-end of the market is expected to grow, spurred by the success of Asustek's Eee PC ultramobile notebook, which has sold thousands of units so far, said Dean McCarron, founder of Mercury Research.

"Once the Eee PC happened and we saw the volumes associated with it, all of a sudden design activity really stepped up," McCarron said.

The Eee PC is powered by a specially made Intel Celeron ultra-low voltage processor, which Diamondville will replace in the low-end notebook segment, McCarron said. The Celeron brand itself will not go away, but will instead focus on speedier processors to meet higher multitasking needs.

Diamondville could also have competition from Via Technologies C7-M processor, which is included in Everex's Cloudbook ultraportable PC. Via Technologies' is also designing a processor based on its Isaiah architecture to replace the C7-M processor. The new 64-bit Isaiah architecture will enable processors in notebooks and desktops to run at speeds from 400MHz to 2GHz and include 1M byte of cache. The processors are set for release in the middle of the year, around the same time as Diamondville, McCarron said.

This is the first time Intel is making a purposefully designed chip that is low in cost, McCarron said. Via is the pioneer in that space and will continue to make low-cost products, so there will be some obvious overlap in the future that will lead to competition, he said.

Advanced Micro Devices will focus on hitting the low-cost market in 2009 with Fusion, which includes highly integrated components, McCarron said.