Intel moves up date for Pentium 4 to be primary chip

Paul Otellini, general manager of the Intel Architecture Group, told analysts during a Web broadcast that the Pentium 4 will hit its "crossover" point for volume production, or the point at which the chip will account for 50 percent of all microprocessor output, in early 2002.

"And our goal is to accelerate that as quickly as possible," he said.

Although the Pentium 4 is a large chip, Intel CFO Andy Bryant said average chip costs will go down slightly because of manufacturing improvements.

Otellini's comment is significant in that it reshapes the competitive outlook for the microprocessor market. In October, Intel executives said the Pentium 4 wouldn't take over the Pentium III in terms of volume until later in 2002, a gap that seemingly opened a window for rival Advanced Micro Devices.

The Pentium 4 update was one of the highlights of the company's biannual analysts meeting, which took place Wednesday afternoon. Executives alternated between apologizing for product recalls and shortages that plagued the company in 2000 and touting plans for 2001.

"Operational excellence is one of our two main priorities," said CEO Craig Barrett, addressing the company's plans to put an end to product missteps. "We are effectively getting back to basics."

For 2001, Barrett said the company's goal is to grow revenue in the "high mid-teens." The microprocessor group, which accounts for 80 percent of revenue, is slated to grow around 10 percent, he said, lower than in the past. However, new businesses like networking and communications are projected to grow by 50 percent.

Cell phones will also become a major focus for Intel, Barrett and others said. The company already sells flash memory, one of the main cell phone components, and is coming out with its first digital signal processor, another crucial component, later this year in conjunction with Analog Devices.

In the future, Intel will release chips that integrate all cell phone silicon into a single chip, Barrett said.

"The cell phone is turning into a more general computing platform," said Sean Maloney, worldwide director of sales and marketing for Intel, who said the company has landed manufacturing contracts for supplying third-generation cell phones in Asia.

Among other highlights of the broadcast:

• Server and notebook sales will continue to grow faster than desktops in most markets around the world. Regionally, China will remain one of the fastest-growing markets. "The action will still be in Asia," Maloney said.

• Price cuts and competition with AMD will be a constant. "Our goal is not to lose one point of market share," Otellini said.

• Intel will increasingly reach out to a wide network of small manufacturers, application service providers and dealers to grow its business. Many of these companies have been hooked into the E-Business Network, an electronic marketplace, and similar programs, Maloney noted.

• Xscale, a microprocessor that consumers little power and was formerly the StrongARM chip, will begin to take a more prominent place in the market, Barrett said. The chip will appear in networking equipment, cell phones and Internet access devices.

Intel also will streamline its product lines. Because of recent product cancellations, Otellini said, the company has "been able to narrow the overall number of products to ensure that what we do commit to can be delivered in volume."

Still, microprocessors will be the focal point of the company. The Pentium 4 will come out later this month and run at 1.4 GHz. By the third quarter, the Pentium 4 will run as fast as 2 GHz, Otellini said, confirming earlier analyst predictions.

The Santa Clara, Calif., chip giant has lagged AMD in terms of performance for substantial periods in 2000. Intel has also had difficulty in boosting the speed of the Pentium III.

To bring the chip to volume, the company will invest heavily in retrofitting its facilities to make chips on the more advanced 0.13-micron process. Current chips are made on the 0.18-micron process, which results in larger, more expensive microprocessors.

The first 0.13-micron chips will start to emerge in the first half of 2001, said Mike Splinter, executive vice president of the technology and manufacturing group. In all, eight factories are being prepared for 0.13-micron manufacturing next year, he added.

Bryant said that because of the Pentium 4, the average cost of manufacturing microprocessors will be greater than expected in 2001, but still lower than the current level.

"Our average cost per unit next year will be lower," he said.

Among other releases, a 900-MHz Xeon chip for servers will come out in the first quarter. "Foster," a Pentium 4 for servers, will come out in the first half at 1.5 GHz. "McKinley," the successor to Itanium, the 64-bit server chip, will come out in demonstration units late next year.