Intel, the world's largest chip maker, apologized for its previous policy on the flawed microprocessor as it launched the replacement program at the height of the key Christmas selling season.
The company continued to insist that worries about the Pentium microprocessor, which handles the central operations of personal computers, were overblown.
But it conceded it may have upset consumers with its earlier policy, which put the burden on consumers to show that the chip flaw affected them.
"Our previous policy was to talk with users to determine whether (they) required replacement of the processor. To some people, this policy seemed arrogant and uncaring. We apologize," said Intel chief executive Andrew Grove.
"What caused our change in policy was continued unhappiness by customers for what they saw as a highhanded policy," Grove said in a conference call. "That policy clearly rankled some people."
Grove stressed that Intel still believes the flaw in the Pentium "is technically an extremely minor problem" that would affect a very small number of users.
Intel said it plans to the charge replacement costs against its fourth-quarter earnings.
Paying for all the replacements will be cost at least five cents a share, or $30 million, a company official said. Industry analysts said it could be far higher.
Robertson, Stephens & Co. analyst Daniel Klesken estimated the charge at 15 cents a share, or $100 million.
Intel has maintained that the chance of an average computer user encountering a problem remains remote. It said the problem occurred "once every nine billion random number-pairs."
Intel has said this happens only in sophisticated computer operations and "almost no one will encounter the flaw."
Starting Wednesday, Intel will run large advertisements in major newspapers across the country, and later in Japan and Europe, apologizing for the flaw, and the handling of customer inquiries, and offering new chips.
The flaw in the state-of-the-art computer chip has been the focus of discussion on computer bulletin boards and in academic circles for months. But Intel decided not to recall them or take any other action, and sales of Pentium PC's remained strong.
The problem became a major crisis for Intel last week when International Business Machines Corp., the world's largest computer maker, said it would halt all sales of Pentium-equipped PCs because of quality problems.
IBM took the action, it said, because it had discovered more basic flaws in the chip in its laboratory testing than Intel had disclosed.
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