Intel is capping its processor speeds at 3.8GHz in a move some have interpreted as the final humiliating climbdown of a difficult year.

Certainly it marks the end of an era, after more than three decades of cranking up clock speeds to power the IT revolution.

The capping is not permanent but it means the much heralded 4GHz Pentium 4 is unlikely to appear until 2006, up to two years after expected. Even then, clock rates will not increase at the rate of the past few years; Intel president Paul Otellini said as much at the Intel Developer Forum back in September.

It makes sense, because there are other ways to boost performance and they don't need fans powerful enough to drive a battleship. One way is to increase on-chip cache.

In 2005 Intel will offer a 3.8GHz P4 with 2MB that will match the performance of the 4GHz chip. Also, within the next year Intel is going dual core (two processors on one chip), which allows more to be done per clock cycle, providing higher performance at a lower frequency.

Some suspect the company continued the speed race as long as it did only to keep ahead of AMD, whose chips already do more tasks per tick than Intel's and so run slower for a given performance.

The latest hiccup reflects a changing market as much as changing technology.

For most of Intel's history processors never quite had the legs for the software in use, but around 2000, PCs became more than powerful enough for routine applications.

People still wanted speed but it was no longer a priority. Transmeta touched a nerve when it launched a series of low-drain chips, forcing Intel to do the same.

Ironically Intel's low-drain Centrino notebook platform is now one of its big success stories - and there are few complaints about its performance, though most models clock less than 2GHz.

Meanwhile Intel faces intense competition from the likes of Samsung and Texas Instruments in the burgeoning mobile market, which is not hooked on its technology.

It was no accident that Intel had almost as much presence as Microsoft at the London launch of Media Center Edition 2005. Both companies need to ride a similar transition: they cannot depend indefinitely on upgrades to generate sales, and they have to compete with consumer electronics companies for the emerging networked home.

For Intel that means making quieter, cooler processors. Intel founder Andy Groves is fond of talking about points of inflection, where the rules change, where nothing is the same again.

It seems Intel has hit one.