Increased focus on consumer electronics, Intel execs say

Chips for cell phones, set-top boxes, high-speed modems, and Internet devices will all become a larger part of Intel's business plan, company executives said today during a Webcast.

"Our principal aim here is to make sure that access is synonymous with Intel processors," Andy Grove, Intel chairman, said during the presentation.

Intel also confirmed it will release a processor with built-in graphics, code-named Timna, in the third quarter of 2000. The product will be intended for budget PCs.

Increased focus on non-PC devices is part of the company's plan to diversify, executives said. Chips for PCs and servers will likely continue to dominate the company's business, but as more types of devices are used to access the Internet, Intel will move to provide silicon for these so-called information appliances--and even work to design them.

The company is already seeing a surge in demand for flash memory, which goes into cell phones, said Craig Barrett, Intel's chief executive. Acquisitions over the past few years will allow the company to provide the microprocessors and digital signal processors that go into these devices as well.

"If you look at the market for cell phones, it is semi-infinite," Barrett said, citing market reports that as many as 500 million cell phones could be sold annually by 2003. "We're looking at a variety of clients for Internet access," he explained.

In addition, chips for networking and communication equipment will represent a substantial opportunity.

Diversification seems a prudent course. A report released yesterday by the Semiconductor Industry Association showed the growth of PC microprocessor sales leveling off in coming years, compared to semiconductors for consumer electronics products.

Moreover, although the company's "Intel Inside" campaign has been successful in persuading consumers to equate Intel's chips with desktop and notebooks computers, the company is mindful of technological shifts that threaten to undermine the PC's predominance. For instance, Sony's PlayStation II appears to promise to combine strong graphics and Internet access, according to Paul Otellini, general manger of the Intel Architecture Business Group.

Asked if the PlayStation II could compete against the PC, Otellini said "The PlayStation II has a couple of impacts on Intel." The company's job for the future will be to improve graphics and to ensure that the PC remains "the premier Internet access vehicle," he added.

As for set-tops, Intel has already landed three high-profile set-top box deals and will continue to pursue such agreements, Otellini said. Along with providing chips for these deployments, Intel has been working behind the scenes to design these boxes, usually a task taken up by the manufacturers.

"These set-top boxes are all designed by Intel and are all based around Intel technology," Otellini said. 'We are also designing a line of Web appliances" for debut in 2000, he added.

Nonetheless, standard PCs and servers will should remain at the heart of the company's business. In 2000, Intel will release 800-MHz Pentium IIIs for desktops and servers in the first half of the year and follow it up mid-year with Itanium (nee Merced), the first 64-bit processor. Notebook chips, meanwhile, will hit 700 MHz in the first half and speed past 750 MHz in the second half.

Also in the second half, the company will release "Willamette," a new architecture for PCs. Willamette chips will run at 1 GHz and faster.

New packaging will come out that will reduce the cost of Celeron and Pentium III chips by 20 percent and 50 percent, respectively, said Otellini.