Intel has unveiled a new solid state hard drive based on Flash memory that aims to provide a low cost alternative to mechanical hard drives.

The Z-U130 is currently shipping in 1GB and 2GB models, and the company is scheduled to add 4GB and 8GB versions in the coming months.

Models with capacities of 20GB and 40GB are slated for release by the second half of this year, followed by 80GB and 160GB versions next year.

The units are attached to computers through USB 1.1 and USB 2.0 connectors which in most cases will be integrated on the motherboard.

The low capacity drives target inexpensive desktop and notebook computers as well as systems for emerging markets such as Intel's Classmate PC, according to Peter Hazan, a marketing manager with Intel.

"The intention is to drive to the lowest cost with good enough capacity," said Hazan during a meeting with reporters at Intel's corporate headquarters last week.

"If your application requires 8GB or less [a solid state hard drive] can deliver that at a bill of materials that is lower than a hard disk drive."

Flash memory on average performs at twice the speed of a mechanical hard drive and consumes about half the power, Intel claimed.

Traditional hard drives also have a higher chance of breaking because they contain moving parts, and can make noise when spinning.

Intel's Classmate PC targets students in developing nations, and will be one of the first devices to use the chipmaker's solid state hard drive.

A Linux powered model will be equipped with a 1GB drive, and the Windows XP version is powered by a 2GB version.

At an estimated price of $300 per unit, the notebook computer is considered a direct competitor to the One Laptop Per Child notebook computer, which runs on a special version of Linux stored on 512MB of Flash memory.

Intel expects the solid state drives to show up in low cost desktop systems as well as embedded applications such as routers and point-of-sale terminals.

As chip sizes continue to shrink, Flash memory will increasingly march on the territory of hard drives. Hard drives furthermore have fixed components such as the casing and reader which cannot be reduced.

Intel predicts that a 4GB solid state Flash drive will become less expensive than a 1.8in mechanical hard drive in the first half of this year. The costs are scheduled to surpass those of 2.5in drives by the end of this year.

The 8GB model will break even by late 2008 for the 1.8in drives and mid-2009 for the 2.5in versions. Small 1.8in drives are used in portable consumer electronics such as Apple's iPod. The 2.5in models are commonly used in notebook computers.

Flash memory specialist SanDisk unveiled a 32GB solid state hard drive earlier this year.

But whereas the Intel drive is designed to reduce the physical size of the storage unit and requires a special connector not commonly found in mainstream systems, SanDisk offers a drop-in device that can be connected to a notebook's regular hard drive port.

• A video demonstration of Intel's flash drive is available on the Silicon Valley Sleuth blog.