Over the Christmas holiday buying season of 1997/98, Intel(r) realized that there was a large gap in their then-current CPU offerings. The "$1,000" PC had caught the public's attention and was turning in some impressive sales figures at the time, with Intel(r) competitors Cyrix and AMD reaping much of the rewards from OEMs equipping their products with underpowered/low cost CPUs like the MediaGX and K6.

The "Intel(r) Celeron(tm) processor" was conceptualized by Intel(r) to fill the sub-$1,000 PC market for 1998 and beyond, and accomplished this feat by incorporating the best parts of the Intel(r) Pentium(r) II CPU package in a unit that cost up to 50% less than it's Intel(r) Pentium(r) II processor equivalent when launched.

To lower the cost of the Celeron dramatically, Intel took two large steps. First, they eliminated the 512K 1/2 speed L2 cache that their Pentium II line came equipped with. L2 cache is essential for most Win95/98 business applications to run quickly, so immediately the Celeron was 15 - 20% slower than a Pentium II running at the same core speed when used under business applications. Under light aps and games however, the Celeron performed within 90% of the speed of the much more expensive Pentium 2, at half the cost. The second step Intel took to lower the cost of the Celeron was to remove it from the "SEC Cartridge" that they used/use for the full-speed Pentium II line. Since the Celeron doesn't have any additional L2 cache modules to protect, the decision was made to mount the Pentium II Deschutes core (minus L2 cache) on a standard small PCB wafer, and allow it to plug right into any "Slot-1" based mainboard.

To even further reduce Celeron costs in 1999, Intel has begun manufacturing Socket9 or Socket370 variants of the Celeron CPU, so that it can be fit to very low cost mainboards which don't incur the costs associated with a Slot 1 board. These Socket370 CPUs, which are called "PPGA" CPUs by Intel (Plastic Pin Grid Array), have proven to be more difficult to overclock reliably than the standard Slot-1 CPU designs. If given the choice, users should avoid the PPGA CPUs and Socket370 mainboards, and instead opt for a Slot-1 solution whenever possible.

After the press reviewed the initial cacheless Celeron CPUs last year, they reported that the performance in Win95 business apps was nearly 20% lower than in a real-deal identical MHz Pentium II CPU. This affected sales of the Celeron to a larger degree than Intel would even like to comment on today, as the masses instantly equated the "Celeron" with "low performance".